Hi,
This is a tricky question to ask so here goes.
I know if you put your rent up on an investment property you can go to the bank and possibly get a better valuation thus giving you more equity. Can anyone tell me how the banks do this calculation. Is it a sliding scale thing, dollar amount for a certain area????If I spend $2000 putting on a carport that will only get me $10 more in rent and the estate agent tells me that the value of the property wouldn’t really go up much either, then why would I do it?
If I can only get an increase in my valuation when I jump up $50 more rent then I have to think of something a bit more creative that the tenant will want to pay more for. I hope this make sence.Beck.
Tell me what you do between 9am and 5pm and I can tell you how much you earn. Tell me what you do between 5pm and 11pm and I will tell you your future.An increase in the rent received for an IP does not directly increase your equity.The equity you hold is the difference between the value of the property and what you owe on that property.If you pay the increased rental amount off your loan,then you will increase your equity by that amount.For the bank to increase the valuation,you woul dneed to have added value to the property,or been fortunate to have had a general market increase.
Tools
If you increase the rent this will increase your income and thus increase the level of serviceability over future debt/loans/finance.
If you increase the value of a property this will increase your Equity and if the property is held as security over a loan i.e. encumbered/mortgaged the LVR (Loan To Value Ratio) will decrease, allowing you to access the available equity, providing you can service/repay the increased loan amount. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Hi Becca,
an increase in rent only results in an increase in property value on Commercial properties; rom what I know, as that is one of the contributing factors to its ‘Usability’ and, hance value!Residential properties are as the two gents before me have explained!
Hope that helps clear up any confusion…
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas Edison
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