Without reading any of the present forums I would like to throw a question out there. Property on the market consisting of 18 units, each rented for $380pw, total cost $2.2m. What are the chances of first timers being able to enter the market this way. I am of a mind to dive in, hubby is a softly-softly kind of investor. My calculations bring this in as a positive investment, but how will the lenders view it? Has anyone out there started out this way? What sort of deposit would the lendors be likely to expect?
My understanding is that many lenders will only allow lVR of 60% or lower, so you will need a sizeable deposit. Banks don't appear to like multi unit properties.
cheers
Sonya
Sonya
Thanks for that . I don't want to go shopping for finance as yet. When we purchased our first home, we had lots of hassles as with the advise of well meaning friends, we shopped around, and as a result had multiple queries lodged against us on CRAA etc, this reflected to the other lenders as unsuccessful applications, even though they were just queries. Took weeks to sort that out, and missed out on the original proprty that we were interested in at the time. Lost a lot of confidence as well. Sold that property 12 years ago now, nothing since.
We have wasted so much time already (40yo).
Is anyone aware of financial institutions that focus on this area (multiple dwellings)? There seems to be niche lender for everything else out there. I know the above seems extreme, especially for a first timer, but comparitively speaking the local market just doesn't lend itself to positive returns on rentals without copious up front funds, which defeats the purpose of this. The extreme purchase costs involved for the properties in this area actually means that it's a 'bulk buy and save' market.
I would feel more confident investing in a rental property where the income stream comes from 18 parties, thus minimising the risk, than having 4 local properties fo rthe same value with additional rates, maintenance etc. Anyone else see things this way?
Jay
Depending on the style of units and location you might get 65% on a standalone security.
Couple of specialised lenders out there in this market but would depend on a few factors.
Richard Taylor | Australia's leading private lender
Richard
Well that's bad news – that would clean us out once we worked in the costs. Bit of an irony when you look at the situation, but I really hate to lose my safety net. Seems like such a shame, when the this will be so clearly a positive earning opportunity. More info on the property if anyone else is interested. It is based in Darwin, a block from the largest shopping centre in town. Close to uni, and all bus routes, and everything is no more than 20min away by car. There are two blocks of 8, with minimal work required up front, but plenty of opportunity to improve (little bit shoddy looking). And all the units are titled, so opportunity to sell off individually in the future if needed.
Seemed ideal, but I have been told I have a 'pie-in-the-sky' way of looking at things. (I will not point out that the people that say this are not poster boys for investment strategies). I am just getting sick of people pooh poohing any idea I have, just because it scares the s.. out of them My thoughts are the money in the bank is barely earning anything, need to invest it with more growth. I have an extensive background in the building industry so can see where a little could go a long way, why not use it? Everyone says to invest in what you know!
I would prefer not to invest in IP that doesn't have land attached (eg managed properties, flats) as I don't want to play with others. Looks like I will have to lower the boom a bit.
Jay
Rich,
Am I right in assuming that most lenders would want this done on commercial rates also?
HI, i also had the same feeling as you that having more people contributing to mortgage payments should be seen as a positive, however, the banks don't see it this way. i don't know what their reasoning is.
i had looked at buying a block of six units that were VERY poditive cashflow with long term (15 plus years) tenants for a price less than the average Sydney home and i could not secure finance. Very annoying!
Hi Sonya,
The issue for banks is concentration risk.
If the bank had to sell one house, they will most likely get a price close to market for it, even on a short term marketing plan.
If they had to sell all 16 units "in one line" as they call it, then the value of each unit would be severely devalued. Hence the lower LVR.
JAY BURSLE wrote:There are two blocks of 8, with minimal work required up front, but plenty of opportunity to improve (little bit shoddy looking). And all the units are titled, so opportunity to sell off individually in the future if needed.Hi Jay – most comments above are due to people thinking they are on one title. You could split the titles between lenders at 80% LVR. If you were lucky you might get 90% on a few.
