Finance

[Bonesy]

Hi there. I am relatively new to the investment scene and currently setting up to purchase an investment property in the next couple of months. After reading a swag of books I have a few questions still bothering me. I have read in some books that it is advisible to use a line of credit when setting up the loan, repayments, and rent money. Any thoughts? Also I have heard a few stories in regards to banks telling investors they cannot buy more properties until 6 - 12 months after doing renovations etc as banks only realise the purchase price and not the new valuation. What is an effective way to avoid this?

[drelly]

Regarding LOC's... I use one that no matter how large it is, only has an amount I know I can pay off over a year owing. This way, I tend to pay my loan off faster than normal. It requires discipline though!

Most banks will accept a revaluation straight after doing renovations. However, most will not revalue within 6-12 months just because you say you've purchased under market value.

[fudosan]

Hi Bonesy, welcome to the forum

While LOC gives you the flexibility to pay down your loan and use it again when you find a good bargain, you need to be disciplined so that you won't use the money for a non-investment purpose.

[NZMtgBroker]

LOC's do require extra discipline and if you have no major surplus repayment ability I would recommend that you take a fixed rate that is 1% lower. Also the Loc should only be for say $10k to $20k as I doubt you will have the ability to make the mtg payments and pay an extra $10k from cashflow over a one year period. Most people would not have this ability.
A Loc is also used by investors to grab funding for future projects where they may wish to use a different lender. This will provide the 20% deposit and they can finance 80% stand alone elsewhere.
As for values most lenders will use the purchase price for 6 mths then look at the new value after this. However I have had cases before where we have been able to provide costing of improvements which have been reflected in the valuation that the lender has been happy with.
It will depend on your equity, income etc as to what is the best set up for you.

Regards

[Bonesy]

Thanks for your replies guys. Can't believe I have only just found out about this site. Will no doubt post some more questions when I pick my brain a bit more.

Cheers.

[muppet]

Hi Bonesy

Glad to have you along and look forward to your next questions and the forumites answers.

Regards

[Oopsick]

Hi everyone!

I am new and have not bought anything yet

I was reccommended the web a week ago and I'm just going through all the forums fishing out valuable info and learning

Thank you guys for spending your precious time to teach others and share your experience. It is so great!

What is LOC you are talking about here?

Thanks

[fudosan]

Hi Oopsick, welcome to the forum

LOC= Line Of Credit, a facility that allows you to withdraw (borrow) money at any time you want, up to a maximum pre-determined limit.

[Stevegoodey]

Hi,

From my previous posts most forumites know I am a trader but if I had to start again from scratch I think I would buy a doer upper complete the refurb and sell.

Say you made $40,000 profit then split this and have 2 $20,000 deposits to start two more projects then you would be able to have 2 Lines of credit with two banks and should be able to continue without waiting the 3-6 months.

In principal this works but in practice it may take the 4-6 months to complete the first refurb anyway so may not be a problem.

I find it is also agood idea to ask for early access of the property and do the refurb before the settlement date then have it valued completed.
You can still only borrow against the purchase price but you have all the paper work required to take it to another bank and apply to refinance.

Just some thoughts

Steve

[Oopsick]

Hello!

Thanks for the description, Fudosan.

Steevegoodey, I appreciate you sharing your thoughts

I would buy a doer upper complete the refurb and sell

I've thought about that but ... I am a girl with almost no savings yet
So I will have to pay someone to do it for me

Thank you anyway. I might do that sometime later though

Well... does anyone have any ideas on where I should start having no deposit money. I read about Quick Cash in John Burley's book: find a seller and a buyer, buy for less sell for more without owning the property.

Does anyone want to share their experience in that area?

Thanks

[Stevegoodey]

A couple of interesting exerts from your post


I am a girl


Desire = Power

Hmmmm

[Bonesy]

Hey guys. Currently I am stuck trying to decide between buying an investment property and a home. For the investment property my broker has said to put in $15,000 and get the other $15,000 from my parents equity (up to $150,000 loan). I still have to make up $3000 in the next couple of months if I do so. For the home all I have to do is borrow $16,000 from my parents equity and I will have a house albeit without the tax breaks of an investment property. I am leaning towards the house purchase now as I need a foot in the door and I'm not really that keen on spending all that cash as I will do some sort of renovations. I'm quite keen on heading overseas for a while but this won't happen if I save to purchase the investment property. Any thoughts guys?