"How to access more equity faster"

Hi Followers

I came across this today and thought I'd share:

There are plenty of bargains around in the current market and for some investors that could well mean finding a property well below its true value.

So once you’ve found your cheap investment and finally gotten used to another mortgage, you might want to start thinking about investment number two, or tapping into equity from another property. The trouble is, the current financial situation around the globe means banks have tightened their lending and may be reluctant to lend you more money in a short space of time.

However, Your Property Success director Jane Slack-Smith says those hoping to tap into more equity using either their home or an investment can use a few handy tricks to pull equity together, especially if you hope to borrow more money within just six months.

“The lenders will use the valuation that’s on file for six months, unless there’s something substantially different,” Slack-Smith says.

“So if you’ve done a major renovation or bought below the market value, if you can show somehow that it’s outside the norm, you can request another valuation to access equity. If you’re really onto it when you purchase a property and put yourself in contact with the valuer, you could have noted down their details. So if you used Herron Todd White last time, you could go to Herron Todd White again and tell them you want a valuation. Let them know it will be for bank purposes, so they’ll use it for a different assessment.”

In other words, Slack-Smith says you should be making friends with your local valuer, not your local tradies.
“You can influence the valuation. The valuer will try and put up recent sales and they’ll do a verification, but I would produce the valuation document for the valuer in exactly the way I wanted it. For instance, I would go to all the recent sales and use examples of pictures and properties. If there are some that went to auction that haven’t settled and the valuer doesn’t know about them, you can go around and write down the addresses and put down the agent’s phone number.”

Slack-Smith suggests you should also play dumb and let the valuer know that they’re the professional; your research was merely something you did in your spare time. This makes sure you won’t offend the valuer.
“Do comparisons on different properties. I say that mine was a three-bedroom home that’s on 300 square metres but the other one is only 280 square metres and internally it’s inferior. I use their terminology to do half the work for them.”

Slack-Smith also likes to get three local real estate agents to report on the rent you could get for the property and include this in her own valuation report.

“Then I put that on a spreadsheet and I go to my API magazine and I pull out all the rental yields. I reference API and dates. I can say the rent is worth, say, five per cent. If the rent is worth $300 per week, I know that’s $15,600 a year and if that represents five per cent yield then the property is worth $312,000. I’m not using medians, I’m back-calculating.”

If you’re planning to borrow against your own home, Slack-Smith adds that the money borrowed to buy an investment will actually be tax deductible. So while some people think it’s better to pay off your home first before you start investing, Slack-Smith believes this is actually a myth.

“It’s attributed to an investment, so it’s not bad debt,” she says.

“But from a borrowing point of view, you need to link it back to your own goals. There’s no point accessing equity just for the sake of doing it. If interest rates go down, you might have better borrowing capacity. But if you were going to access equity and didn’t have a plan, I would ask why you’re doing it. There’s more protocol from the mortgage broker and a lot of banks now won’t release the funds until there’s a contract of sale.”

This information was gathered from:
http://apimagazine.com.au/api-online/news/2011/11/how-to-access-more-equity-faster

DEB BRADY
0405 570 903