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Thread: Finance

  1. #1

    Default Finance

    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?

  2. #2
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    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.

  3. #3
    Join Date
    Jun 2004
    Location
    Auckland
    Posts
    2,103

    Default

    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.

  4. #4
    Join Date
    May 2004
    Location
    Bay of Plenty
    Posts
    26

    Default

    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

  5. #5

    Default

    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.

  6. #6
    Join Date
    Sep 2003
    Location
    High up above and deep down under
    Posts
    10,915

    Default

    Hi Bonesy

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

    Regards
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  7. #7
    Join Date
    May 2005
    Location
    Auckland
    Posts
    257

    Default

    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

  8. #8
    Join Date
    Jun 2004
    Location
    Auckland
    Posts
    2,103

    Default

    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.

  9. #9

    Default

    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
    Steven Goodey - CEO PropertyTutors Wellington

    www.propertytutors.com

  10. #10
    Join Date
    May 2005
    Location
    Auckland
    Posts
    257

    Default

    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


 

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