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Recycling Equity

Unless you have a large amount of equity or money saved, in most cases if you want to build a property portfolio reasonably quickly it is important to understand how to go about recycling equity so you can continue to purchase more properties.
 
Most lenders lend against the lower of purchase price or a registered valuation meaning that even if you have purchased a property at a significant discount and can prove it by way of a registered valuation showing the higher market value the banks will just lend off the purchase price.
 
With the LVR restrictions that were put in place this means that if you are past your first couple of purchases it is likely that you will need to put a 20% deposit in to make a purchase work.
 
See how we recommend structuring initial set up here, however if you are wanting to get your equity back out for further purchases please note:
 
  1. That if you have purchased at a discount and are not looking to add any value through renovations in most cases you will need to wait 6 months before lenders are willing to work off a registered valuation.
  2. If you are wanting to recycle more quickly then it is often worth doing at least some cosmetic work on the property as if you can show some work has been completed (I recommend taking before and after photo’s and keeping invoices) then we can recycle the deposits out much more quickly. I generally tell investors to work off 3 months from initial settlement but we have completed numerous cases where the investor has early access prior to settlement and we can recycle the deposit (or a good portion of it) back out within a month of initial settlement.

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Kris Pedersen Mortgages Limited
+64 9 486 4719
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info@krispedersen.co.nz

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Takapuna Office
 
388 Lake Road
Takapuna
Auckland 0622
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Level 6
135 Broadway
Newmarket
Auckland 1023
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PO Box 33650
Takapuna
Auckland 0740