Hi all,
i am looking at purchasing an investment property in Melbourne city. It is a studio apartment (student accommodation) priced at $140k, and it is 23 metres squared in size. I've asked around at many banks and building societies, although without much luck. The banks simply don't want to lend on anything less than 50SQM.
So my question is, has anyone had any experience, or know of, any banks of lenders that would lend on a property with this size? If so, what sort of Loan-to-value ratio could I expect?
Cheers
Hi Tomo
No conventional lender will touch it.
Anything over 35 SqM you are ok but 23 Sq M no chance.
More likely to be maximum 50% lvr under private finance and then you are going to pay for it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Tomo
Steer clear.
If you are going to find it tricky to buy the thing due to being able to borrow 50% at best, then anyone you hope to sell the property to in future would face the same difficulties. In other words, it'll be hard to sell if you need to offload it. This will affect its capital growth because there won't be lots of buyers beating down your door wanting to buy it from you.
Better to look at a normal dwelling with more floorspace, and against which you can borrow at a higher LVR. Ideally something that would appeal not only to investors but also owner occupiers, in case you ever needed to sell it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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Hi Tomo,
It's absolutely possible to get funding for places like your suggesting.
I have bought 3 studios (27sqm, 23sqm and 23sqm). I have used CBA for all of them. But CBA aren't the only lenders that will lend for it.
I asked my broker (I'm in NSW) why I keep hearing that banks don't lend for small studios and he said that it's just that most brokers don't know how to go about getting funding for them.
I would ask around at different brokers to see if they know how to get funding for studios. Or ask CBA directly? (I've never dealt directly with a bank…)
This doesn't mean of course that your chosen property is a good investment, just that it IS possible to get funding for places like you're describing. Oh, the other thing is that there were a couple of restrictions – I couldn't borrow more than 80% and the place had to have a "full" kitchen. Grey area, but basically it meant that it had to have an oven. Don't know why!
Good luck!
Hi Tomo
I'm with Jac – you're going to have issues off loading this in the future – which will impact on longer term growth.
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]
If you have 20% deposit and stay away from Mortgage insurance you can. But considering its student accommodation you may need 30% deposit.Also would be a big help if its for both students and residents like Shafston mansions in Brisbane
I use Commonwealth bank to finance these in the beginning.
Studios can never compete with a 2 bed unit in capital, but has its benefits in extra income returns. So its best to only buy one or two.
LMI isn't necessarily a bad thing if used in the right situations. It can actually be quite a handy tool when buying a few IPs.
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]
Even if you could get finance for such an investment you are wasting your money
There will be a glut of third rate investments in Melbourne that will see the prices sliding backwards they are third rate dont touch them.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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Thanks everyone for your input – much appreciated. It has definitely caused me to question my strategy and understand a broader scope of investing in these types of properties. I agree that if I'm having trouble buying it now, it's likely that I'll have trouble selling as any future buyer will also struggle.
Janecav, thanks for pointing me in the direction of CBA, I understand they have no minimum size requirement, so I think I will see them, and develop my rational further based on what sort of LVR they can provide.
Nigel – I'm interested to know why you hold that view on the current market in Melbourne?
Cheers,
Sorry that is absolute rubbish CBA do not lend on 23 square metres units or indeed do any other standard lenders.
Certainly in the good old days lenders used to but this day and age those have gone.
A requirement for the lenders that do lend on units under 40 square metres is that they must have a separate bathroom and is some cases a laundry.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Tomo11 again,
I'm glad you've found all the comments helpful!
Just to clarify on the last post from Qlds:
I just bought a 23sqm place in December with 80% LVR and no mortgage insurance. Lender was CBA.
The 27sqm I bought in 2011 with same LVR and no mortgage insurance. With CBA.
The first place I bought was 23sqm, was in 2008 (just before GFC), had a 20% deposit, borrowed 80% and paid mortgage insurance because I was self employed at the time. CBA too.
I've just stuck with CBA because it suits me, but others do lend for it too. Can't remember who though soz.
I refinanced my 28sq unit with CBA 80% lend (not crossed but I did have another property with them). They revalued it first (up). It previously had no mortgage.
Jane, you might want to be double checking CBA credit policy come Jan 1 2014.
No other lenders will lend on a property that small at a sensible rate.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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