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Property manager says it will rent for X. Banks say it will rent for Y.

Discussion in 'Property Management' started by Fortune Favors the Bold, 5th May, 2016.

  1. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Hi folks,

    I'm looking at a specific property and the vendor agency has provided a rental assessment of of $675-$725 per week. We've had the property assessed by two banks - ANZ and BankWest - and ANZ has come back with a rental appraisal of $900 per week and BankWest have said $850.

    Why do you think there's such a huge discrepancy? Who do you think we should believe, and why?

    Thanks in advance!
     
    Last edited: 5th May, 2016
  2. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Well, what do similar properties rent for in the area? Surely this is something you must have researched already.
    That is what you should believe.
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Usually it is the other way around.
     
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  4. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Indeed! Quite surprising actually!
     
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  5. kierank

    kierank Well-Known Member

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    I would let the bank's use their numbers for their serviceability calculations and use the vendor agency numbers for your calculations such as cashflow, etc.
     
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  6. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    We've done our own research and based on comparable properties we think it should rent for around $800 per week, maybe even a bit higher, but when I spoke to the property manager at Nelson Alexander (which basically control the suburb) she was adamant that we'd struggle to get more than $750.

    Strange, eh? You will have read about our tenuous position with the banks, after the recent changes. Do you think that whoever was doing the assessment might have had an agreement with the lender / broker to give an inflated assessment so the property would service better?

    Yup. I was surprised as well. I told the property manager at Nelson Alexander what the banks had come back with and she said "No way. Not in this rental environment." The house is on one of the best streets in Melbourne.
     
  7. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Yes, I think that's sensible - though of course I'd like to hope for a higher actual rental as well...
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Nope
     
  9. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Hmm. I didn't think so, but still it's quite weird how far about the assessments are. There's a big difference between $725 and $850-$900.
     
  10. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Terry - a question for you. If we bought this house based on the bank's rental assessment, got a loan approval from that same bank, and then advertised the property for rent around $750 prior to settlement, do you think there's any risk of the bank seeing the property advertised for $750 and then giving trouble with settlement?
     
  11. kierank

    kierank Well-Known Member

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    Do two scenarios - one with the agency's numbers (call it Likely) and another with your numbers (call it Possible).

    I always run another scenario where there is no rent and call it Worst Case.

    If you have time, run another scenario using the bank's numbers and call it Dreaming. :) :)
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Little to no chance of this happening for 2 reasons. Banks don't scour the news papers or internet looking for rental income discrepancies and they have based their assessment on a valuers opinion.
     
  13. D.T.

    D.T. Adelaide Property Manager Business Member

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    Ones for finance purposes and the other is what they'd be comfortable marketing it for.

    Same as the house price, chances are the valuation and what it'd actually sell for are 2 different figures as well. The latter requires a different skillset.
     
  14. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    I've seen this happen a few times. In those cases, the valuer looked to be using the median yield for same-#-of-bedrooms property in the suburb and applying it to the purchase price. In each case they were purchases well above the median which typically means yield below the median.
     
  15. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Right. This actually makes a lot of sense. The house is advertised as 3 bedroom, but is really two bedroom plus a sort of study / storage room that could maybe work as a young child's bedroom. Probably the property manager understands this and has factored it into her assessment, while the bank has just said "3 bedrooms in this area rents for X".
     
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  16. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Right. Thanks for affirming that. This is a first time for me and so much has gone wrong so far that I'm hyper-cautious at this point.

    Yes, although normally isn't the valuation significantly lower than the usual sale price?

    Anyway, thanks for your help. I appreciate it. This forum is amazing, as is the generosity of the people who contribute to it.
     
  17. melbournian

    melbournian Well-Known Member

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    whereabouts did you buy suburb wise? if it is nelson alexander i presume it is somewhere in north, north east
     
  18. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Fitzroy North.
     
  19. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    That might be it :)
     
  20. Perthguy

    Perthguy Well-Known Member

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    I found in Melbourne that the list price and the actual rent price don't equate in a lot of cases.

    I have not had good experiences with Nelson Alexander. However, the agent could be correct, highlighting the discrepancy between list price and actual rent achieved.

    For budgeting, I always assume the lower amount.