Please see my previous blog on refinancing for an overview on what I have been trying to achieve. Mainly that my bank had a new policy in place that would not allow total loans to go over $2 million. So even with appropriate equity and serviceability I was ham strung from moving forward as my next loan would bring me just over. The past few months working with my very patient broker has seen us finding more banks have put this same policy in place in the past 12 months. We found out only after engaging with them and having valuations completed. All banks were wanting to take on my current loans however none were willing to move ahead with future loans so they were dismissed. It would have been good to know this before we engaged in the process but unfortunately as they were trying to win my business it was only after advising I would only sign on if future loans would be available that they advised they had the policy in place. Classic avoidance tactics when asked initially.
My new bank (sits under the big 4) is much more forward thinking with Investors and assesses 100% of rental income so another bonus for me and they don’t have an upper limit on loans as long as you can meet the equity and serviceability requirements.
I’ve been looking for an old rentable house on a decent size block within a street or two back from the beach and café strip. The idea would be either to subdivide and sell the blocks or build and sell/rent.
A corner block with old 3x1 house came onto the market about 7 weeks ago a street back from the beach. Being a corner block it ran down to the beach only five house blocks away and there were side sea views if a double storey home was built.
To conduct my due diligence I contacted the council to find out future plans for the street which had quite a few skid marks on the main road. A minor roundabout was being built on the side of this block which was purely to prevent hoons from using the street to do loops around the beach front. As it is a fairly quiet street at that end of the strip there isn’t an issue and minimal disruption. I conducted driveby’s at different times of the day/night over several weeks (it’s not far from where I live) and was comfortable that there were no heavy traffic issues.
There were two large trees, one on the verge and one inside the property line and the council inspector advised the verge one would need to stay for streetscaping. The council was very helpful and they even drove out to investigate if the tree could be a danger as I advised it might block the view coming out of the driveway close to the exit of the roundabout. Please note at that stage I had only been to a viewing of the property and to get an inspector to physically check was above and beyond my expectations.
Most of the houses in the small street had already had the older homes demolished and double stories built, making the most of the sea views. Buying an old home, renovating it to
rent for a couple of years then deciding on future plans works well within my skill and comfort levels.
The home is on a 494sqm block (previously subdivided from 1012sqm) and meets the R codes for subdivision to two blocks with separate entries on different streets due to its corner location. There would be future value in subdividing or building townhouses to rent or sell. This is where the emotional side of it kicks in. I’d like to live there and build a big double storey for my own use so who knows what the future holds. There are options with this property and I like that.
The day my refinancing was finalised my broker immediately put in for pre approval for my next loan. That week I booked another viewing of the house and commenced negotiations subject to finance.
There would be quite a shortfall in rent vs mortgage payments, even after a cosmetic renovation. Another benefit of moving to the new bank was the ability to have a Line of Credit(LOC) for the first time. This provides a buffer for those times when I might be caught short due to rental vacancies or urgent repairs (for my other properties also). It also provides funds for future stamp duties etc however will NOT be used for personal means not investment related. You need to ensure your personality isn’t such that you would be tempted. Credit card usage is a good way to gauge your susceptibility. Always check with your accountant if you’re not sure of anything.
The upshot is I made an offer, we negotiated and I now have my next property loan going through. I made the offer conditional on a building report which also gave me piece of mind if there were any major works to be carried out prior to the house being rented (noting it will be demolished in a few years).
I’m looking forward to starting a new renovation, it’s been over 12 months since my last one and I’ll keep you posted as I go.
