Most people do not undertake illegal renovations on their property. Option 1 will cost you from the tenant and won’t stop the Council. Option 2 will cost you a lot more to get approval which I doubt will come. Option 3 has buckleys of happening!!! No-one I know would pay an extra 50% rent for a rumpus room. Option 4 will realise a much lower price due to illegal renovations.

By the way, you do know any insurance you may have on the property is null and void due to the illegal structure don’t you? If your building burns down or a tenant hurts themself, it is all over!

TMA

Wow, you are easily pleased oshen!

TMA

That is not 95% LVR. I thought that was what you were talking about. I have done heaps of these for old clients as I am sure many brokers here have also done.

I have done a loan in excess of 150% “LVR” of purchase price!!!!! Woooooohoooooooooooooo!!!!!!!!!!!!!

The client bought off the plan in 2001 for 290k. Valuation in 2003 was 560k. Loan amount was 438k at settlement!

It is also common with advantageous purchase.

All lenders I know will also base LVR on valuation instead of contract price regardless of time limit but may restrict actual lending to contract price if there is no valid reason for the difference in prices.

In devil’s case, it was a completed renovation causing the valuation to include the improvements to the property instead of land only.

The only nice thing BankWest seem to have done here is waive LMI on the minimal amount above 80% LVR. This would be not much more than the cost of the second valuation paid for by the client. What was it, about 0.2% of loan amount?

I still think they are the pits… wait until redraw is needed!

TMA

I totally support investing while renting. It is usually cheaper!

TMA

I would go with buying the home to live in for 6 months and then moving out to rent a place to live and rent the property. That way, if in NSW, you pay no stamp duty, you get the FHOG, you get a 6 year CGT exemption, the whole property becomes fully deductible and your overall cost to hold the property should be less when it is rented out depending on how much you pay for the place you rent to live in.

Also, whoever is telling you prices are high and rents are low at the moment is a bit confused. Prices are coming down quickly in many areas and rents are stable or moving up as people are staying away from property in many cases. It is a great time to find some bargains!!!

TMA

Offices will be at the lower end of the LVR market. They are higher risk.

TMA

That is true Alistair. Also, there is always the 100% no deposit loans with FHOG where the stamp duty savings (in NSW) and the $7,000 grant will pretty much cover all expenses up to a purchase price of around $250,000. The rates on these are not to bad (around 0.8% – 1.5% more than normal).

TMA

I have not missed a thing!

I think you are missing the point that there are so many ‘IFs’ and ‘BUTs’ in the ‘LIVING’ off equity strategy one of which you outlined above. It has way too many variables and too much risk to be considered as a serious strategy to be used.

There is that ‘IF’ again. What happens if you have a small income and NO growth? Nothing is absolute!

OR…

What happens if you are lucky enough to have your LVRs low and then the market does a quick about face and you can no longer draw equity because your LVRs have shot up? You still only have a small income but now you have a lot more debt from previous draw downs. What do you do?

Get off the eggshells mate! I don’t know how your mate considered your comments balanced. Your surplus growth might not be as high can easily be your surplus growth can be non-existent or negative.

When you suggest changing your level of gearing when tough times hit, surely you are not suggesting selling some property??? What a poor plan and a great way to end up with nothing over a long period.

And here is the point you are missing….

INVESTING!!!!

I have said it many times and I will say it again… ‘LIVING’ off equity is not investing. It is using your asset base to fund non-deductible personal expenditure which would only be required by those who cannot afford their current lifestyle and their levels off debt. It is a recipy for disaster.

It must be made clear when discussing using equity whether you are referring to ‘LIVING’ off equity (which I think is ridiculous) or ‘INVESTING’ off equity (which I totally support 100%)!!!

I think you speak of ‘INVESTING’ off equity (which is a fantastic plan for any investor) when you write ‘LIVING’.

I noticed someone made mention of the elderly living off their equity. Reverse Mortgages are a totally different ball game which I support for those who have no inclination to invest and want to improve their lifestyle. The BIG DIFFERENCE between reverse mortgages and ‘LIVING’ off equity is that one has to be repaid in life and the other is only repaid in death or moving into full-time care! They are not even close in comparison.

TMA

Notice how the interest rate was conveniently left out…

There has been such products around for years. Other lenders offer more than 105%. It is no big deal.

APerry, to address your comment, this product is marketed to higher income earners who spend on lifestyle and wake up one day thinking it is time to buy property.

They stop renting that $3,000 per week waterfront unit, start eating in instead of restaurant dining every night, lay off the expensive champagne, buy a silver watch instead of a gold watch and take 100% plus loan to buy their home and pay it down very quickly.

TMA

Don’t get defensive… I am allowed to ask questions. So, where is all the extra funds going????? Devil, do you have more than one property????

Is this an oxymoron??? What do you define as a 95% loan when LVR is less than 80% based on valuation????

TMA