Finance Questions

Not at the moment. They have a residential loan product for up to 4 leases. A 5 lease going concern such as a new rooming house is referred to their commercial lending team. There are specialist Lenders that can do a competitive residential loan on your Rooming House such as Granite, Liberty, and Mortgage Mart. Please note that not all lenders are available direct to consumer and we advise you to use a broker to find an appropriate lender. We can refer you to specialist brokers who we recommend for this unique area of lending.

There are competitive residential finance options available for buying and building a Rooming House. While there may be features of a commercial loan that benefit you substantially, keep in mind that you will pay higher interest and need a larger deposit for commercial finance for a Rooming House.

Residential loans will still have a commercial valuation. They have 80-90% loans, meaning your deposit of 10-20% down. This can be cash or equity from an existing property. Commercial loans will typically be 50-65% lends, and have higher interest rates.

A commercial valuation done by the lender is because the lender will hold financial risk on the property while the mortgage is being paid down. This form of valuation will be a more thorough review of your asset and take into account its rental income, outgoings, the comparable sales of like assets in the area and the replacement value of the property.

A residential valuation done by the lender is because the lender will hold financial risk on the property while the mortgage is being paid down. They typically rely on comparable sales of like properties in the area - houses of similar size, amenity and land size are compared to determine how much the bank will lend against the property.

When a residential property has multiple leases and makes a high cash flow, the lender needs to ascertain a more thorough report for its risk mitigation, and they will use a commercial valuation. A commercial valuation is typically not available to the buyer or their broker. It is prepared and retained by the bank issuing the loan on a property. They assess the property across many categories to build a case for its value. Such a valuation will look at gross income, net income, age of the build, size and quality of build and design, value of the land, value of the build, risk assessment of the sales market, lease market, performance of the property, cash flow risk, environmental issues, built context in the area, and socio cultural risks in the area. They will make critical assumptions on the conditions and limitations and weigh this up to produce a range or number value.

By understanding the recent sales of similar properties with rental income similar to your target property, you can evaluate whether you are getting good value in your purchase or build. Experienced agents will have a raft of sales evidence to assist you when weighing up a Rooming House acquisition.

The bank will typically lend up to 80% of the valuation, not the purchase price. A buyer will want the valuation to be the same as, or higher than, the purchase price so there isn't a shortfall. A shortfall will mean the lender will ask for larger deposit.

Your finance broker can advise you on the lender's policy for pulling money out of your property asset. Generally, a valuation is required and the bank can lend up to 80% of the uplift to the owner.

Cash works, however, collateral in an existing property is also a great way of completing a Rooming House purchase with no cash down.

The bank will assess your income to service the mortgage for your Rooming House. If you put a substantial deposit, such as 35 - 40% (depending on the lender and loan product), the bank can secure the loan against the asset without looking into your serviceability. An experienced finance broker can assist you here. We recommend active finance brokers who understand Rooming Houses, and the lenders, and their loan products.

Not necessarily. If you want to buy a Rooming House with a small deposit, it is easier with a high income. However, many buyers with a sole or combined income slightly above average can purchase a Rooming House with competitive finance. These calculations will need to be carried out by a finance broker for you.

Generally, yes. As the bank has a lower financial risk in the loan, they will offer more attractive lending conditions.

The Big 4 - ANZ, NAB, Westpac and CBA have a residential loan product for up to 4 leases. The 5 lease going concern such as a new Rooming House is referred to their commercial lending team. There are other specialist lenders that can do a competitive residential loan on your Rooming House such as Granite, Liberty and Mortgage Mart. Rooming Houses are relatively new and loan products will come in time, but have not yet been made available from the Big 4 banks.

As the complexity of the asset and loan are of a semi-commercial nature, we highly recommend experienced brokers that have settled Rooming House loans. The first time a residential finance broker tackles a Rooming House, they will struggle unless they have exceptional competence. We can refer you to the most experienced brokers who handle Rooming loans regularly.

At the moment, Columbus Capital has lenders such as Granite. Other lenders in this space are Liberty and Mortgage Mart. Please note that not all lenders are available direct to consumer and we advise you to use a broker to find an appropriate lender. We can refer you to specialist brokers who we recommend for this unique area of lending.

