Advise please - LVR on a block of flats

[Bigbob]

Hello everybody,
Just a quick query, I own a block of flats returning about $550 per week which has been recently valued at 296,000, my current mortgage on that is $244,000.

I have found another property 6x2 bedroom units that I would like to purchase for $610,000 which is returning $1200 per week.

Obviously the math works and these things are good earners, however when I go to get finance for the second lot, banks are sheepish even when offered $100,000 as a deposit.

I have a stable salary and am working for the government.

Is there something I'm doing wrong?

p.s I am using a mortgage broker.

[KyronGosse]

Have you asked the mortgage broker why the banks are being sheepish, it may help in repackaging your application. It could also have something to do with where the units are.

Banks also use a different formula for working out your servicability. They work off a higher percentage, and less rental income, therefore when you look at a deal and think you're making $100 per week, when the bank looks at the deal they could see it as losing $100 per week.

[Bigbob]

Essentially its coming down to Lvr Westpac have said no with a max of 60%. ANZ are also a "no go" as they would only look at 70%. Is anyone else encountering this issue?

[Orkibi]

ASB been good to me lately, you will need at list 25% deposit or security to buy a block with 3 flats or more.

[Bigbob]

Okay so ive found the best I can get is a 70% lvr wih westpac. The main reason for this ia they say anything over 3 units on the one title is commercial.
Anywaya around this?

[revdev]

Looks like your LVR would be around 83% (754k/906k) IF you purchased this block.
Also, with a possible purchase price of $100k per 2 bed unit, it looks like you are in small town NZ.
These 2 points combined will be an issue for the bank.

(p.s. I changed the title of your thread, easier to find)

[Craig Pope Mortgages]

Hi Bigbob, If those six units are all on one title, you will normally need 30-35% deposit. It is frustrating, especially when cashflow is high. It's just one of those (sometimes) annoying bank rules. But in saying that, you would end up being fairly highly geared (as the above writer mentioned 83%) if you did this deal. If you needed to cash up quickly it could be difficult as potential purchasers would all face the same deposit requirements. Meaning only investors with good equity could afford to buy, and I am sure they would want a great deal!
Given your equity levels I would look to spread your risk to different asset type classes to minimise risk. With $100k cash that could be used in other deals with less constraint. All the best!

[PC]

Will the vendor leave in $80K as a second mortgage?

[NovInvestor]

Banks generally require more deposit on multi units on one title properties because:

1) if your crap hits the fan, the bank needs to mortgagee sale your property,
2) no home owner is ever gonna buy it, and investors will not overpay either.
3) bank makes a loss


Hence the banks want more security to protect themselves.