Join Australia's most dynamic and respected property investment community

Renovate then pay on sale finance?

Discussion in 'Property Finance' started by NewySteve, 13th Aug, 2015.

  1. NewySteve

    NewySteve Member

    Joined:
    13th Aug, 2015
    Posts:
    7
    Location:
    Newcastle
    Hi guys - first post on the new forum!

    Cut a long story short - have 5 properties with one in SMSF in our portfolio. We have one older house that was inherited that we have decided to sell during the summer - current value $360,000 with a $100,000 loan on it now. We reckon with some sensible work we can get the value up over $450,000 for sale and get rid of it quickly (it's close to the beach etc). My other properties are at 80% LVR or near enough.

    Problem - due to doing that silly thing of leaving a PAYG job and starting a business less than two years ago, bank has already knocked back a request to borrow the funds to renovate the property, citing serviceability, even though the rent is $360pw now.

    We simply want to borrow some funds, renovate, sell and clear the debts, credit cards and another mortgage - common sense I thought.

    I have seen one company advertise renovate then pay on sale which seems the perfect solution, however they only operate in Melbourne. Does anyone know of similar schemes or of a finance strategy to get this reno happening? Thanks in advance.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,254
    Location:
    Perth WA
  3. NewySteve

    NewySteve Member

    Joined:
    13th Aug, 2015
    Posts:
    7
    Location:
    Newcastle
    Had the ABN for two years now, just about to prepare next ITR which would be the second since starting business. Business hasn't been great, but I expect to pay tax this year which is a good thing in a way!
     
  4. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,136
    Location:
    Melbourne
    You might qualify for a low doc loan. Make sure you let the broker know your intentions to sell, their comm gets clawed back of you sell within 2 years. If possible you should secure it against another property, so on the sale you still have access to the loan for the next purchase.
     
  5. NewySteve

    NewySteve Member

    Joined:
    13th Aug, 2015
    Posts:
    7
    Location:
    Newcastle
    Didn't know about that 2 year sale clawback with brokers. Just some further info that will help - I own the house 50/50 with my brother - he took out the $100,000 loan for his own renovations etc. I am guarantor, the simple thing seemed to be to go for a 2nd mortgage of about $70,000 for me to get the work done, clear a personal loan and get the property on the market. Once sold all those debts cleared and then I can renovate one of my other properties.

    CBA who have the original $100,000 loan said no, entirely due to servicibility - this despite having combined PAYG income of my brother, wife and my wife as well. Also told us that because of my status they could only lend 48% LVR, so totally stumped. Pretty maxed out with other loans so loathe to borrow against them short of getting up to date valuations. Another option would be to completely refinance the $170,000 total with another lender and pay out on sale?

    I know you can look at caveat or private loans but would rather avoid the expense - it just seems a simple concept to borrow money that is guaranteed to be repaid within 6 months. Frustrating.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,254
    Location:
    Perth WA
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,409
    Location:
    Gold Coast
    its Aug 2015

    if your business has decent real taxable income for 2015 perhaps find a lender that will work off the one year financials and borrow against those.

    ta
    rolf
     
  8. Mortgage Capital Australia

    Mortgage Capital Australia Mortgage Broker & Brisbane Buyers Agent Business Member

    Joined:
    20th Jun, 2015
    Posts:
    206
    Location:
    Brisbane