All Topics / Help Needed! / SHACK queries – equity, borrowing capability, investment opinion?

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  • Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    Hi All,

    I'm looking at buying a shack, possibly in halves with a mate TO USE, not as an investment. It is cheap and with a spruce up would provide some equity. My question is can i use the equity in this for future investments or do banks look negatively on this?

    I'm also looking at charging people to stay there so it some cases it would return an income.

    Can i use equity in my IP to fund 50% of the deposit (halves with a mate)?

    What do i have to look out for with shacks and investing in the future?

    Plan would be to buy this, use it and gradually do it up a bit, but still buy more IP's and keep investing.

    Thanks in advance.

    Pagey.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    On the face of it – it is ok. However, you may need to consider other elements such as postcode/location of the property, LVR, etc. You should be able to go to 95% plus LMI. You will need to structure the application correctly and choose the right lender.

    TheFinanceShop | Elite Property Finance
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    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Pagey

    What do you mean by a shack? Can you provide more info on the property?

    Not sure if I have the same confidence as above – the words shack and 95% LVR don't look like they belong together.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    My sentiments exactly Jamie.

    I had thoughts of a large rural property with a tin shed on it.

    Pagey, yes you can certainly use your equity in your current IP to fund your deposit but there maybe better ways to fund the deal depending on your own circumstances.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    The 'Shack' is a tiny asbestos 3 bedroom open fire place on the west coast of tassie. Perfect for fishing, riding bikes and sipping on ales! My circumstances are ive spent all my money on my IP which is now 99% complete with available equity. Tenant moving in next week.

    Ive been talking to a finance broker and its looking like we may need to put in 20% deposit, which is ok as the place is cheap (depending on purchase price).

    Someone told me i couldn't use equity (in the shack) for investing as it was a shack, this has me worried. So if i brought the place for say 100k and it was worth 200k would i be able to use the equity in it to later invest?

    thanks for the reply guys!

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    Ok Pagey maybe the post code location means that you have to put in 20% deposit but i have to say i find that hard to believe.

    If the property is zoned residential and is valued at 200K by a valuer then no reason why you can't access the available equity.

    Course need to use the right lender in the first place.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
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    That is because it makes their life when the LVR is 80%. Several lenders have a no val policy at 80%. We have financed plenty of "shacks" at 95% but there may be other attributes of the property you need to look at. 

    TheFinanceShop | Elite Property Finance
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    Profile photo of PageyPagey
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    @pagey_1
    Join Date: 2012
    Post Count: 34

    Thanks for the reply guys, Richard, if i give you the postcode can you tell me if it is an area where 20% deposit is required?

    Why do i need the right lender? Do i need to ensure they will acknowledge the equity in the shack at a later date?

    Cheers

    Pagey

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
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    Why go with a lender with a postcode restriction?

    TheFinanceShop | Elite Property Finance
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    Profile photo of PageyPagey
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    @pagey_1
    Join Date: 2012
    Post Count: 34

    Oh ok i didn't realize they varied i thought they would all have a postcode restriction if one had one. Thanks!!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
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    Yes Pagey need a lender who does restrict and one with flexible policy when it comes to equity release down the track.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    pagey_1 wrote:
    Oh ok i didn't realize they varied i thought they would all have a postcode restriction if one had one. Thanks!!

    Lenders like CBA and Homeside who have a DUA with Genworth will look at deals in any location up to 95% – but the valuations still need to stack up and it can be hard to get comparable sales in certain areas.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Rick staRick sta
    Participant
    @rick-sta
    Join Date: 2011
    Post Count: 120

    I have also been keenly looking at rural lifestyle blocks with 'shacks', however this is something I intend to keep at arms length from my investment affairs, 80% LVR etc. 

    The idea is growing on me, somewhere to escape to, take the dirt bikes, fill the dam with red claw. 

    Just haven't come to terms yet with taking on another liability, my investor mindset is challenging the idea. (Also been battered by the plummet in PM prices)

    Profile photo of PageyPagey
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    @pagey_1
    Join Date: 2012
    Post Count: 34

    Hi Rick,

    Im in the same mind, great idea but a bad investment. money could be used better elsewhere but you have got to have a bit of fun and relaxation. Especially if the place is cheap and can still gain you equity. Ive been talking myself into the idea for months!

    Cheers

    Pagey

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    pagey_1 wrote:
    Hi Rick,

    Im in the same mind, great idea but a bad investment. money could be used better elsewhere but you have got to have a bit of fun and relaxation. Especially if the place is cheap and can still gain you equity. Ive been talking myself into the idea for months!

    Cheers

    Pagey

    If you can afford it – then why not. Sometimes we just need to treat ourselves – it might not be the best return on investment financially – but if your jungle shack is going to bring joy than who cares. It sounds like an amazing place BTW!

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    I like your advice Jamie haha!

    I have put in an offer (low ball).

    See how i go, thanks for all the help guys.

    Cheers

    Pagey

    Profile photo of Rick staRick sta
    Participant
    @rick-sta
    Join Date: 2011
    Post Count: 120

    Keep us updated

    Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    Awaiting to sign the contract then i will fill you guys in :)

    Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    Hey all just reading through this. If anyone is interested i did buy this a while back now, halves with a mate 80%LVR. Have done a few things to spruce it up but its pretty much just a get away holiday place.

    Heres a link to it on gumtree for rent if anyone is interested:

    http://www.gumtree.com.au/s-ad/burnie-devonport-region/other-real-estate/granville-harbour-shack-holiday-house-for-rent-hire/1053555439

    I know it wasnt an investment, but if we can make it claimable on tax and maybe make a few $$ off it why not.

    If anyone has any queries about it let me know.

    cheers
    Pagey

Viewing 19 posts - 1 through 19 (of 19 total)

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