Hi All,
I'm new to the forum and am looking at purchasing my first IOP. I'm sorry if this has been asked a 1000 times before.The house I'm looking at I should be able to buy for $255000, and the Real Estate agent said with some renos it would be worth about $300000. So new paint, floorcoverings. replace some electrical wiring, new bath, which I'm hoping can be done for under $25000. What I want to know is how do I organise my finances to pay for the house and renos?
Is it best to get 1 loan or some other way?
Cheers Cheryl.
Hi Cheryl
Welcome aboard.
You won't be able to fund the renos out of the same loan if you're only using the property you're purchasing as security.
If you have another property with equity, you could borrow against that equity to cover the deposit/costs/renos on your IP.
Does that make sense?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Also Cheryl, it's wise to take what the real estate agent says with a grain of salt. After all they are legally required to work on behalf of the vendor and pursue their interests, not yours! The property may indeed be worth 300k after a reno, but it's best to verify this by looking at the sales prices of renovated properties in the area to see if the numbers stack up.
I provide clients with residex reports for investment properties that they are interested in. One of the best features of these reports are the past sales data for the area, which is useful for comparing prices (and potential prices post reno, like in your situation). Have a chat with your banker/broker, they may offer this service.
On pricing, if you have a bit of nouse and the skill set, you should be able to keep well within your <25k estimated budget.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Cheryl,
Here are a couple of questions to ask yourself:
What is your Strategy?
Buy, Reno & Hold?
Buy, Reno & Sell?
Buy, Reno & Live In?
Purchase price:
Stamp Duty:
Bank Fees:
Reno Costs:
Interest Cost While Vacant:
Cost of Your Time:
Proposed Profit margin:
Cost of Selling:
Is this worth the risk for this level of return?
Often other experienced investors forget how much they already know, when you are just starting out what you don't know is what will end up costing you the most.
I would suggest playing it very safe on your first two or three properties. Concentrate on capital growth areas and good cash flow. I have reno'd over 100 houses and the same again in units and I don't treat the process lightly. Reno's work best in a raising market where the market can hid your mistakes.
For a list of trades check out this old post: https://www.propertyinvesting.com/forums/help-needed/4349049
Modernity Investing
Email MeWhilst normally you cannot finance the renovation costs in the same loan as the initial purchase there are a couple of ways of getting round this.
We have done a couple of loans recently for forumites where we have we funded nearly 100% of the initial purchase price leaving them with cash over to carry put the reno when they needed it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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