Hi all,
Answer me this question, and I will be a very happy chappie!
Regarding serviceability of loans.
One house, (current property that the bank and I own) 7 bedrooms, rented out on a “room to room†deal to students, generates $715 per week, but the lenders will only recognise the $460 per week (from the valuation) that the whole house will rent for.
How can I get the lenders / banks to recognise all the income generated by a investment residential property, rented out on a room to room basis, instead of only recognising the amount of rent a standard REIQ lease / property valuation lists?
If I could work out a solution to this problem, I would be able to get 106% loans, the TOTAL income covers the serviceability, and I can find / make enough of these properties to keep me busy for a long time
I have found one perfect (subject to building inspection) house for $370 000 or less, that I would love to get into. Seven bedrooms, two kitchens, two bathrooms, two toilets, two lounges, fully furnished, two of almost everything, (except the animals [hair2]) 737 sqm, 11 kilometres to the Brisbane CBD, about 140 metres to a train station, I can build to 3 stories anytime in the future, and with 5 tenants from the get go.
And the answer is ….
Cheers
TMR
[biggrin]Hey TMR,
That sounds like a great opportunity.
Most banks/lenders are very cautious with student accomodation as it resembles more of a commercial deal then a residential as it is basically a mini hotel. If you can service it on market rental you could use this rental however most lenders won’t accept increased rental income from student accomodation or ‘room by room lease’.Josh
Originally posted by joshadelsa:Hey TMR,
That sounds like a great opportunity.
Most banks/lenders are very cautious with student accomodation as it resembles more of a commercial deal then a residential as it is basically a mini hotel. If you can service it on market rental you could use this rental however most lenders won’t accept increased rental income from student accomodation or ‘room by room lease’.Josh
Josh – that is exactly his problem. Market rental doesn’t allow him to do what he wants.
TMR – Can you get 7 x leases drawn up? Or can you get a rental letter froma real estate agent showing market rent being what you are getting now? Maybe the agent selling the current property you are looking at will write it to keep you on his hook?
Have you tried a good broker who can shop it around the loan approvers at each bank? Your local manager has no authority when it comes to lending any more these days. 20 years ago the bank manager approved loans and there was no LMI etc. Today he seeks approval from the same centre the brokers use. So cut him out and have one guy shop it to multiple lenders for you.
I also have a five bedroom student house and am looking for another. But serviceability is not my problem so I have never had to solve this issue myself.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Josh,
Yes, it is a great opportunity!
Thank you for your reply, but your not telling me anything new.
If I can find a way to fix this problem, I could most likely find one of
these deals a month.
Cheers
TMR
Hi Simon and thanks for your reply.
TMR – Can you get 7 x leases drawn up? Or can you get a rental letter from a real estate agent showing market rent being what you are getting now?Yes, I can. I have found a property management company that deals in boarding / room-to-room houses, and that would confirm and legitimise the rental income. The REA should also be happy to supply a letter confirming room-to-room income.
Have you tried a good broker who can shop it around the loan approvers at each bank?
I have some guys in Melbourne who worked a miracle April 10th 2004 to get me into a 9 bedroom $456 000 property 5 k’s to the CBD in Brisbane, but no answer to the current problem yet. I will contact you soon.
I also have a five-bedroom student house and am looking for another. But serviceability is not my problem so I have never had to solve this issue myself.
Good for you!! : ) It always an interesting proposition these kind of rentals. My first venture has totally added to the list of interesting stories I can now tell! LOL
It’s all an interesting learning experience, and it can’t be that bad as I would like to have about 50 more of them!
Thanks again.
Cheers,
TMR
Hi TMR,
Just make sure the property is up to scratch in regarding to being compliant for border housing. After the Childers backpacker hostel fire the QLD government are very strict on getting these properties up to compliance. The costing could be very high if the property is not compliant.
Check with local government agents.
Thanks
Aslam Sargeant
[email protected]
Looking for properties in Brisbanes South?Hi Aslam, and thank you for your reply.
Yes, I am aware of that, but what I was looking for is help with my question.
Thanks to some other suggestions, it looks like a third party lease will solve 75% of the problem.
Cheers
TMR [exhappy]
Hi TMR,
Just wondering what a third party lease is? If you can elaborate that would be much appreciated.
Kim
Kim Anand
[email protected]“Money Can’t Buy you Happiness but it Does Bring you a More Pleasant Form of Misery”
Hi Kim,
From what I am told, it’s just a lease from a party other then the buyer or the seller.
As an example, one of the guys I work with has a house in Karratha in WA, but he lives in Brisbane now. His old employer in WA needs housing for its employees, so his ex company leased the house from him for a few years.
I don’t have all the information yet, but it seems if I can find a “friendly†third party / company / business to lease the property from me as a whole, and supply me with a “paper†lease, the bank will recognize 75% of the stated monthly amount on the lease.
As long as there is no mention of a room-to-room deal, students, low-end workers, that the third party is leasing the whole house for staff accommodation or interstate visitors or staff, the bank should accept it.
Is this kosher? Well, if you can find a “friendly third partyâ€, if you can re-structure the problem to provide low cost accommodation to those that NEED it, satisfy the lender, get what you need, it sounds good to me!
Cheers TMR
Just find out the lenders requirements and work out how you can meet those requirements.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi all
Just a thought, do not know if legal or can be done.
Can you set up your own company say ” Student accomodation pty ltd” and do your third party lease through it?
Celeste
Yes you could, but the lender may see that you were a shareholder or director when they did the credit check. If they do then this won`t really solve the problem as they might require further proof.
A better option would be to have a company controled by a friend or a relative. Even just leasing to a friend or a relative may be enough.
AS an aside, this is one way to divert money into a trust, if you just purchased it in your own name to begin with. If you are geting a good income, you could lease your property at a low rate to your trust which then on leases it at a higher rate, making the profit. It can then be distributed to a person on a low tax bracket.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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