M was one of our most challenging clients as we had to overcome a lot of obstacles before we got her deal across the line.
M is a professional in her early 50s who works and rents in Auckland. She brought up 4 children all by herself and a few years ago started focusing on her financial future. She purchased one rental property in Christchurch and had $110,000 left in savings to invest into another property. With her savings making 20% deposit she was able to afford a $550,000 townhouse in Hamilton. She happily signed up on the property and then we had to submit all the paperwork to the banks. This is where all the “fun” started.
After a couple of banks have declined her application we decided to approach Resimac which is a non-bank financial institution. The great thing about dealing with Resimac is they have slightly more relaxed rules which benefits the clients quite well. In return they charge slightly higher interest rates. If you have an investment property with them then 1 year fixed mortgage will cost you 5.24% per annum. Because this client has a big cash deposit she could bear this interest rate quite easily.
When Resimac has approved her loan, they have imposed a couple of conditions. The first one was she had to pay off and close her credit card. The balance was nearly $9000. They also were willing to provide lending short of $6000. Because Resimac doesn’t do any cash incentives it also meant that M would have to cover all of the settlement expenses such as legal fees, valuation fee, Body corporate fee paid upfront, rates etc. The total bill was around $5000. So here is what we have done to help her overcome all the obstacles:
- We engaged our recommended accountant to prepare the tax returns for her current rental properties for the last 2 years. That resulted in $7000 tax refund which went towards paying the credit card balance.
- We had to negotiate a longer extension of a month with the developer. Because of our relationship he was happy to do that for DPG and our dear client.
- We also had to negotiate a $5k discount with a developer to compensate for the shortfall of lending.
- DPG provided a financial assistance of $5000 towards the client’s settlement expenses.
- Because there were 3 months before the settlement we sat down with the client and designed a budget so she could save up more.
At the end, everything got done and M settled on her beautiful investment. Her property was tenanted on the day of settlement $20 more that what we have said in her cash flows. In addition, the registered valuation came in at $5000 higher.
The purchase price was $550,000. The rent was $520 per week.
The next goal is to sell her other investment and reinvest the proceeds into a better performing property.
We would also like to note that it wasn’t easy for this single lady to make property investment decisions. However she accepted our guidance and we worked together as a team very well.