Is there such a thing as "instant equity"?

I've been reading about this lately - instant equity upon purchase by either buying below market value, or building new.

Is there a way to know before purchasing that there will be equity available? If there is this means moving deal to deal a lot quicker. Or can buyer's agencies help with this?

Wondering what everyone thinks!

 

I think there is. But i also think if you spend time searching for 'perfect', too many 'greats' will pass you by.

 

Yes, instant equity is brilliant, buying below market value. Its all good on paper and if you can access the equity

Selling may not be viable immediately with this strategy

Currently using this strategy, am looking a 12 month window, where I start flipping a few, rinse and repeat

 

Exactly what I was thinking, is there any way to know before purchasing? Check the value on Core Logic?

 

The last time I did this in Oz was 2014
Basically you are looking for product which is much cheaper than median house price. I aligned myself with a real estate agent and set alerts and just have to keep looking and cash helps

I am using this strategy in US, a little different here as markets are rising

Basically buying next to suburbs/areas which adjoin higher end values. Buy volume, sell a couple in 12 months?? No reno required for this strategy

 

Yes. It works by paying a large deposit and getting a lower LVR

 

Are you talking about accessing bank equity or true equity creation?

One way I have experienced is buying something that is a bit rough around the edges, say bottom quartile of sales, but on paper looks like the suburb median for beds/bath/garage/land size.
Down the track desktop bank Val's can usually be achieved in line with the suburb median.

 

That's what I was thinking, bank equity. Just wanting to try to think of ways to make sure it does come through as a good/strong equity position, checking core logic reports, suburb history. Maybe I'm overthinking it

 

Forget corelogic, waste of time, stats can be totally wrong and even predictions.
For example Corelogic got it wrong this year would you believe.

What matters is the actual real numbers/sales figures, what is actually happening on the ground and comparing apples with apples.

MTR

 

For me, when building new, instant equity is a must!!
It's really only a matter of looking at the suburb median, then looking at what comparable properties are selling for.
If comparables are selling for say 500k, and you can build a similar property for say 420-430k, there's your instant equity.
If you buy into a rising market that's just a bonus. Don't rely on it for growth or equity though.
Always make sure you have a decent margin at current market values.

 

Hi

This is what I suffer from.

Regards,

alicudi

 

If you are going to try to get a bank valuation to access the equity then you may run into problems. The valuer will take the purchase price into consideration especially if it is low.

I ran into a similar problem in Melbourne when I tried to refinance. For some reason my neighbor sold his house under market value which brought the valuation of mine right down. The low valuation crashed the refinance. The valuer put a low 4's valuation on my property and later that year my property sold in the high 7's. This is the vagaries of valuations but you are stuck with the system.

You may be better trying to find something with potential to add value. My last purchase was being valued as a 2x1 but it was a bit of a mess due to the last owners badly joined a granny flat to the main house. My investment partner saw that the floor plan could be configured to covert the house to a 4x2 without extending. That should add some value but it's not 'instant' equity. It was a bit of work.

Adding bedrooms and bathrooms usually adds value. Just make sure the amount of living area balances with the number of bedrooms. A 4x2 with only a small living area doesn't work. The 4x2 we did has 2 seperate living areas, which is expected with 4 beds.

 

Not quite, that's the developer's margin.

 

That's one heck of a difference. Finding something like this is what I'm struggling with.

Maybe contacting councils to see the value they put on the property for rates. Maybe this is reliable?

 

Good point, and I guess to look at stale/older listings to see what the issue is and if it's worthwhile fixing.

 

Rateable value has nothing to so with market value.

 

I've often found banks are more willing to 'recognise' the instant equity portion after some 'add value' work has been done. So now you have the 1. instant equity portion and 2. the add value equity portion.

Buying bmv and getting a bank to recognise it and let you take out that equity the next day is generally alot harder.

 

If you've just purchased 'BMV', you've dragged the market expectations down. How so you know that the market wasn't already on a downward spiral?