One key point that I have noticed when dealing with property investors and traders across the years is that those who are successful will continue to look for solutions to make a deal work even if initially it looks like it is not going to be straight forward to pull the deal together. This may be by bringing on a joint venture partner, renegotiating the terms of the agreement or using creative financing. Many investors have been affected by the introduction last year of the LVR (Loan to Value Ratio) rules, and one issue we have noticed is that there are less people who have enough funds for both the deposit to complete the purchase and for the renovation after settlement to get the property performing how they would like.
For those who have a lot of equity this example doesn’t apply to you but if low equity/deposit levels are a problem one example of a solution is that there is a finance company who has released a new renovation product where they will look to extend up to a 90% LVR, up to a maximum of $50K. While there are fees and costs associated with this it is always important to understand the end position and I’d recommend the way to look at it is that if the product allows you to purchase a property, renovate it and then increase a bank mortgage to cash it out, all while meeting your overall property buying rules then it is worth looking at.
It is likely that at some stage in the next 6-12 months the Reserve Bank will relax the LVR rules; however note that at such time this will allow more buyers into the market thus making it harder to find quality investments. This is where using creative ideas to get in before the competition arrives can be beneficial.
By Kris Pedersen from Kris Pedersen Mortgages