Looking to refi to release equity for new IP purchase (long term a few IP purchases)
Why is it better to refi all properties and release all available equity for investment purposes at the one time? Meaning change of lender, higher rates, lower vals than current bank has BUT more flexibility with splits
.
Hi John
my first comment would be, when you go and see your GP because you have a medical complaint, and she says lay off the booze, the smokes and the junk food, there is reasonable likelihood that she has some data to make that recommendation on,
What you're asking for here is highly generalised and may not apply to your situation or anybody else's.
In general, it is better to clean things up in one go to various reasons, but in many circumstances it is also not beneficial to do so.
Some of the reasons where it is beneficial are
1. Borrow money when you don't need it.
There is a great folly in doing financial structured lending in "bits", to the extent that if a client of mine or prospective client of mine wants us to do that we won't, we would rather walk from the business. The logic behind that is, if the data we have to hand suggests that the client is better off doing everything in one go for reasons such as a current lender promotion, reasonable valuations, future serviceability considerations, market changes, personal situation changes, then they need to do the work NOW.
Its hard work convincing clients to make significant changes, and conventional sales wisdom teaches you to only look for a call to action with "incremental" additions and not significant change. But it's
right there where you will spot the difference between a transactional broker/banker............ and someone that's willing to fight for your understanding and education, and ultimately to challenge you every inch of the way at the risk of "losing the business", with the end outcome being a better financial position in the long term.
Invariably what I have found is that humans are HUGELY resistant to change, simple little things on the surface like changing direct debits on an offset account, can often be the difference between building a $3 million portfolio, or a $2 million portfolio. Simple little, and seemingly insignificant thought processes can compound into big dividends or significant losses.
2. Several lines of advice. .....................
We do all of your work or none of it. This will sound really arrogant to many, but again in reality after 13 years in the financial services business, we have worked out that if we set up a financial structure for a client, and that client still has significant contact with either another broker or banker, conflicting lines of advice will often cause angst to the borrower. By all means take our stuff to an accountant, financial planner, solicitor or even another broker for a second opinion, but don't implement financial structuring advice from two different (often conflicting) schools of thought. you would not believe the amount of times we get clients coming to us after they have been to a lender, and for whatever reason the bank has not been able to put the deal together. When you look at it on the surface, the bank should have sent the client away in the first place because either the security doesn't fit, the serviceability is the edge of the envelope, or there is some aspect of the transaction that was never to work - but because of KPI pressures the client was encouraged to apply when in reality the chance of approval was slim, and would have been better with another lender.
There are lots and lots of other things that may be relevant in terms of doing your particular scenario in one go.
Conversely it depends upon what the motives of the broker or banker REALLY are, but only you can really glean that.
the most perverse failed structuring attempts that I come across are where bankers or brokers have tried to work with the concept of "not leaving money lying on the table". While I am a business person, and will take every reasonable opportunity to make a dollar while serving a client, and adding value to what they're doing, many people in our industry in the retail and broker area are into what is known as "churn".............. which is simply described as refinancing for no real derived client benefit.
I have seen circumstances where lenders have tried to take a whole client Portfolio over, and have failed to do so because of serviceability or concentration risk issues with their credit area, when they could have just had the one nice 500 K deal rather than the whole two mill portfolio.
While as a broker over time, we will obviously look to do similar if it serves the client and adds value to their proposition, but as a broker you can have the capacity to do that by spreading the business amongst different lenders over different times - and that is one area where certainly it's sometimes better to do things in "bits" rather than focus on the revenue from the one transaction NOW.
In general there is really no clear and simple answer to your question, however, there are many circumstances where it is better to take a higher interest rate and a lower valuation because it allows you to move on in your acquisition cycle, and that seemingly little benefit may have significant outcomes.
Sometimes, to get an answer one needs to take a step back and add salt a much more global view and get away from the nitty-gritty of the 10 points in rates or the 700 discharge fee.
Finally..... ask your broker / banker your initial question about how the flexibility of the splits will help build wealth. You might be surprised.
ta
rolf
Rolf
