New guy needs opinions

[Bigbob]

Hello everyone, long time watcher first time poster
Abit about me first, I am 22 years old earning a decent salary.


I am looking to purchase my first I/p which is a block of 3 2 bedroom flats.
The purchase price is $280000, a valuation will show it to be valued at approx $310000. (Buying from family)
Weekly rent from the flats is $540 roughly 10% gross yield.

I know ul ask where it's located, all I'll say is tenancy is not an issue.
Due to having my investment (approx 30k) tied up in a fund until 2014 I don't have access to a large sum of cash for a deposit.
I am curious as to whether the bank will be interested in the equity created on the purchase and secure my loan On a low or no deposit.

I have seen a broker but after a second opinion.

Lastly this loan is likely to be through anz however I find that Bnz offers some really interesting services as far as property investment is concerned. Can anyone make a recommendation?

Thanks heaps

Bob

[BigRedDog]

Can you work something out with the vendor (family)?

Purchase the property but pay off as you go along similar to vendor's finance?

[Gladdynook]

The bank is very unlikely to consider any equity at the time of purchase. Better off as BRD says to work something out with the family. IE they give you 30k and you buy the property for 310k. They end up with the 280k as expected. However most banks will want to know where the 30k came from, and are likely to want your family to confirm in writing that they don't require repayment of the money. Could get tricky if the sale and purchase agreement then has their names on the agreement. What about your family becoming guarantors? You may be able to purchase with zero deposit. Either way, don't give up and keep trying to find a lender that will help

[BigRedDog]

That is a nice idea Gladdy.
Wouldn't most banks require 3-6 months of evidence of savings for that $30k?

Bob - Do you have enough spare cash not tied up in investments for 5% deposit?

[Craig Pope Mortgages]

Hi Bigbob, this is a fairly common situation I deal with. Basically you have the S&P agreement done at the RV ie $310k. Then you obtain a gift letter from your family stating that $30k equity is non repayable, non interest bearing and no encumbrance will be placed on the title. You raise a loan of $280k. Issues may be around property type eg 3 units on one title being less attractive to the banks than 3 units/3 titles. Deposit source (ie gifted not saved) may also be an issue for some banks. If you could squeeze another 5-10% deposit on top of the $30k gift then you will have more options. Servicing doesnt appear to be a problem. Biggest hurdle may be the property type if all on one title.

[NovInvestor]

Buy with BNZ direct.

BNZ charge better Low-Equity-Premium fees than other banks, and their lending criteria is easier.

Is this all on 1 title? if yes, then the bank would want more deposit.

I suggest talking to BNZ first and also see if your family can contribute vendors finance.

[speights boy]

Basically you have the S&P agreement done at the RV ie $310k.

I would have thought the bank is going to be very careful in regards to the quality of that RV.
They may well demand another one; especially if the original is not on their approved list.

[Craig Pope Mortgages]

I would have thought the bank is going to be very careful in regards to the quality of that RV.
They may well demand another one; especially if the original is not on their approved list.

Yep they sure will, will need to be reputable panel valuer for the bank and be addressed to the bank that provides the finance. I am assuming Bigbob has used a reputable valuer.

[Bigbob]

Thanks for all the replies your advise is much appreciated.
I have no issues getting a 5% deposit however I don't have the saving record for the bank.
The equity gifting idea has been suggested and remains on the table.
At this stage I am wondering if it is best to settle the deal on the equity gift plus a 5%+ gifted deposit or wait another 4-5months and build up the 5% record for the bank. Opinions?

[Craig Pope Mortgages]

Hi Bigbob, I think the first thing will be to find out if the property itself is ok with the banks at 85-90% lend. Then work on whether the 5% portion coming from a non saved source is acceptable.