Bridging loan to buy a new property ..

Discussion in 'Investment Strategy' started by D'Mo, 1st Aug, 2017.

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  1. D'Mo

    D'Mo Well-Known Member

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    Hi guys.. need some prettt urgen advice if anyone has experienced a similar situation ..

    I currently have 1 investment property that is needing some renovations that I am not prepared to do due to not having the finances etc

    I'm faced with the option of keeping it & lowering the rent so I get tenants OR selling it (and hopefully buying a new property)

    I'm worried that IF I sell it, would it be near impossible to get back into the market

    Or should try get a bridging loan to buy something new first, then sell the old property?
     
  2. D'Mo

    D'Mo Well-Known Member

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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Why is urgent?

    A bridging loan won't help you. Substitution of security might.
     
  4. D'Mo

    D'Mo Well-Known Member

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    Urgent because current tenants are wanting to end their lease which finishes in September ..

    If I rent it out again, I'd have to lower the rent due to the renovations that need to be done

    What do you mean by substitution of security ?
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You have a different definition of urgent to me.

    Urgent is when you need to find toilet after 4 hours on a bus. Something with 2 months to decide allows for a leisurely decision with breaks in between to relax and ponder different scenarios.

    If it is urgent you should seek specific credit advise asap.

    Substitution if security means changing the property that secures the loan. You might be able to keep the loan open, sell a property, buy a property and mortgage that and releasing the old one - all simulataneously.
     
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  6. D'Mo

    D'Mo Well-Known Member

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    Lol I've 'urgently' needed to find a toilet before also & this feels different

    My loan is on fixed for another year, would substitution of security still be an option ?
     
  7. Brady

    Brady Well-Known Member

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    yes
     
  8. Corey Batt

    Corey Batt Well-Known Member

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    Yeah - bridging not necessary. If you sell you can just port it to a new purchase. Otherwise cop the lower rent.

    Can't borrow for the renovations otherwise?
     
  9. Befuddled

    Befuddled Well-Known Member

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    If you sell, wouldn't you be up for break costs?
     
  10. Brady

    Brady Well-Known Member

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    Not if you don't break the loan and substitute/port the security.
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Which Bank D'Mo?
     
  12. D'Mo

    D'Mo Well-Known Member

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    So I just called NAB and they said I could possibly do a port of security HOWEVER I would need to sell my old property for approx 465k - even tho I've only got 369k owing on the loan

    I don't think I'd get 465k for it tho

    So I'd have to put in my own cash? (Which I don't have)

    It's sounding quite confusing
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That is not necessarily true. You would still need to maintain the same LVR or less with the new security.
     
  14. D'Mo

    D'Mo Well-Known Member

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    Who would be the best to speak to about this ?

    The bank guy sounded like he didn't have a clue
     
  15. Brady

    Brady Well-Known Member

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    As @Terry_w suggest you need to keep the same LVR - that's not the same as now, but the same when the loan was originally established.

    Your loan is now $369k - what was the value of your property when you setup the loan?
     
  16. D'Mo

    D'Mo Well-Known Member

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    I got the property for $405k plus there was LMI

    The loan is currently fixed

    The bank told me today that IF I got the port of security ..

    I'd need to make atleast $465k to be able to get a new property

    I really don't think this property will get $465k ESPECIALLY AFTER paying the selling agent fees :/
     
  17. Foxdan

    Foxdan Well-Known Member

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    What are the renovations needed, why are they're urgent and if you can not do them and get a tenant at a lower rent, I assume they r not essential?
     
  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Someone licensed to give advice - a broker or a bank.
     
  19. D'Mo

    D'Mo Well-Known Member

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    Just the bathroom is having issues - leaking, needs to be fixed as it's soaking some of the hardwood

    Rent needs to be lower due to lots of new units being built in area.. so for the same price, tenant can rent a BRAND NEW property instead of my old house that needs repairs

    I literally don't have any cash to do the reno's so it's tough situation
     
  20. Befuddled

    Befuddled Well-Known Member

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    I seem to recall you bought in Algester not long ago (less than 2yrs?).

    What's changed in the last couple of years that's changed your sentiment about the area or the property itself?

    Property is a long term play. Once you crunch the numbers, I doubt it makes financial sense to sell and re-purchase elsewhere due to high barriers to entry, exit costs and the fact that you paid LMI to acquire the property in the first place.

    I'm assuming the property is livable as is, as there's a tenant in place.

    Consider:
    1. No renovation + drop rent to get a new tenant to buy time while you save up for a reno
    2. Take another look at performing a renovation but keep scope to a minimum
    In my opinion, both these options are more appealing compared to selling