80% - 90%, meaning a 20% deposit or a 10% deposit. Keep in mind the smaller deposit you offer the lender, the more involved their assessment of your finances will be to judge your serviceability.

From 10% - 20% typically. A broker can help you use equity in your home or rental properties in lieu of cash savings.

Yes. If you buy an under performing or pay over market price for your Rooming House, or buy a Rooming House in a premium inner city location with high land tax, with a very small deposit and higher interest rate, or you foolishly choose to use a high interest commercial loan, then your costs can exceed your earnings and be negatively geared. If you do your sums correctly, purchase well and lend well, then the cash flow is very high from your Rooming House, and the loan will. not need you to tip in cash to service as it will be positively geared.

It can be, depending on the Rooming House package and finished build you are comparing. Typically there is an uplift in value from build package price to market value of the finished product. It will take 4-5 months or 8-9 months to build a Rooming House depending on your builder and design, so you will need to account for an additional time frame. Sometimes it is better to pay slightly more and buy a finished Rooming House to start earning and paying down the mortgage.

Yes, there will be a slightly higher interest rate during construction. It will take 4-5 months or 8-9 months to build a Rooming House depending on your builder and design. Once it is complete, the interest rate drops. Please refer to your broker to ensure your finance product has this function.

At the moment, they are very similar, if not the same as interest rates for a detached dwelling house leased as an investment.

All the lenders with the most competitive rates and LVRs are only accessible by certain finance brokers.

Only a finance broker or an accountant can produce your funding table. It essentially shows you all the finance inputs into the loan such as stamp duty, initial deposit, loan establishment fees, valuation fees, and the principal and interest payments to satiate the mortgage.

Yes, however each buyer is jointly and severally liable. Family members such as spouses or siblings often do this. You can also buy with a business partner that you know, however buying with a stranger is tougher as you will need to establish both your intentions and expectations and we recommend you get such an agreement in writing. A good solicitor can produce a reliable and sound document to protect all parties in a tenants in common property purchase.

Yes, you can if the equity available is sufficient to cover the loan deposit. An experienced finance broker can determine this for you.

Most buyers do set up a trust with a company as the trustee for their purchase. A good solicitor can set the appropriate buying entity for you relatively quickly.

It is a good idea to be GST registered as you can claim the GST you pay on outgoings such as property management, insurance, rates, urban utilities, maintenance, labour and items over the course of ownership.

No, there are over 3971 single bedroom leases every quarter in most suburbs, meaning there are often over 30 lease examples to give you a strong idea of the rental income when you buy before a Rooming House is tenanted. Often they are for sale while the final certificate is pending, which is needed before it can be leased.

New property has very attractive benefits such as tax depreciation and builders warranty, and the maintenance schedule is very minimal. Older properties may require more repairs to maintain their presentation and functionality, and tax depreciation, while lasting 41 years, has the greatest benefits in the first 1-5 years.

Your finance broker can produce a Funding Table for you so you can see how additional payments can get your mortgage finalised sooner.

The extra cash flow can be tipped into the Rooming House to pay the mortgage down quicker, or you can use the additional money to invest elsewhere.

You can get your finance broker to order a finance valuation and tap into 80% - 90% of the uplift with some lenders. Alternatively, you can use this as collateral to purchase another Rooming House, or you may choose to sell your Rooming House. We sell a great deal of Rooming Houses and have an extensive database of Rooming House buyers who would be very keen to review your Rooming House when this opportunity arises.

Landlord insurance will cover the building, and may also offer loss of rent depending on your policy. A good insurance broker can show you policy options that are less expensive that you probably think.

It is a good idea to have a professional manage the tenancies, property compliance and property maintenance. Rooming Houses are bigger and have more leases than dwelling houses, so an experienced specialist will save you time and money over the duration of ownership.

No, furniture is optional, however it increases the income of the property substantially and means tenants are not moving heavy and cumbersome items into and out of each room, minimising wear and tear to the property. Furnished tenancies are highly sought after by tenants as they are convenient and easy to lease.