IP Repair during contract what could go wrong?

Hi
We managed to secure a structurally sound IP in Brisbane; but with termite damage and few other issues that need fixing and repair of about 30K. The valuation came back saying "not suitable for renting". We are happy to fix the IP and get it back to rental standard.
We therefore plan to have delayed extension and seek early access to the IP to fix it while under conditional settlement subject to Building & Pest and Finance.
What could go wrong?
- We may not get finance approval at the end.
- Can the seller change his mind?
- Could the seller litigate against us and ask us to return the property in same condition i.e prior to our repair if it is not settled.
We are trying to get the contract suitably amended.
Any tips / experiences or things to watch out for? Ideas are welcome.

Regards

 

Heaps can go wrong so make sure you get good legal advice.
Vendor dies.
Vendor refuses to complete
Someone else gets priority over property (see Black v Garnock)
Who is liable for issues relating from the repairs
Insurance issues
What if the toilet is stolen?

 

it is not the one that is 399 that someone else already let go due to same issue/s is it.......anyways......

If something goes wrong while your doing this, such as further structural damage, you are responsible, if you fix it all up nice, vendor does not complete and says, thanks for fixing my place (not to your face of course) and your out.

if it is not habitable, I would guess the lender wont count income from rent and value will be less in their eyes, if you can show you have the cash, they may think it is ok.

Why would a vendor, or you, get into any major repairs with the finance all ok anyway ?

I have risked painting and minor repairs where the majority is my labour, I would not be slapping down sizable sum of my cash to fix what is not mine.

 

Could you go 80% with a desktop valuation?

 

Dear All,

Thanks for the responses. The IP is good value and well located in logan shire. There is equity in it. We also own the next door block; Therefore could be good purchase from land banking perspective.
The challenge is given today's lending market we have few lenders to go to & full valuation (perhaps a mistake) came back "not rentable".
Anyhow, Nemo still trying my finance options. Wylie know how you must have felt, about to tread that path. Terry respect your views & knowledge working closely with my solicitors. Dabbler this is a cheapie low 200K 3+1 standard block.
Thanks for all the tips and suggestions. Will keep you posted.

 

I bought and renovated a place a couple of months ago. We got early access and permission to do certain things, like paint and clean. I also used the time to measure and order things like a new kitchen, curtains etc. I got a bit impatient and did rip out the old disgusting kitchen a few days early.
Because the place was so disgusting and I didnt want to risk the valuation, I bought it at 80% so I could just do a desktop valuation, which stacked up nicely. The 20% was borrowed against another property, so still deductible.

 

Hi Nemo,
Thanks for sharing the experience. We are looking at a win win outcome. The seller has agreed for early access / complete cooperation for reno / repairs / delayed settlement. All subject to satisfactory Building & Pest and Finance approval.Their solicitor will also accept the amended contract with conditions. In lieu we will transfer initial deposit as they need to pay the same for their new purchase.
Plan B is to keep equity handy to settle @ 80% if required or even at land value worst case.
Unfortunately I am not very hand's on in doing the reno; but it's an experience that will be worth going through.
Thanks again for the positive support.

 

If you had used a broker who structured the loan correctly, the valuer would have looked at the contract only and not at the property and none of this would have even come up.

 

If you really want it, just keep getting other finance options, or come up with any shortfall & show a plan & funds for repairs (and that you own block next door and want to develop)

good luck, there is usually a few hurdles here or there

PS is it worth putting 30k into a place that you may knock down anyway seeing it is only at the 200k mark ? If it is not dangerous, maybe way lees is needed to make it a satisfactory rental ?

 

If you havent already got a broker I highly recommend @Corey Batt He's fantastic. I couldnt have bought my place without him.

 

Hi dabbler,

Yes quite determined to get this through. Your though of trying to optimise the reno cost is also noted. Might try to convert this into a 4 bedder from a current 3 bedder

Plan is to keep this house standing for few years hope to get a rent of 290 for a purchase price of 200 + Reno & closing cost.

Thx.

 

Thx. I do have a Ross from Aussie Parramatta on my side since past few years. No issues so far.

 

I think in general what was possible few months back is not possible in today's market in terms of Finance.

 

The ability to have the valuer review the contract and not the property has not changed. You should have communicated with your broker that the property was in disrepair and he should have organised finance to suit.

 

Yes Agreed. lesson learned. I also insisted on full valv as I wanted to be sure of finances.

 

These sorts of deals the finance needs to be structured carefully to allow the right result.

The policy around this hasn't changed with APRA - so definitely would have been prudent to utilise a lender with policy to use contract of sale/desktop for purchase.

 

Lessons Learned mate. There is always a next time.

Thx.

 

Hi Wylie,
Thanks for the concern. We do use a broker, but in our anxiety to be sure we asked for a full valuation.