• an understanding of your bank’s debt service ratio (DSR)
• an understanding of your bank’s loan value ratio (LVR)
• a copy of your bank’s valuation and/or access to your bank’s valuer.
If none of these things rings a bell, then you probably haven’t established a structure you can duplicate. This doesn’t mean you can’t duplicate. It just means that you haven’t properly prepared yourself for duplication and you may be allowing your financier/lender to stunt your growth if and when you do decide to duplicate.The following is an action checklist to enable you to reappraise your LVR so you make sure your structure is in good shape – and you are managing your equity to build.
Tap into local comparable sales
On a three monthly basis, you should be asking your local real estate agents to print out local comparable sales that are registered through the appropriate state department or the valuer general’s office. Your managing agent should be able to give you this and it’s not a bad idea to have contact with a couple of other agents and check out what is on the market at any one time (and, more importantly, what sold.) Log recent comparable sales on your property management tracker. I gather so much key information on this, and keep referring to it year on year, that I generally add a continuation sheet (shown over the page) which I staple to the current year’s tracker.
Revisit your valuation
Compare your valuation documents to recent comparable sales to identify whether there has been an increase in your property’s value and therefore, potentially, your equity. I like to do this for myself first and then make an appointment with the valuers to ask them to reappraise the valuation on behalf of the financing bank. Some valuers may require instruction from the bank but if you have access to them yourself, you may be able to initiate the process on the bank’s standard instructions.
Often valuers are too busy to see you in person, so it’s not a bad idea to fax them a copy of your most recent comparable sales information and an idea of the range at which you want them to revalue. (I hope by now it’s obvious that you’ll be going for the upper end of the range.) A revaluation should cost you approximately $300. The purpose of revaluation is to improve your LVR. As the value of your property increases, the LVR goes down and your percentage equity increases.
Once you have confirmation of the revaluation, go back to the bank and resubmit your income status. With the enlarged equity in your property, you should be able to borrow further and duplicate your structure.