Broker vs Banker Thread [Split from $100K passive income thread]

I disagree with the not going through a bank, this is rubbish.

You need to go with someone who you can trust to structure the loans correctly and be honest with you.

I personally have had assisted one client grow his portfolio from 1 property to currently owning 5 in two years (51months to be exact). In that time he has also sold 2 properties.

Current portfolio $1.8M debt $1.4M with $175k in offset.

He started with a $70k pa income and ~$50k deposit.

Now has loans structed through personal, company and trust.

All not x-coll.


He has said many times that he wouldn't be able to have done what his done without my assistance, not saying another broker or banker could...

But you are saying that a banker cant...
 
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I disagree with the not going through a bank, this is rubbish.

You need to go with someone who you can trust to structure the loans correctly and be honest with you.

But that has to do with the person and has nothing to do with whether it's a bank broker or an independent broker. In addition, the independent broker isn't restricted to just one bank's products.

I personally have had assisted one client grow his portfolio from 1 property to currently owning 5 in two years (51months to be exact). In that time he has also sold 2 properties.

Current portfolio $1.8M debt $1.4M with $175k in offset.

He started with a $70k pa income and ~$50k deposit.

Now has loans structed through personal, company and trust.

All not x-coll.

What does that prove? It proves you can do it up to that level, but my own experience is that it's precisely AFTER this sort of level of debt that one starts to fail a lot of serviceability calcs, and having a choice of products from different banks is crucial.

He has said many times that he wouldn't be able to have done what his done without my assistance, not saying another broker or banker could...

That proves you're a good broker, but you're still restricted by the products you have to offer. It may well be that you've educated your customer and he's achieved more than he imagined, but he might have done even better with a good independent broker. Though they may also have done worse with a crap independent broker. And they could also have done worse with a crap bank broker.

Bottom line for me is two things: whether the broker is good, and what products they can offer (the more choices the better).
 
Brady what happens when you client runs out of serviceability with the one lender, or runs afoul of that lenders risk tollerance? Your employer is certainly a good lender, but there's lots of things they won't do and the serviceability is good, but nowhere near the most generous.

I have a client who's gone from 3 properties to 16 in 6 years and is still purchasing more. He consistantly purchase using 90% with total debt levels of around $5M.

This is not something you can achieve using a single lender.

Straight from by CBA relationship managers mouth:
* Branches can usually get things done faster.
* Brokers give far more diverse advice and can put together a far more comprehensive lending structure.
* For 90% of cases, neither group actually understands or plays to their strengths.


Back to that client though. He doesn't think he's done anything special, but he has found a strategy which works for him. Whilst many of the specific numbers are different from what Jake has indicated, the overall methodology is what I've seen in every successful client.
* Buy under market value
* Find ways to add value
* Diversify when you can
* Take advantage of capital growth
 
Brady what happens when you client runs out of serviceability with the one lender, or runs afoul of that lenders risk tollerance? Your employer is certainly a good lender, but there's lots of things they won't do and the serviceability is good, but nowhere near the most generous.

I have a client who's gone from 3 properties to 16 in 6 years and is still purchasing more. He consistantly purchase using 90% with total debt levels of around $5M.

This is not something you can achieve using a single lender.

Straight from by CBA relationship managers mouth:
* Branches can usually get things done faster.
* Brokers give far more diverse advice and can put together a far more comprehensive lending structure.
* For 90% of cases, neither group actually understands or plays to their strengths.


Back to that client though. He doesn't think he's done anything special, but he has found a strategy which works for him. Whilst many of the specific numbers are different from what Jake has indicated, the overall methodology is what I've seen in every successful client.
* Buy under market value
* Find ways to add value
* Diversify when you can
* Take advantage of capital growth

Just because they're a CBA RM doesn't mean they get it right. My client yesterday, he is a paediatrician and also runs a private practice, his wife is a obstetrician. has $700k in borrowings with CBA, just gone throught the process of getting approval for $4M commercial property in the last few months in this process he dealt with RM's and State Managers. Yesterday I told him how he had been banking for the last 15years was completely wrong (x-coll, LOC with mixed purpose business, personal and investment, no offset fully repaid 2 houses). He just about fell off his chair after I ran through everything with him and he made comment that he is off to fire his accountant who he has been using the whole process.


Your third comment contradicts the second comment. Brokers have the ability to give diversed advise, this doesn't mean that they do and doesnt mean they get it right.

As for running out of serviceability yes this happens, I haven't had a senario yet where is has happened and it wasn't able to be mitigated if it was actually a deal.

