Not really renovating - but still adding value. Mods - feel free to move this to somewhere more appropriate if necessary.
Hi there: an interesting story for you. Hopefully some take away lessons for those who are starting out.
I am involved in purchasing a PPOR property - which should settle on Monday.
Part of the deal involves selling a PPOR and removing security from a loan & LOC which
is Cross securitised with an IP in Logan.
(yup, messy).
Bank 1.
Loan 1 old PPOR &IP1
LOC old PPOR &IP1
Loan 2 old PPOR &IP1
So, in removing the security from the bank 1, they had to keep both:
LOC IP1
Loan 2 IP1
No bank likes losing security!
So they revalue IP1.
What could happen here? The valuation could be reasonable, based on current market conditions and based on an ob
or it could be savage, and we would have to reduce LOC down to an unacceptable level to satisfy
the banks LVR situation.
In this case, the Valuation came in savage - at least 25K below market value, (280K, instead of 300-310K that is being asked and got right now)
Also the rental value was $30/week under what is being asked and achieved right now.
PROBLEM: I have to now tip in money to Loan 2, or reduce the LOC to a limit that is BELOW what is currently drawn down!
Yikes! I talked with the Mortgage Broker, and then made some phone calls to a friendly real estate agent in the area.
They ordered a Department of Natural Resources Search - the data is 90 days newer than the RP data, and showed much higher
settled sums.
NB - PM me for the details of the real estate agent or Mortgage broker.
They gave me 5 cases that were comparable or higher, and we supplied the rental statements and rental proposal letters,
and queried the valuation.
Hold your breath:
The 2nd valuation, supplied with the right data, came in at $305K - which the bank accepted and they are going to use.
Our LOC is safe, and we have still headroom, our PPOR purchase is safe.
Lessons learned:
1) Don't Cross Collaterise if you can avoid it - and if you want to do a repeatable business of accumulating investment property.
(NB - I did this initially because I had $100 deposit on IP1, the rest came from equity - but it COULD HAVE been avoided)
2) Team: Have relationships with friendly real estate agents and knowledgeable brokers, and keep them sweet.
3) Almost all Problems can be overcome, they do have a Solution - we may not know it just yet.
4) Money is just an idea. (Try as they might - Valuations ARE subjective, not objective)
Hope that helps someone out there:
Cheers,
AC
Hi there: an interesting story for you. Hopefully some take away lessons for those who are starting out.
I am involved in purchasing a PPOR property - which should settle on Monday.
Part of the deal involves selling a PPOR and removing security from a loan & LOC which
is Cross securitised with an IP in Logan.
(yup, messy).
Bank 1.
Loan 1 old PPOR &IP1
LOC old PPOR &IP1
Loan 2 old PPOR &IP1
So, in removing the security from the bank 1, they had to keep both:
LOC IP1
Loan 2 IP1
No bank likes losing security!
So they revalue IP1.
What could happen here? The valuation could be reasonable, based on current market conditions and based on an ob
or it could be savage, and we would have to reduce LOC down to an unacceptable level to satisfy
the banks LVR situation.
In this case, the Valuation came in savage - at least 25K below market value, (280K, instead of 300-310K that is being asked and got right now)
Also the rental value was $30/week under what is being asked and achieved right now.
PROBLEM: I have to now tip in money to Loan 2, or reduce the LOC to a limit that is BELOW what is currently drawn down!
Yikes! I talked with the Mortgage Broker, and then made some phone calls to a friendly real estate agent in the area.
They ordered a Department of Natural Resources Search - the data is 90 days newer than the RP data, and showed much higher
settled sums.
NB - PM me for the details of the real estate agent or Mortgage broker.
They gave me 5 cases that were comparable or higher, and we supplied the rental statements and rental proposal letters,
and queried the valuation.
Hold your breath:
The 2nd valuation, supplied with the right data, came in at $305K - which the bank accepted and they are going to use.
Our LOC is safe, and we have still headroom, our PPOR purchase is safe.
Lessons learned:
1) Don't Cross Collaterise if you can avoid it - and if you want to do a repeatable business of accumulating investment property.
(NB - I did this initially because I had $100 deposit on IP1, the rest came from equity - but it COULD HAVE been avoided)
2) Team: Have relationships with friendly real estate agents and knowledgeable brokers, and keep them sweet.
3) Almost all Problems can be overcome, they do have a Solution - we may not know it just yet.
4) Money is just an idea. (Try as they might - Valuations ARE subjective, not objective)
Hope that helps someone out there:
Cheers,
AC