100% finance Method?

W

WebBoard

Guest
From: Anonymous


Has anyone tried this? I got this idea from another forum.

You buy a property using cash from your line of Credit. You then do some minor renovations, then apply to the bank for a loan to free up your cash for the next property. When you get the valuation done you claim you did a lot to improve the value of the place you and aim for a higher value than the purchase price. The it may be possible to reduce the amount of net cash outlay, or if you are really good, to get 100% finance.

Eg you buy a house for $100,000, tidy it up etc, valuer comes in and values it at $120,000. You then approach the bank and get a 90% loan based on the valuation. (They should be able to do this because you already own it). 90% loan = $108,000 so you have enough money for some of your costs too!

I assume this would work well when you stack the contract as well. Eg $120,000 on the contract with $20,000 rebate at settlement. There would be no requirement to tell the bank about this as you will already own it when you apply for the loan. This would help with the valuation as well-as the valuer would see that you paid $120,000 for it. You could then claim you did some renovations as well and then maybe get it valued at $130,000!

As you did more of these it would get harder to qualify for 90% LVR loans, but it would still get you further than otherwise.

Has anyone done this? Can anyone see any problems with it? One problem may be convincing the valuer that it had gone up in value by so much.

I think the guy on the other forum said he made $16,000 this way by just mowing the lawn!

Passive
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1
From: Anonymous


And what, take advantage of the poor
little defenseless banks that are screwing us
all every day ?

My god how could you sleep at night ?

Regards

Bernie Fraser
 
Last edited by a moderator:
Reply: 1.1
From: Rixter ®


Hmmmmmmm Bernie Fraser????? now that name rings a bell!!??
Happy Investing,
Rixter :)
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1.1
From: Mike TheBloodyIdiot


Thank you Mr Anonymous Bernie Fraser.

You have really made my day. Unfortunately my English would not allow me to make such brilliant passages, but I will make it up by printing your quote in gold and framing it.

Dear Anonymous #1 - everything is excellent, except 2 things.

1.Talking about DECENT property (SYD or MEL) - you have got to have $300-$400K in cash to implement this strategy.
Who has this much? Actually I do, but I a bloody idiot, remember? Normal people will get much further ahead if they do not accumulate that much of cash in their LOC. Instead of saving $300K you can buy up to $1.5M in property if you buy "normal way" as soon as you get $60K in your disposal.

2. I do not get why you are so concerned about your purchase price. If you own the house already and not in process of buying, you do not need to show contract to valuer. If he asks, the only right answer from you would be "none of your business". Look, it will take you 2-3 months at best to finish oyur reno. On booming market you have to persent valuer with the most recent sales, not the one that happened 3 months before. Tip - hire valuer that is on your bank's panel, tell him you are going to sell the place. After you get val that satisfies you, ring him and tell you have changed your mind and you now want valuation to redraw your equity. He will perhaps ask for couple of hundreds more, but he will not have any choice but to yell "Hurray" and to write the same val for the bank.


Cheers,

Mike-TBI
 
Last edited by a moderator:
Reply: 1.1.1.1
From: Tibor Bode


Mike,

Thanks for the tip in 2. I have not tried it, but seems to me a pretty smart idea and definitely worth the money spent on it.

Tibor
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1.1.2
From: Anonymous


Hi,

Two question for Mike TBI -
1. how do you find out which Valuers are on your Bank's panel?
2. Do you provide the valuers with sale prices of comparable local properties? I have always left it up to them and perhaps that explains the crap $$ valuations I've had!

Thanks.

Newbie
 
Last edited by a moderator:
Reply: 1.1.1.2.1
From: Michael G


1a) Ask your broker or your bank. Westpac has been known to hand them out (ask at the loan centres not the tellers)

2a) Ask your brokers, or Realty Agents to make a list from their RP Data access. Get a price guide from www.apm.com.au or Sun Herald, Residex, etc. Check land values at council (havent tried that).

Michael G
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1.1.2.2
From: Anonymous


Thanks Mike!
 
Last edited by a moderator:
Top