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Gaining finance on a IP that needs a lot of repairs

Discussion in 'The Buying & Selling Process' started by PJ1, 6th Sep, 2015.

  1. PJ1

    PJ1 Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    72
    Location:
    NSW
    Hello
    I'm looking for an IP that I can add value to and have come across a few that are run down which I would like to renovate . I was concerned that finance on these types of properties might be more difficult to secure.
    How does a bank assess a property that migh have had , water damage , termites, general neglect . Probably sounds crazy but these are some of the things I'm looking for in a property as I enjoy rebuilding and seeing the finished product as much if not more than a financial gain.
     
    WattleIdo likes this.
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    It depends on the lender and the valuation report. A lot of the small lenders (particularly those without DUA) won't like properties that need massive amounts of repair. I would stick to a lender that has DUA.

    There are different types of "risk ratings" on a valuation report and the risk rating called "improvements" relates to the condition of the dwelling. Anything over a 3 is not good. Even at 3 you may have issues with non DUA lenders.

    You may need to using lenders that do no valuations and take the contract of sale but these are restricted to some lenders and at a lower LVR generally 80% (some at 90%).
     
    PJ1 likes this.
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    13th Jun, 2015
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    Location:
    Adelaide, SA
    The way I've bought these types of properties was to do a COS (Contract Of Sale) valuation where they value it just based on the contract only and don't go look at the property. Only certain lenders do this and only at certain LVR's so check with your broker on whether this is right for you.
     
    PJ1 likes this.
  4. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    This is where strategic lending planning comes out to shine. There's plenty of options, not including no valuation policy, or a strong policy which will allow the lender to mitigate any issues.

    This is just one facet of a greater plan which will take into account other factors such as future cash out potential for said property etc.
     
    PJ1 likes this.