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LETS GET DOWN TO BUSINESS.

Question :
Recommendations please – We have an opportunity to purchase a piece of commercial land. This is something we have been hunting for approx 5yrs.  We would build a purpose built workshop on the land for our growing business we have been operating for 10years. Initial quotes to achieve this will be around $800-900k including land and building. We have approx $700k equity in our home we could use as security.  We have initial support from our bank, but is this the best approach? Are there better leaders than a bank for commercial land and buildings?  Are there better leaders with better terms? Should we be ‘shopping’ around for a good leader?  With forward work until Feb 2021 and low interest rates, hunting for land for a length of time, it seems the right time to jump at this opportunity. 

Question submitted 29/09/20 @ 04:48pm
Industry: Funding & Finance
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  • Hi there
    Great to learn that you have found something that you have been hunting for years.
    Trading Banks offer some of the best rates for residential / commercial Property Loans. So using equity for your home as security and finance from the bank would probably be a much cheaper option compared to the non-bank finance.
    There is also second-tier lending via the likes of Solicitors’ nominee companies and private lenders, however these will be more costly to service due to higher interest rates and lending up to 70% of a current Registered Valuation. They are often shorter term, 1 to 5 years, and may be interest only. In our experience, we do find that some customers, who struggle to meet all the conditions when dealing with a bank, want to work with a more hands on Non-Bank lender with greater flexibility and less hoops to jump through.
    It certainly pays to shop the options to find a deal that best suits your situation and investment / business strategy. It is also important to seek the advice of an accountant to ensure the property is purchased under the best structure.

    Wish you all the very best out of this opportunity.

    Hi There,

    The banks will always have the best interest rates available compared to private markets. Where the private markets help though is the flexibility around loan to value ratio (LVR and debt servicing.

    One thing to take into consideration is the additional costs developing CRE brings such as ‘development Contribution’ to the local council. I just finalised a CRE build for a client and that was a cost they didn’t budget for.

    Happy to discuss your situation further and we have financial models specifically around developments if you want a free consultation.

    Happy to help!

    Dave@vegalend.co.nz

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