Advanced Investment Strategy: Financing multiple dwellings on one title

Finance for multi-unit dwellings usually requires larger deposit sizes.  The type of finance obtained (commercial or residential) and the lender chosen will mainly depend on the number of dwellings on the title.

 How to finance multiple units on one title:

• For <4 dwellings, it will be a standard residential loan, with a maximum LVR of 80%. Major banks will be willing to lend here.
• For multi-unit dwellings above 4 units, some non-bank funders will offer finance at higher interest rates. This can reduce the net yield of these investments.
• Once multi-unit dwelling sizes go above 8, the most common form of financing will be commercial loans.

How do valuations work?

• Valuations for these types of assets will typically be ‘long form’ valuations. These work the same as full valuations, except the valuer provides a denser report that examines data more thoroughly.  These usually take up to 10 business days after an initial inspection to produce, compared to 1 business day for standard full valuations.
• Long form valuations are relatively expensive (~$2-3k), with the cost often passed down to you from the bank. The prohibitive costs of valuations often means releasing equity from these type of investments is usually painful compared to standard unit purchases.

What is the maximum LVR possible?

In general, the following rules apply to the maximum leverage ratio’s possible for these investments:

• 90% for 2 units of less.
• 80% for 4 units of less.
• 65-70% for 8 units or less.
• Commercial loans for 8 units+ in most cases, around 65-70% LVRs.