Hi All,
Considering purchasing and older investment property which will need some renovation before renting out. Our strategy is to maintain 80%LVR so could you suggest some strategies on finance for purchase & renovation (immediate) so that I don't have to add my own savings for renovation?
Thanks,
TLPIf you have other property borrow against that to finance 20% deposit + purchase costs + reno costs
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeThere are no secrets or special ways you can get around it. you need to put in your own cash or borrow 90% and pay LMI.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi,
Not seeking any tricks, more a question of which order in arranging finance, i.e.
1. Purchase price – 500k
2. Deposit – 100k
3. Borrow 400k
next:
Need 100k for renovation:1. Will a bank lend me 80k as long as I have 20k for renovation under construction finance? reason why I ask this objectively is that without seeing the finished product how would they know it would be valued at 600k after renovation?
2. fork out my own 100k for renovation, then refinance once completed in the hope that they would lend me an additional 80k on the basis of value add that I have put in, obviously this is not ideal as I would somehow need to come up with 200k upfront initially.
Thanks
TLPHi TLP,
Your first option may be possible however you would have to buy the prop first, then after settled you could use a licensed contract builder to do the reno. A lender will only take the improved value from the reno into account if you are using a builder, they wont use the "as completed" valuation if you plan to do the work yourself. The risk with this is, you buy the property go to the trouble and expense of getting plans approved and then engaging a builder but in the end there is no gurantee that the bank's valuer will agree that you have added the $100K value.
If you plan to do the work yourself there are three solutions I can think off..
1) put in as little of your deposit as possible and borrow 95% +LMI…use the remainder of your deposit to fund the renos.
2) If you have a relative who would be a gurantor for you short term you could borrow the whole purchase price use your funds for the reno, get revalued and hopefully have enough equity to release the guarantor and avoid the dreaded LMI. Again there are valuation risks.
3) Borrow $100K from family to fund renos…dont like this though as what if you cant refi and or valuation doesnt stack up for whatever reason.Cheers + good luck
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeHi Marty,
Thanks for that, spot on and my fears as well.
Regards,
TLP
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