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Safe as houses

15 July 2016 | Marcus Morrison
 

Very interesting times at the moment, both here and abroad. A huge amount of discussion here in New Zealand, across the ditch in Aussie and in parts of the States like Hawaii about an increasing ‘affordability crisis’ for home buyers.

Everyone seems to have a comprehensive plan of some sort, but few seem to agree on what myriad of small things can be done, which together will create the big change. One thing we can agree on, certainly here in NZ, is that the crisis is having an impact on a diverse range of potential borrowers – whether borrowing for commercial or private use.

Take one of our borrowers from the last month. Let’s call him Bob.

Bob is a good guy. He has worked for a large chunk of his career over in Australia, in or around the mining industry. He has saved a bit of money over the years, and decided he wanted to put that to use back at home here in New Zealand. I think we can all agree that this is a great thing. So, he bought a piece of land in a good area. It’s a reasonably well sized property, so he had it subdivided into three lots. As you would expect, he approached the bank with his plan to build three nice townhouses on the land and was looking for finance to help make this happen. The bank was good enough to see the benefit of what he was doing, and clearly thought he was a good guy and his finance application was approved. But there was one condition. He had to finish one of the properties first and sell it before they would finance the last two. Less than ideal for Bob. How does that model help with cash-flow? How does that help, when the major benefit of the development is the economy of scale achieved by building three at once? In a nut shell, it doesn’t help at all on either count.

So, Bob (through his mortgage broker) contacted LendMe. Having already put a large amount of his savings into the development himself and with his own home available as potential security, Bob (and his development) had suddenly become a great investment opportunity for a potential lender or lenders. As it turned out, a single lender snapped up the opportunity and lent Bob the finances he needed to get his development finished.; all backed by the security of the development itself and Bob’s own home. And how is the project going? Awesomely! We are obtaining building statements and cash-flow updates on a regular basis to keep the lender informed every step of the way… and Bob is currently making great progress!

It’s satisfying to know that LendMe, is helping kiwis to fund other kiwis to develop much needed properties Could this be an example of one of those small things that positively contributes to a solution to the current housing crisis? It’s absolutely not the only answer, but it is an increasingly exciting one… And we are thrilled to be involved!