Hi All,
Question for brokers and experienced property investors…
How difficult is getting finance for fire damaged property is it is purely cosmetic work that need rectifying?
Is a lower LVR or anything else out of the ordinary required on application?
Thanks in advance,
Babyflynn81
It depends on the bank. Some won't lend as it's not livable. Some even baulk if there are holes in the walls. This is where a good broker is very handy.
I bought one that I wanted an 80% lend on. The price wasn't much more than land value and I already had sizable loans with the bank. They came to the party the week before settlement. Lucky I had a plan B if they hadn't come through. Best to have good equity before committing.
Same problems as catalyst, base your LVRs against the land value of the property – 10 % as some valuers will even include a deduction for demolishing the house to get to the land value. As you won't see the CBA bank manager in there with a paint brush fixing it if they reposess.
I researched and wrote an article on this – http://positivecashflowaustralia.com.au/mortgage-uninhabitable-house/
Basically you CANNOT secure traditional lending on an uninhabitable house. You would either need to borrow equity against another property or gain a construction loan which means you would need to provide detailed costings and plans for the construction to the bank.
If you are doing the reno's yourself it will be even harder to get the loan than if a builder gives you a fixed quote or something.
Nathan Birch bought a burned down house for $25,000 and made a killing from doing it up. Watch his 5 minute YouTube video http://www.youtube.com/watch?v=8PhhwxdbNA0
He spent $25,000 on renovation.
Ryan McLean | On Property
http://onproperty.com.au
Email MeRyan- You CAN get finance but it's not easy. As I mentioned I got an 80% stand alone traditional loan. The other 25% I borrowed from them too but from equity in other properties. CBA
We originally said we were doing the reno ourselves and they would not lend for that. My BIL is a builder and he wrote us a quote for the work, then they passed it.
ryan mclean wrote:I researched and wrote an article on this – http://positivecashflowaustralia.com.au/mortgage-uninhabitable-house/ .Ryan, Excellent article. Thank you.
Hari Yellina
Email MeKeep Investing - Grow while Resting.
Yes finance is available but boils down to the level of damage and lvr required.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
I saw an interesting property that was in the middle of renovation and looks like a fire has gone through parts of the house (that the insurance company had then repaired) but then the owners decided to sell half reno'd.
I would think the same thinking would apply or would this be viewed differently?
P.S. Merry Christmas to all!
Appreciate your thoughts, babyflynn81
Why not just go with a lender that has a no valuation policy?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi babyflynn
Yes same policy would apply and an upto 90% maybe possible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard.
Which are the banks that don't do valuations?
If the loan amount is under $1mil then regardless of LVR ME Bank will accept the COS and will not order a valuation. Quite a handy niche.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
And there are a couple of others also.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes but in order to get finance you have to have insurance.
When they ask is it habitable and you say no then that is recorded on the insurance. The bank will see that.
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