Background
Our client was an experienced developer who had completed several multi-unit development projects. While most of the completed stock had been sold, they retained some from each development to build a long-term rental portfolio.
They were seeking to purchase two adjoining standard residential properties in Auckland, both with resource consent already in place for future multi-unit development. The intention was to hold the properties as rentals in the short term while progressing building consent, before transitioning to a development funder to assist with the next stage.
Challenges
The client approached a few different financiers but failed to obtain the funding of $3.8 million required for the purchase due to the following reasons:
- Clients had significant existing exposure across both bank and private lenders
- Complex ownership structure involving multiple entities
- Unable to demonstrate full servicing capacity for the proposed loan
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
- Able to demonstrate other lending self-funded by rental incomes, enabling ring-fencing of this debt
- Clear exit strategy, with plans to refinance to a development funder within 2 years
- Verified cash reserves available to cover the minor servicing shortfall
- RV provided demonstrated acceptable security
Solution
Our team workshopped a deal with the client’s adviser, splitting the lending between two funding lines backed by two securities. This approach allowed us to meet the client’s full funding requirement.
Should the client choose to exit before the 2 year term, a minimum early repayment fee of just $23 per loan would apply.
LOAN AMOUNT
$3.8million (split into two loans)
INTEREST RATE
8.95% p.a.
LVR
70%
TERM
2-year interest only
AVANTI FEE
1%
ADVISER FEE
1%
COMMISSION
Not applicable for short term products
CASE STUDY - PROPERTY LENDING
Split Lending via Different Funding Lines
At Avanti, our diverse range of funding lines for both short term and long term first mortgages allow us to cater to a wide variety of client needs. Each funding vehicle has its own credit appetite, enabling us to provide more flexible and tailored solutions.
For strong applicants with multiple securities, we can look at splitting lending across different funding lines, giving us the ability to offer higher loan amounts and more optimised structures.
If you have clients in a similar position, get in touch.