IP cash squeeze.

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From: James Spiropoulos


Hello everyone out there.My question is if I have been able to raise a loan for investment to buy a particular property that I know will rise in value quite dramatically,after improvements are made on the property,but after my initial borrowing,I have no cash left ,what options are open to me.Would I have to do deal with another party??Any advice would be most welcome.
James thanks you.
 
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Reply: 1
From: Mike .


Hi James,

Here is one scenario but it needs the co-operation of both the bank and the vendor. You need to secure a personal loan from the bank, no collateral required. Also ask the vendor for a long settlement period and free access to the property to complete the renos. Be careful you don't get gazumped or the vendor decides to take the property off the market after the renos are done.

If your assumptions are correct and the market value increases, secure a LOC along with the IP loan and paydown the personal loan. The interest on the personal loan and the LOC will be tax deductible.

Good Luck - Mike
 
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Reply: 1.1
From: Kylie S


Citibank are keen to "give" a personal LOC to people with an income over $30K (I think). The LOC can be up to $25K and is unsecured. The interest rates are high (about 15% I think) - however you can use the credit when and if you need it (it comes with a cheque book and credit card). Of course this is only sensible if you don't spend it on doodads. The reason I know about this is we have applied for one so that we can use the money for deposits/renovations if required. There are no fees/costs - except interest if you use the credit.
 
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Reply: 1.1.1
From: Sam Vannutini


I believe that you can also borrow the costs of renovations from some lenders provided you have a contract in place. If you have a builder friend, they may do you a favour.

Another option, depending on reno costs is to use a credit card and pay it ouut after revaluing the property. As interest is high, you must be sure that you can do the work and re finance quickly. The extra cost over 2 months is small compared to the hassles of dealing with lenders.
Good luck,
Sam.
 
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Reply: 1.1.1.1
From: Sam Vannutini


In the case of getting access to do renovations prior to settlement, what rights does the vendor have to take it off the market?
Thanks, Sam.
 
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Reply: 1.1.1.1.1
From: Paul Lytwyn


Sam
IF you have exchanged contracts, the property is of the market. That's the whole purpose of a contract i e. to lock in both parties. The vendor must sell at the price and terms agreed to. As for access this is an issue that the vendor may agree to in writing in the contract or you may negotiate it afterwards.
 
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