Banker
Hi Steve
Yes 16 in line would be consider a Com deal especially if they were buy, renovate and onsell type of acqusition.
Still can be done at competitive rates.
Richard Taylor | Australia's leading private lender
Thank you everyone for your ideas.
Banker – So if I get this right – I could realistically approach multiple lenders (perhaps two), thus sharing their risks. And with the seperate titles, I could perhaps go for lower deposit across the board, but most likely at a higher commercial rate on a few of them? The property contains two blocks of eight, so split the two and negotiate on half of each block? What would be the increase to the up fronts seeing that the transactions, with multiple titles for each lendor, would have to be seperated to do this (I assume)?
Richard – I would be looking at these as a buy and hold. They seem in good shape structurally (no close inspection as yet)
just bland and shabby. The market is here, especially for two bed with off street parking assigned. The CBD is glutted, however the parking is minimal, the rents exorbitant, so suburban areas surrounding the major shopping centre rather than the CBD have enjoyed good growth, I see no reason to sell on quickly, especially when they are positive income.Even if this one doesn't come to fruition, I would definately be looking at similar, so any advise will still be relevant and appreciated. Both for myself, and people like Sonya, who have more experience but the same issues.
Jay
Thank you everyone for your ideas.
Banker – So if I get this right – I could realistically approach multiple lenders (perhaps two), thus sharing their risks. And with the seperate titles, I could perhaps go for lower deposit across the board, but most likely at a higher commercial rate on a few of them? The property contains two blocks of eight, so split the two and negotiate on half of each block? What would be the increase to the up fronts seeing that the transactions, with multiple titles for each lendor, would have to be seperated to do this (I assume)?
Richard – I would be looking at these as a buy and hold. They seem in good shape structurally (no close inspection as yet)
just bland and shabby. The market is here, especially for two bed with off street parking assigned. The CBD is glutted, however the parking is minimal, the rents exorbitant, so suburban areas surrounding the major shopping centre rather than the CBD have enjoyed good growth, I see no reason to sell on quickly, especially when they are positive income.Even if this one doesn't come to fruition, I would definately be looking at similar, so any advise will still be relevant and appreciated. Both for myself, and people like Sonya, who have more experience but the same issues.
Jay
Thank you everyone for your ideas.
Banker – So if I get this right – I could realistically approach multiple lenders (perhaps two), thus sharing their risks. And with the seperate titles, I could perhaps go for lower deposit across the board, but most likely at a higher commercial rate on a few of them? The property contains two blocks of eight, so split the two and negotiate on half of each block? What would be the increase to the up fronts seeing that the transactions, with multiple titles for each lendor, would have to be seperated to do this (I assume)?
Richard – I would be looking at these as a buy and hold. They seem in good shape structurally (no close inspection as yet)
just bland and shabby. The market is here, especially for two bed with off street parking assigned. The CBD is glutted, however the parking is minimal, the rents exorbitant, so suburban areas surrounding the major shopping centre rather than the CBD have enjoyed good growth, I see no reason to sell on quickly, especially when they are positive income.Even if this one doesn't come to fruition, I would definately be looking at similar, so any advise will still be relevant and appreciated. Both for myself, and people like Sonya, who have more experience but the same issues.
Jay
Jay don't listen to what other people are saying, do what you think is right, freinds and family always say its a bad idea unless they have done it them selfs and still sometimes they can be negative.
How about you approach the vendor or agent and sign up a deal subject to finance on a longer settlement,
Now if there all on seperate titles and you have some spare cash in the bank you could buy one or 2 then have it valued at its true value and then use the equity in that one to get the next one and so on, it might take a while but it will be worth it in the long run.
from my calculations they look like a good buy around 15% returnOr maybe the vendor will do some vendor finance, so buy them and have them revalued and draw down on that cash at a later stage to pay out the vendor
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