You?ve seen a property that has great potential for renovation, a property that is currently worth substantially less than those around it. Find out how to take advantage of this great opportunity and have investors eager to help you.

Property Developers have been using a strategy of funding their developments using 2nd Mortgages for many years. This strategy can also be applied to property renovations with great results.

Developers usually source their funds from banks (1st Mortgage) and private investors (2nd Mortgage). While the developer may put in some of their own funds, private investors are often very eager to provide some of the capital required, for a higher rate of interest.

The higher rate of interest for the smaller portion of the funds translates to a small increase in costs over the total project

Renovators can use a strategy similar to this to source all the required funding for their renovation projects. In this case we may only need to fund the deposit for the property, as banks will usually lend 80% of the value of the completed property.

Step 1. Source a property that has potential. For best results; there needs to be a large price difference between the subject property and others nearby.

Step 2. Do the research to identify amount of funding required and potential profit by engaging a professional valuer.

Have the property valued ?as is? and ?as if complete? for bank finance. This will confirm to you and your potential investor that your figures are justified.

The difference between the ?as if complete? and the ?as is? valuations will provide the working capital. Funds will be needed from your investor to purchase the property.

Step 3. Present ?the deal? to the potential investor and offer or negotiate the interest rate that is effective for both parties.

Step 4. Offer to secure the investors funds by offering either a caveat or a 2nd Mortgage over the subject property.

Step 5. Obtain the finance from your investor to purchase the property.

Step 6. Refinance the property with the bank to pay back the investor and provide the working capital for the renovation.

Now you have an investor earning a high rate of interest on their funds want to invest in your next project and your ready to complete your renovation.