In the last 2 years i've only had 2 loans that I couldn't get approved that were approved elsewhere.
- First one I didn't want to touch in the first place, bad conduct on accounts, weak application and didnt believe he was being all that honest with me... But it was a branch managers friend... scored a CAT 5 and was declined by credit after large appeals from the branch manager
- Second one was a NAB branch manager who came to me because she new that I could get it done, in the end I could but I couldnt get the LMI waived like NAB as she was staff so she ended up changing the structure and went there

Every other time I had an application that I haven't been able to get done, I've passed it onto brokers (most of the time without putting in an application to keep credit file in tact) and each time the broker hasnt been able to get finance for these people..

I dont care to comment for the general bankers or brokers because as we both agree so many get it wrong. There are multiple times that we could both comment on bad stories done by each, terrible stories done by each.

But I don't make claims that all brokers are bad. I defend the claim that so many on this site say no bankers at all, no doubt its because of poor past performances.. but it happens in both ways.

*I can I can put together a comprehensive lending structure (yes with the one bank, but doesn't mean it cant be done. Still able to hit 90% early 80% later, no x-coll, IO offset (soon to be transactional ;))... hitting a hurdle with genworth cant be a stopped but im still yet to have something that I believe is a deal declined, when this time comes I will happily pass the client over to a trusted broker to see if they can assist, again its yet to happen.)
*I can tell you that I could get things done faster then any broker 99% of the time, the team leader and manager of document preparation know me very well, I contact them often. The team leader and manager of certifications know me best ;).
*The credit appeals manager knows me well, again we speak most weeks.

What I'm suggesting is that you must have someone who you can trust, who is honest and who has the ability to set your loans up correctly... And obviously get the loans approved.

The client I gave an example of wouldn't of been able to do what he did if he didn't deal directly with the bank and went through a broker. Each purchase and sale he has made has had to be done extremely quick, this is where he has been able to purchase so much below value with quick settlements. He uses a coveyancer who I used for my own property, who I personally know. Just about each deal I've had to speak with my contact in each different area to get things done.

I'm not saying this to bignote myself, I have no commerical interest in these comments. Just giving you guys insight to the other side :)
 
Sigh... I would love to do some business with CBA. Problem is they can't work out how I could possibly feed myself! They seem to load up existing debt like nothing else...

Thanks for the input Brady - it's good to hear another side to the story.

However, I'm genuinely interested in the metrics for your Client's CIP purchase. Can I ask what yield this was showing? LVR they could achieve? Was it tied up with their business? Did they have a very large income of their own? It's just that it's a pretty big jump to go from $700k of debt to a $4m CIP... but if they were on $400k per year themselves then of course it would be fine.
 
Sigh... I would love to do some business with CBA. Problem is they can't work out how I could possibly feed myself! They seem to load up existing debt like nothing else...

Thanks for the input Brady - it's good to hear another side to the story.

However, I'm genuinely interested in the metrics for your Client's CIP purchase. Can I ask what yield this was showing? LVR they could achieve? Was it tied up with their business? Did they have a very large income of their own? It's just that it's a pretty big jump to go from $700k of debt to a $4m CIP... but if they were on $400k per year themselves then of course it would be fine.

Existing debt isn't loaded with a higher assessment rate, existing debt is what the actual repayment amount is. Unless its IO for existing CBA debt as it will calculate the repayments based on the contracted repayments PI. It that what's happening in your case?

Yield was good, but wasn't your straight forward deal. He is a doctor at two different hospitals along with his own private practice, his wife is also a doctor. CIP was place to run his private practice and was also trying to get colleges in there as well. $700k is the existing debt (well not even as its a LOC with $700k limit but only $300k outstanding). There assets would be circa $2M. They have taken poor advise from previous bankers and accountants who have structure their finances very poorly. Resulting in them having large amount of assets an minimal cash. If this clients banking was set up correctly to begin with he could paid >$1M cash deposit for the CIP and had alot of tax deductible debt for the IP. Dare I say it would of been a lot easier for the commercial guys to get the loan approved if it had of been structured correctly.
 
Existing debt isn't loaded with a higher assessment rate, existing debt is what the actual repayment amount is. Unless its IO for existing CBA debt as it will calculate the repayments based on the contracted repayments PI. It that what's happening in your case?

Thanks - must have been another issue with CBA then. That's the usual one that catches me. Can't think what else could be the problem - might have to revisit...
 
Thanks - must have been another issue with CBA then. That's the usual one that catches me. Can't think what else could be the problem - might have to revisit...

You're not trying to refinance a whole heap of debt at once are you?

Can be an issue because then all new debt should be assessed at a higher rate, which makes servicing tight. But this can be mitigated by speaking with the appropriate people ;)
 
You're not trying to refinance a whole heap of debt at once are you?

