Peer Estate's latest investment opportunity is a residential unit, this time in the upper north shore of Sydney in the suburb of Asquith.
This loan is secured by a first ranking registered mortgage over a brand new apartment in a recently completed 47-unit project. It is a 3-bedroom, 2-bathroom apartment of 95sqm (internal area) plus a 22sqm balcony and a two basement car spaces.
The loan is advanced at an LVR of 57.78% against a fresh valuation which shows a $30,000 premium to purchase price and thus, allows for a fall in value of approximately 40% for the property to be worth less than the loan.
Investors will have interest paid to them on a monthly basis at a rate of 7.9% per annum.
The loan has been fully vetted and settles in mid-November. It will run for a term of 12 months.
Payments to investors will be interest-only, with capital to be repaid upon maturity.
Note: this loan is due for Financial Close imminently with legal documentation being finalised. Any investment funds transferred will commence earning interest from the date of Financial Close. At this stage that is estimated to be on or before 29 November 2017.
The subject unit is located on Level 2 within a part 5-storey building with a southerly aspect. Within the development, upon completion, there will be 47 similar units.
Asquith is located approximately 27 kilometres by road North West of the Sydney CBD. The area is well serviced in relation to shops and schools and a bus service operates within the suburb.
The subject property is located in a well established residential neighbourhood, comprising predominantly apartment living.
The accommodation consists of 3 bedrooms, 2 bathrooms, entry/foyer, hallway, lounge/dining, kitchen, European laundry and two balconies. The completed unit is of a high standard with stone benchtops, tiled splashback, laminated kitchen cupboards, polyurethane kitchen cupboards, stainless steel appliances, breakfast bar, soft closing drawers, full height wall tiling in bathrooms and is fully carpeted in bedrooms and living areas.
The specific apartment was purchased off-the-plan in August 2015.
The apartment has been valued by an independent reputable valuation firm.
The valuer used the Direct Sales Comparison approach to assess the “As Is” value of the apartment. This valuation method is the most frequently used method for such properties and involves comparison of the property to be valued with sales of similar properties. Comparisons can be made in many forms including straight comparison, or analysis on a rate per area basis (such as rate per square metre of living area). Points of difference are taken into account by the valuer including the location of the property, the difference in size and improvement quality and view and aspect differences.
The specific apartment is 95sqm (internal area) and is valued at $810,000, being $30,000 above the purchase price. The value equates to a rate of roughly $8,500 per square metre. However, at the loan size of $468,000, the "breakeven" rate falls to approximately $5,000. This means the apartment could sell for $5,000 per square metre and the full loan, and your investment could be repaid (in the event the loans are not repaid on maturity by the borrower).
The valuer noted that there continues to appear to be a significant amount of ‘off the plan’ unit stock approved for development, currently under construction and or nearing completion within Sydney’s North, with most new developments due for completion in 2017 and 2018. While the property market continues to remain fundamentally undersupplied, high levels of forthcoming unit stock coming into the property pipeline over the next 24 months may have a mitigating effect on property values within this market segment. Accordingly, should high levels of unit stock remain on the market for sale at the time of completion, subsequent high vacancy rates may have a negative impact on both investor and owner-occupier demand and market activity.
Due to lack of settled 3 bedroom apartments, there are limited recent comparable sales for comparison purposes in this segment. In completing the comparative analysis, consideration of differences between the sales evidence compared to the subject property are taken into account, including, but not limited to, physical attributes and any changes in market conditions in the case of older sales.
The borrower is a Chinese national, who has been through a rigorous credit checking process required to meet Australian lending standards (see Credit Checking Process below).
The borrower shows evidence of good income sourced from a permanent sales and marketing role for an equipment factory, has good asset backing and has contributed significant equity to settle the purchase of the apartment.
The individual carries no debt.
The borrower intends to rent the apartment as an investment with a view to it being an Australian home for her teenage daughter in a few years time. The valuer notes an estimated rental of $640 per week which shows 0.84x interest coverage on a gross basis.
However, and importantly, the borrower shows the ability to service well in excess of their obligations without any rental and after all their other personal expenses and debts are taken into account. The borrower has shown an ability to service the interest on the loan with an interest coverage of 2.6x (excluding rental of the subject property).
The loan meets the requirements under Australian Credit Licence responsible lending obligations. The borrower has been interviewed via video conference, including a visual passport verification and a full search undertaken on their credit history and identity with employment and income verified. The borrower has been 100 point identity checked and screened in accordance with anti-money laundering and counter-terrorism rules.
Full valuation in place.
Proof of interest coverage across all income, expenses and liabilities.
The property must be fully insured.
No questions have been asked.