Bargaining the Banks Down & Other LEarnings

Hi Guys,

Thought I would share some learnings/advice from a recent deal I have done. And thanks particularly to TerryW for his sage advice up front on the way to finance this.

I've just bought a 9 dwelling proeprty on one title in SA. As some will be aware this means that it falls into the commercial range for LVR determination by the banks so my first learning is:

1) More than 4 dwellings in the deal seems to be a rule that you'll only get a 70%LVR lend on the property

The most interesting thing that I found was that the banks were willing to neogtiate significantly. NAB my usual bank wanted to charge me $2500 application fee and lend at a commercial rate of 8.3%. I pushed them and they agreed to reduce this to $800 and 8.1%. So then I took Terry's advice and rang the ANZ. They agreed to do the deal on the residential interest rates and offered 7.55% and nil fees. So back to the NAB and they came to the party with nil application fees and a 12mth fixed rate of 7.49% plus the same discount (ie .81% on the variable rate after the end of the fixed period). In the end this was the deal I took. So:

2) The banks will negotiate on interest rates and fees and this can save significant $'s (I estimate on my deal $4k first year and $2-3k per annum thereafter)

The current challenge is insurance (which the banks requrie). I have now found that getting landlord and building insurance is not as easy as just phoningh EBM or AAMI. In fact AAMI declined to even quote saying it was too hard for them. So my final learning:

3) Insurance brokers are the way to go when it gets to this point as they know the market and who deals with these more complicated type deals – and if you have a good relationship with one then their job is too get you the best deal as well as their commission (not just the latter as I have experienced before).

I think that the deal I'll do for insurance will be through QBE but the broker will have done most of the running around on this.

Anyway, hope that this is some use to people consideirng multiple dwelling deals.

Good luck,

Paul