Asset Based Lending & Hard Money Loans For Real Estate Investors
Lending And Loans For Small Apartments
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Lending And Loans For Small Apartments There is the old question that comes up every now and then, - "Should I buy that studio apartment?" They are usually marketed with a very attractive rental return however that's sometimes where the good news ends. Here is some of the "noise" that surrounds them-: "They won't lend against small inner-city studio apartments, You won't get approval if the floor size is less than 50 sqm, Student apartments are not an option, Some lenders won't lend for apartments in large complexes, Hotel or motel conversions are no good, The location of the unit within the complex is important While being just "noise" some of these points are somewhat valid. The recent credit crisis has put the brakes on a lot of lending overall and small apartments have not been shielded from this The biggest hurdle is usually lender's mortgage insurance (LMI). They are the ones imposing all the restrictions that are passed onto the bank. If you require LMI this is where the hard work starts Hurdles: Title. Strata/stratum title is normally acceptable, as are 'group' titles. Mortgage insurers aren't usually afraid of company title and will lend, though they may lower their LVR. Size: While this might not be important to the lender, you can expect the mortgage insurer to have minimum limits on the floor space. Always aim to avoid any apartments with a floor space of less than 50 sqm. It must be 50 sqm of actual 'living area' (not balconies and car space etc). In special cases this may be stretched down to 40 sqm but the property would have to be in a "blue-chip capital city area". The Bank may not impose a floor-space limit but notes that LMI might fail the application for that very reason. Location in the development/complex. One important factor may be whether it's in a good location in the development or if it's at the dark shaded noisy rear corner of the complex.
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Transcript of Lending And Loans For Small Apartments
Lending And Loans For Small Apartments
There is the old question that comes up every now and then, -
"Should I buy that studio apartment?"
They are usually marketed with a very attractive rental return however that's sometimes where thegood news ends.
Here is some of the "noise" that surrounds them-: "They won't lend against small inner-city studioapartments, You won't get approval if the floor size is less than 50 sqm, Student apartments are notan option, Some lenders won't lend for apartments in large complexes, Hotel or motel conversionsare no good, The location of the unit within the complex is important
While being just "noise" some of these points are somewhat valid.
The recent credit crisis has put the brakes on a lot of lending overall and small apartments have notbeen shielded from this
The biggest hurdle is usually lender's mortgage insurance (LMI).
They are the ones imposing all the restrictions that are passed onto the bank.
If you require LMI this is where the hard work starts
Hurdles:
Title. Strata/stratum title is normally acceptable, as are 'group' titles. Mortgage insurers aren'tusually afraid of company title and will lend, though they may lower their LVR.
Size: While this might not be important to the lender, you can expect the mortgage insurer to haveminimum limits on the floor space. Always aim to avoid any apartments with a floor space of lessthan 50 sqm. It must be 50 sqm of actual 'living area' (not balconies and car space etc). In specialcases this may be stretched down to 40 sqm but the property would have to be in a "blue-chip capitalcity area". The Bank may not impose a floor-space limit but notes that LMI might fail the applicationfor that very reason.
Location in the development/complex. One important factor may be whether it's in a good location inthe development or if it's at the dark shaded noisy rear corner of the complex.
Changing from commercial or industrial to residential. Hotel conversions, holiday lettings andserviced apartments (commercial) lettings rather than residential units fall under completelydifferent lending requirements (possibly commercial). So if they are being converted you may notget finance until the conversion is complete providing it meets all council's ordinances and generallenders' requirements, most lenders will proceed but there may be a reduced LVR or restrictions onLMI. The biggest reason is you're reliant upon the performance of the management company lookingafter the apartments.
Number of apartments in a development: There might be a limit on the number of apartments withinthe one development that you can put up for mortgage insurance.
The bank may limit lending on six apartments in any one development or limit lending for no morethan 25 per cent of a development
Do you want an investment apartment loan? Contact Us Here and let us help you out.
-----------More Hoops?? You Are Kidding------------
Here are some extras hoops you may have to jump through for finance:
-More thorough valuation inspections and reports.
-A lower LVR (70 to 80 per cent max, though some, usually non-bank lenders, only go to 60 per cent)-a higher deposit required.
-Reduced maximum mortgage amount.
-More expensive LMI if even available.
-Reduced consideration of the rental income to allow for longer vacancies.
-A call for additional or cross-collateral security(see earlier post here).
-Downright refusal of application at worst!
The fundamentals of real estate remain important, not necessarily the fact that there's a studioapartment. There are plenty of studio apartments that have doubled their value over 10 years. Theunit my have great rental returns low vacancy and be located very well so a bit of hard work andresearch at the start may pay off long term!
So Where Now-
Will your apartment qualify for finance?
By: Matt Smart
Article Directory: http://www.articledashboard.com
About The Author
www.Investment-Mortgages.com.au operates in Queensland Australia and helps local and
international investors and home owners get the right advice and best loans. They also provideinsurance and risk protection to ensure your strategy is water tight!
I am an author to a number of home loan blog sites throughout the USA, such as
texasusdaloan.org. Throughout all the years that I have been doing mortgages, the industry has beenthrough great deals of downs and ups, however after many grueling, monotonous years, I've made adecision to share my expertise and experience with everyone.
