I have a situation where someone close to me is being forced to sell up all of their properties.
They’ve offered me some bargains (or else the bank will sell for a lot less) and I’m willing to move mountains to a) take the great opportunity & b) help them out
Problem is I’m not sure where I stand finance-wise….
1st off, the properties:
1) 330K…….rents for $390pw (1000K/a strata)
2) 230K…….rents for $270pw
3) 200K…….rents for $240pw
4) 201K…….on large block with plans drawn up for 4 units
My details:
Income = $115,000 (before tax) [saving 4K/m, savings are low because I was paying 4K/m off a bad debt]
HECS = $10,000pa
Savings = $10,000
1 property which I live in but rent 2 rooms out (mortgage shortfall after rent is ~$250pw but I effectively pay no rent)
– market value ~530K
– loan 450K (NAB)
Would there be any scope to buy any/a few of the properties?
Are there any tricks/ways to help my case? Eg. Use credit card or a personal loan for a deposit (I would pay it off ASAP)
Thanks in advance,
Chris
Hi Paperchaser,
You will not be able to purchase all the properties so you will need to pick. Assuming that the servicing side of things add up, your biggest issue is the deposit.
For example, if you are purchasing a property for $200,000 then you will require at least $16k in deposit for that purchase. $10k can come from the savings (I assume that it is geniune savings) and the rest can come from a personal loan. Now thats for one purchase.
Best to speak to the lender or a mortgage broker to map out the scenario.
Also with option/rpoperty 4 – does it have DA or have they only drawn up plans?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
You could possible take your current loan up to 90% LVR which provide you with a cashout in the vicinity of $27k. The equity release combined with your $10k cash might come close to covering two purchases (that's without knowing what your borrowing capacity and a heap of other things looks like).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks guys,
Shahin, that $16k deposit I'm guessing is 5% plus Stamp Duty (or LMI)? What seems to be the bank's minimum deposit atm?
Jamie, that's one thing I was unsure of. I thought you could only take it to 80%LVR (was hoping for 90% tho).
I dare say 95% is not allowed?
Servicing is no issue, they're close to (or are) neutrally geared which makes it even easier. As I mentioned, I'm putting 4K away every month and have no personal debt.
Can your friend provide vendor finance for some/all of the properties?
I would also be wary as if the bank is preparing to sell the properties for less than what you will pay for them, maybe you are paying above market value.
Luke
You mentioned something about paying off a bad debt. What exactly did that entail? Did it coincide with any defaults against your credit history?
If so, it might restrict what lenders and LVR you are be able to get.
Hi,
On a purchase of $200k you will need approx $16k which is broken up into the following:
$6k – Stamp Duty
$10k – 5% Deposit
General rule of thumb is about 8.5% minimum deposit required.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
yeh nah it's actually my dad, the bank hasn't communicated a selling price but they'll sell them for peanuts if they have to.
Not 100% clear on Vendor Financing, my understanding is they don't get the funds from the sale until I've gradually accrued a 10% deposit with them which would then allow me to take out a 90% loan? (which would actually work as I'd accrue that pretty quickly)
The bad debt was just a personal loan I took out, always payed on time though.
PaperChaser wrote:Jamie, that's one thing I was unsure of. I thought you could only take it to 80%LVR (was hoping for 90% tho).
I dare say 95% is not allowed?
Hiya
90% is generally possible. I had a 95% cashout done with CBA once but isn't something I'm keen on going through again in the near future.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
My girlfriend is in a position to buy but is not 100% convinced about the price being below market value.
Excuse my lack of knowledge here but what would be the best way to get an official (as opposed to speculative) valuation on the properties to eliminate any doubts?
Also, if anyone could provide input to my earlier questions:
– What seems to be the bank's minimum deposit atm?
– What is the absolute max LVR that banks allow you to draw equity to?
Thanks in advance,
Chris
You can either approach a Valuer directly or have a broker order the valuation for you (this is the cheaper option).
Bank's minimum deposit is approx 8.5% and the maximum LVR increase is 90%.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
5% plus enough funds to cover costs is the minimum.
Technically some banks will allow equity releases up to 95% but it's a painful process and difficult to get approved.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Chris
It's been mentioned by Luke above and I too would suggest your friend look at selling one or two with vendor finance. If you're able to buy one or two traditionally this may not be necessary but, if you can't get the finance, s/he may be able to sell you one or two with an Instalment Contract.
Your mention of a vendor finance transaction above is more like a Lease/Option (Rent To Own). An Instalment Contract is more fully described at:
https://www.propertyinvesting.com/strategies/wraps
The information on Rent To Own's is at:
https://www.propertyinvesting.com/strategies/lease-options
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
ah ok, 8.5% / 5%plus costs could help me get a couple of them.
The valuation on my house will be critical, the initial loan was 95% LVR, I wonder if that makes it easier to take it back to that ratio….
Thanks for raising the wrap option Paul, I still haven't fully got my head around it though. I'll sound like an idiot but I tried comparing the example (in your link) to my parent's situation and can't see how it would help them pay off their loan on that IP straight away.
Let's say I had enough deposit/equity for 2 of the properties, how would it work if I wanted to buy any of the other properties thru a wrap, in a way that gets the bank off their back quickly?
Wow this is a bit cart before the horse.
It is unfortunate that someone else is in financial strife, but you need to work out whether it makes sense to purchase these investments.
Where are they located, and what does the suburb have going for it? Is there a big demand for rentals?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Gonna have to bite my tongue here, don't know about your relationship with your parents but mine definitely wouldn't screw me over. The properties have been performing well over the 10 years they've had them, we have discussed these things obviously.
Appreciate that you're giving advice though, just maybe learn a bit of tact
Hi PaperChaser
Banks tend to get off peoples backs when loan repayments get caught up and repayments become regular again. If you can buy a couple traditionally, more power to you.
However I like to buy properties with as little of my money in the transaction as possible. I'm not saying that you don't give the vendors a fair price, you do. You just negotiate with the vendor on how long you can take to pay off your debt to them and the repayment schedule that fits that arrangement. With that done and the necessary National Credit Code checks complete, you ask the solicitor to draw up the Instalment Contract for you. And you make sure that both parties get independent legal advice.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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