When it comes to finding your dream home, a common question that arises is to buy or build? Well, the answer can be both! The rising popularity in TV shows such as “The Block” and “First Time Flippers” has inspired many Australians to buy a fixer-upper.
It is predicted by the Housing Industry Association (HIA) that more than $35 billion will be invested in the renovation of existing properties in 2019 which is a 6% increase on 2018 figures. It’s true that this option is not always profitable, however there is the opportunity to do financially well if you are careful, cost-effective and knowledgeable in the property market.
Here are five common ways you can finance a major renovation
1. Top up your existing mortgage facility
You can redraw on equity and either increase the term to minimise payment or factor in additional monthly repayment to access the capital that is needed to finance the renovation. This common method of refinancing will have a calculable impact on your ongoing payments.
2. Straight redraw
If you have an existing mortgage, you might be able to redraw on an existing equity to finance the renovation costs of a new investment property, but this will depend on how long you have had the mortgage and also if there were any additional repayment made.
3. Short Term Personal Loan
When you renovate for profit, your goal is to make money as soon as possible; therefore, you want to maximise the resale value or rental income of the property quickly. In this case, you might be qualified for a short-term loan to direct cash flow to your project and pay it off early to minimise additional interest expenses.
4. Self-funded renovation
Self-funded can mean using your savings to purchase the property, but another option is to turn your liquid assets into cash for a short period. This can be in the form of shares, short term bonds or term deposits. This is a good option for you if the expected return on selling the renovated property is higher than those investments.
In some cases, private investors can provide the cash required to renovate up front, for a fixed fee upon sale or at a specific time in the future. This seems like a sweet deal, but keep in mind that new renovators should be very careful and make sure that the contractual agreements and future obligations for repayment are very clear. The key here is to know whom you are working with.
If you are interested in any of the above financing methods, please don’t hesitate to contact our specialist Finance Broker at FutureNow Finance. Our aim at FutureNow Finance is to help you fund your aspirations faster. To learn how you can start taking control of your future, call us on 1300 013 730 or contact us today.