I am having trouble understanding the scenario you put forward on the Creative Financing section – number 4 Long Settlements.
I understand the concept, and have seen it used under different conditions (equity from another property), but don’t see how it is posible the way you explain it. I have been wrong before (many times![]) so would appreciate it if you could set me straight.
You use the words “refinancing before taking posession”. This means that you have obtained finance over this property earlier? How is this possible without showing enough funds for deposit and costs (assuming your capacity to borrow is ok)?? Non-conforming market – not bank??
Last year Dave and I purchased a block of units for $530,000. We knew it was a great deal but didn’t have enough money to fund a 20% deposit needed as the bank would only lend 80%.
So what we did is pay $10,000 deposit (to the vendor) with the knowledge that we’d have to come up with the balance ($96,000) + closing costs within six months.
As a great stroke of good luck, the property increased in value to $800,000 during that time.
The bank was still willing to lend 80%, but because so much time had elapsed between the contract signing and our possession, they were willing to take the higher valuation figure rather than cost.
80% of $800,000 meant that this was not only a ‘nothing down deal’, which actually received cash from it!
And yes… it was +ve cashflow too!
Does this make it clearer?
Bye,
Steve McKnight
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Remember that success comes from doing things differently.
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Steve…OK just one question…without giving to much away where did this deal take place..town.. state..????? let’s all get in on deals like that..
come on throw some crumbs…
davlyn…
All can see the tactics by which I concur,none can see the strategies out of which victory has evolved…
I am always looking around property websites for a multi unit complex to buy. How often do you personally see them for sale? Is there a better place to look such as a dedicated website? Or should I just contact agents in the area and tell them what I am looking for?
I don’t know about where Steve finds his deals but I look in the Saturday Sydney Morning Herald.
This has a section under Commercial Property Forsale. You will find all sorts of wharehouse, commercial, DA approved property etc advertised. Amongst them generally under ‘Investment’ or ‘Flats’ are multi occupant units.
Generally it runs to 2-3 pages of tight adds so have fun hunting.
The scenario you give here indicates that the bank was prepared to offer you 80% of the higher of valuation vs purchase price. Most of the lenders I have discussed this with will only take the lower of the two.
Do the rules change once the lenders get to know you? Or am I speaking to the wrong lenders?
Hey Dave,
I’ll preempt Steve’s answer by saying that in this case his settlement was so long that the bank was prepared to agree that the value may have gone up in that period therefore their willingness to look at a valuation. On shorter settlements what you said is correct. They will always take the lower of Contract price or Valuation..
Hope this helps.
Enjoy
AD [:0)]
“Enjoy life. There’s plenty of time to be dead.”
-Anon.
another approach is to do works on the property during pre settlement and then have revalued as you have made substantial increaes to the security value of the property.
Hi,
A Quesion for The B, If you do add value to the property before settlement, How do you structure the forms/contract to allow you to have access to the property before it is actually yours. We weren’t even allowed the keys to a previous property untill after settlement. So just curious about it, sounds great.
Thanks.
Sandi.[]
Hi, Sandi.
It depends on the vendor and their solicitor. We just did a paint job on a unit while waiting for settlement – but the vendor was doing her own conveyancing – ie no solicitor to advise her not to !! They may let u in at market rental, but normally u can’t re-let until settlement. Good hunting[^]
Hey Sandi,
I have used a clause in my contracts that stipulates I have access to the property and can complete works to the property prior to settlement. You must be careful doing this though as you will want to ensure you can settle on the day or else the vendor gets a fix-up for free.
Just a matter of timing and comfort.
Enjoy
AD [:0)]
“Carpe diem, quam minimum credula postero.”
Lat., “Seize the day, put no trust in tomorrow.”
-Horace, Odes
In summary:
1) Write it into the contract
2) Convince the Vendor’s solicitors that it is OK. We often put in a clause that says we want access after we have gone unconditional. This seems to satisfy most people.
3) Ensure that the contract goes ahead to completion (if it doesn’t, you must un-modify the property, and it is a little hard to un-paint a wall [])
4) Be prepared for them saying NO. Our experience has been that private vendors will allow it if it is put to them in a favourable manner, however, the director of housing and any mortgagee sellers will NOT!!
cheers
The B r u c e []
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