February 6, 2013 by Dymphna 1 Comment

Your Money Is Waiting–Now Go Get It!

Today, there are fabulous buys happening right now in real estate in many parts of Australia, and all the signs are there for terrific growth in the market going forward. I fully expect to see real estate prices to continue to rise throughout the year, with some areas rising as much as 30 or 40 per cent.

That’s why if you haven’t yet gotten on the bandwagon of real estate investing, now is the perfect time to get in on the property side for those who want to get into the market! And even if you’re already an owner of an investment property–or several–now is the perfect time to expand your portfolio.

Having said that, let’s look at some opportunities in real estate investing that are not on the property side of things per se…

Cheap money

I’m talking about the opportunities on the financial side of things. Because let’s face it, many people who want to get into the real estate market right now, but don’t have the money to do so, are left standing at the door. The truth is, not everyone has the money in his or her pocket to get in the market, even when the opportunity is right before his or her eyes.

And isn’t that the big question? Investors who want in, ask themselves, “Where am I going to get the money?” “How can I get the money?” “How can I qualify?”

Recently, I talked about some of the fantastic opportunities in obtaining an investment property through vendor financing. Now, you know that I’m a big believer in vendor financing of a property because of all the advantages there are with that sort of strategy. It’s a great way to get into a property with very little or even no down payment, your credit score is not a deal-breaker, and you can often get more creative terms to boot! In fact, many of my students have made fantastic profits in chunk deals and positive cash flow deals doing just that.

But obviously there are certain advantages in financing your investment property by using conventional financing options, like lower interest rates, for example. That’s exactly what happened near the end of last year. The cash interest rate was lowered to three per cent, which meets the interest rate low during the heart of the GFC. That means we now have the lowest mortgage rates since the 1960’s in a rising real estate market!

Who is lending right now?

I know you’re thinking, “Right Dymphna, but who’s lending money on real estate right now?” And you’re right; lending on property has been tight. In fact, it wasn’t too long ago when almost nobody was willing to lend money. It’s no secret that the big four banks in Australia have been quite reluctant to lend the past couple of years in the wake of the GFC…

But over the past 12-18 months, lending attitudes have changed. Today there are second tier banks that are now much more willing to lend on property. After all, they need to build up their loan portfolios and they can’t do that if they’re not lending money, can they?

And the lending business is really starting to hum again. With second tier banks now offering real estate financing and expanding their services like they are, they’re putting pressure on the big boys to resume lending as well.

Not only that, but LVRs–loan-to-valuation ratios–are back up to 95%, so you can get into properties with very little money today. Of course, you will have mortgage insurance to pay as you do the mortgage, but I look at that as just a cost doing business.

Start a business relationship

But low interest rates are just part of the picture of a bank lender. Establishing a relationship with a bank can also help you fund additional purchases, offer you a line of credit, and other services that come in handy as a real estate investor. For example, many banks are now offering “Pro pack” loan packages to investors. That is, a “professional package” loan deal on loans of $250,000 and above, which gets you a 0.7% break on the standard variable rate loan. That’s a benefit that saves you money from day one, and the banks are very happy to make those kinds of deals.

But just like picking properties in which to invest, you want to choose your lender wisely as well. Even very standard circumstances in terms of qualifying might give you five or six different lenders that might fit the bill, but there is more to it than that…

You will need to find out which banks will give you a loan with no prepayment penalty. Or which ones will make it easy to refinance or give you reno financing? So it’s really not just about choosing the first bank that will give you a loan. You also need to look into several of these factors as well.

Give yourself some credit

Another point to consider that in my time as an accountant I’d come across is that some people will have a mark on their credit. A mark on your credit history might be a bankruptcy or a default in your past, or it just might be a minor indiscretion, such as late payments on bills, for example. If you do happen to have a bit of a mark on your credit history, they you have some work to do before you apply for a loan from a bank. You may even need to enlist the help of a credit repair service that will work with you to repair your credit rating to get it where you will qualify for lender financing. The costs for these services can vary; I’ve seen it cost any where from several hundred up to a couple of thousand of dollars. But if it gets you into a position to take advantage of a fantastic buy on a property, then it’s well worth the money, isn’t it?

So, property values are rising, interest rates are low, LVRs are high and banks are lending again. If you’re not in the real estate market yet, what on earth are you waiting for?