New Purchase, needing massive reno - all financed

Looking at purchasing a new IP, can secure 95%+LMI on purchase price, but the property is not at all livable in current state.

Only have enough $$$ to put up the 5% deposit and buying costs, not enough for a reno.

No point in doing a half reno job to make liveable, only really worth while doing the full reno that will cost approx. $75k inc holding.

How is this usually done? I can see there been two finance options:

1. Do i secure finance to purchase place (serviceablity will be shot as it is not in a liveable condition at the moment)? and once i have settled, seek finance for the renovation/development, using the estimated future property value as the only deposit/gaurantee that i have.

2. Seek one loan, with my 5% or purchase deposit and buying costs as all the $$$ i put forward, and the back approves the purchase price + reno costs, using the future valuation as security???

Est. purchase price $530.

$75k reno (as owner builder - yes, will plan on living it the place once all reno's complete to satisfy this criteria)

Est. valuation after reno - $750k

BTW - This will be the first (legit) owner builder project I have taken on. Installed kitchens, bathrooms, plastered, footing, framing before... I do however feel competent to complete this project, not sure to what extent I will need to prove this to the bank.

cheers, Jake
Hiya Jake

While im usually positive I think this one will take a miracle

First thing is to find a lender that will take the security as it is .

At 80 youd have an outside chance, at 95 if its not livable the valuer will mark it as unsuitable security

Second is 95 % lend above 500 to the amount you need

Third..........owner builder, even at 80 % most lenders will run

Consider a cash or equity partner to go on title with you perhaps ?

Thanks for the info Rolf!

what if the following where true:

* Technically it is livable (as the elderly owner has been taken into care), but in a very derilict state - not rentable at lease, but does have all the functioning necessities of life. Does this make a difference?

* 95% lend will be just under $500k + LMI on top of this bumping it over the half mill. mark. Could possibly just scrape in at keeping 95% + LMI under the 500k mark (so it is like a 94% lend or something.

* Could entertain the concept of staged development. Only tell the bank about stage one which would be done by builder, then i can pay for the second stage and do that Owner builder... So not really an owner builder project.

So assuming all these stack up (a miracle lol!!!), I am assuming you are suggesting that the finance be separated into two loans...
ok, well this is a really great opportunity. Will put together a detailed info pack, pull all my bank strings, and do my best in hustling a deal...

Thanks for your time matey!
owner builder is not determined by living in the property. Just get a fixed price building contract for the work, what you may have saved being owner builder is irrelevant if you cant secure owner builder finance....
nuy it, live in it, as is. Paint it, new carpets, do what you can. If the market is with you and you have presented it well, you might be able to squeeze a little more on a new val to do some of the major stuff. Perhaps after living with the problem for a while you will find a way to do it cheaper/bettter with out finance....
yeah, could work with that - could get $10k together to do urgent stuff to get it to a decent standard. Planning on alternating between IP and PPOR with this one anyways...

You think better chance of getting this through as a PPOR or IP loan? PPOR available at 95%???
yeah, could work with that - could get $10k together to do urgent stuff to get it to a decent standard. Planning on alternating between IP and PPOR with this one anyways...

You think better chance of getting this through as a PPOR or IP loan? PPOR available at 95%???

hmm i can be considered a newbie in these kinds of stuff but here`s my opinion. I am open to get peoples thoughts on this

Buy it as an IP ( good tax benefits). Finish urgent repairs on stuff that does not work and asthetics (painting, carpets etc) put it on rent for 6 months. save more or more reno put on rent again and so on till you finish the whole thing. Although this would take about 2 to 3 years to complete depending on the cash flow. But then in the end you have a property for which you have tax and depreciation benefits while it is renting Plus 50% saving on CG when u sell since it was a rental for more than a year.
You probably have a better shot at high LVR with an O/O loan than investment. If your a FHB buckle up and enjoy the ride, its bumpy.
mmm, will push for an O/O loan to begin with...

I am bailing on my current broker (no not a FHB, currently have 3 IP's, just shifting around my PPOR in the near future as this place will be blue chip inner west sydney) and going straight to the bank on this, so wont be able to dip my toe in the water and go firstly for IP loan, and if that doesnt work then go down the OO channel (as i can jig it to be eligiable for both if need be by staying in my current place a little longer)...

Any suggestions on dealing directly with the bank who currently have my three IP loans. I have some good contacts in the loans area, but do you need to play hard ball without a broker in between???
might sound funny, but he is nice when it is in his interest, and not nice when it is not!

I am young, and sometimes he can be very dismissive because of this also...

Furthermore, i know for a fact Suncorp loan in 1% LVR increments - he is adament that it is 5%... He still (after me mentioning this twice to him to check) maintains it is 5% and wont follow up!!! This is a deal breaker on this new deal!

reason enough?!?!? lol!!!
fair enough. I'd still ask Rolf's opinion before going to the bank directly. I'm not sure how much of an old fart he is, but from his posts he knows his stuff in relation to investment loans, policy and structure. And from your theories on owner building and 95% loans etc, I think you will get more out of talking to him than a bank direct.