Background
An experienced property developer had completed several multi-unit development projects. While most of the completed stock had been sold, he retained some from each development to build a long-term rental portfolio.
He was looking to purchase three adjoining residential properties in Auckland, with resource consent already in place for a future multi-unit development. The plan was to hold the properties as rentals while progressing building consent, then transition to a development funder for the next stage in around 2 years’ time.
Challenges
The client needed $4.2m to complete the purchase, but had been unable to secure the required funding through other lenders due to the following reasons:
- Significant existing exposure across both bank and private lenders
- A complex ownership structure involving multiple entities
- Unable to demonstrate full servicing capacity for the proposed loan
- Income sources included overseas PAYE and rental income, adding complexity to income verification
Mitigants
The client’s adviser submitted a well-prepared and comprehensive application, providing a clear view of the client’s financial position across all entities and income streams. This greatly assisted us to evaluate the complex situation and identified the following positive factors:
- High net worth clients
- Clean credit history and good scores
- Excellent account conduct across all existing loans and accounts
- Solid equity position across their broader property portfolio
- Proven experience in delivering successful property developments
- Good rental income potential from the three proposed properties
- Evidence that other lending was self-funded by rental incomes, allowing ring-fencing of this debt
- A clear exit strategy to refinance to a development funder within two years
- Verified cash reserves to cover the minor servicing shortfall
- Good location and RV provided demonstrated acceptable security
Solution
Our team workshopped a deal with the client’s adviser, splitting the lending between two funding lines, which was made possible with two securities being offered. This approach allowed us to meet the client’s full funding requirement.
PRODUCT
Long-Term Near Prime First Mortgage
LOAN AMOUNT
$4.2million (split into two loans)
INTEREST RATE
6.60% p.a.
LVR
65%
TERM
30 years with 2-year interest only
Long-Term First Mortgage
Non-Consumer Lending Solutions
For developers looking to retain residual stock as part of a long-term rental portfolio, or hold land earmarked for future development, our Long-Term First Mortgage non-consumer lending solutions can provide the certainty and flexibility to support their investment objectives.
These facilities can help clients:
- Hold completed units until market conditions improve
- Build long-term rental portfolios
- Secure and retain development sites or land banks
- Transition from short-term development funding into a longer-term investment structure.
With multiple funding lines and a pragmatic credit approach, we can consider client scenarios that don’t always fit traditional lending models. If you’d like to workshop a client scenario, please reach out.
If you have clients in a similar position, get in touch.