Can be an issue because then all new debt should be assessed at a higher rate, which makes servicing tight. But this can be mitigated by speaking with the appropriate people ;)

Definitely no interest in that. Just wanting to add another to the portfolio and my lender options seem limited... a large proportion of income is coming from CIP and other property rent so it could be the treatment of that?
 
Definitely no interest in that. Just wanting to add another to the portfolio and my lender options seem limited... a large proportion of income is coming from CIP and other property rent so it could be the treatment of that?

80% of gross income...
 
Hi Brady, I certainly don't think you're doing a bad job, in fact I think you do an excellent job! Your views on things like x-coll, loan structuring, responsible lending have been the same as mine in numerous discussions.

In the last 2 years i've only had 2 loans that I couldn't get approved that were approved elsewhere.
- First one I didn't want to touch in the first place, bad conduct on accounts, weak application and didnt believe he was being all that honest with me... But it was a branch managers friend... scored a CAT 5 and was declined by credit after large appeals from the branch manager
- Second one was a NAB branch manager who came to me because she new that I could get it done, in the end I could but I couldnt get the LMI waived like NAB as she was staff so she ended up changing the structure and went there

I completely agree with your assessment of the two loans that you've indicated were approved elsewhere. I've knocked back plenty of work that I didn't feel comfortable with. I've also advised clients to talk directly to the branch simply on the basis that it would be a better fit, it would be done faster, or it would save them money.

Having said that, I've written dozens of loans for people who were initially rejected by their bank, including the CBA. Speaking with collegues I'm also aware that you have also referred business to brokers because you were aware that the CBA wasn't the best fit.

*I can I can put together a comprehensive lending structure (yes with the one bank, but doesn't mean it cant be done. Still able to hit 90% early 80% later, no x-coll, IO offset (soon to be transactional ;))... hitting a hurdle with genworth cant be a stopped but im still yet to have something that I believe is a deal declined, when this time comes I will happily pass the client over to a trusted broker to see if they can assist, again its yet to happen.)
*I can tell you that I could get things done faster then any broker 99% of the time, the team leader and manager of document preparation know me very well, I contact them often. The team leader and manager of certifications know me best ;).
*The credit appeals manager knows me well, again we speak most weeks.

Your points here however support my argument of the strengths and weaknesses of branches to brokers...

You've stated that in the branch you can get things done faster than brokers 99% of the time. I completely agree. As you've indicated you have a far more direct line to the credit managers, documentation production, etc.

You've also indicated that whilst you can structure multiple 90% deals for a client, you'll run into a road block with Genworth. My understanding is this roadblock is somewhere around $1.5M -> $2.5M. As a broker I've got access to multiple lenders and multiple mortgage insurers (and there are more than 2 insurers). I've written over $5M in loans at 95% or 90% for a single client by being strategic about when, where and how we placed the applications. You can't get this done using a single lender.

My third point I think we can also agree on. There's good and bad people in both channels.

There's often complaints that the branch didn't respond to the clients needs quickly enough. Brokers are just as guilty of bad service, but turnaround time is the main strength of the direct channels, if they're getting complaints on turnaround time, they're clearly not working to their strength.

Likewise, many brokers place clients simply based on the best rate currently on offer and that's all they ever do. Often that's apprporiate, but many brokers don't understand the strength that multiple options of lenders gives them. Not just for rates, but for LMI, credit policy, risk management etc.

Your client couldn't get the service he required from a broker because each purchase was made on short timeframes. Fair point. My client couldn't get the service he needed from a branch because only a broker has the toolbox to create the strcture that was required. In both cases, had either client been dealing with the wrong person (you or me), neither might have been successful if they hadn't gottent he right advice for their needs.
 
2. Maintain a conservative LVR (less than 80%)


I think your initial budget should be close to $550,000 rather than $450,000 in Melbourne. Even though you're spending more you're actually being more conservative due to the increase in quality...

Wow. If I had waited to have the ability to borrow $550K (even $450K!) at 80% LVR I doubt I would have ever gotten into the game. I am in the early stages of aquisition but have a vastly different strategy to this and am doing quite well so far.

We target lower end properties and have a focus on creatively increasing value to pump up equity to fund the next purchase. Deposits are the killer for us and we do 90% LVR on properties up to $250K (and many that have been cheaper!).
 
The business vs property discussion in the above thread is interesting.

I run my property investing as a business, working just as hard on that as I would any other. I have children and work from home so am limited in that way.

My hubby (and I in partnership but it is his baby) has a business that he has made some pretty drastic moves in (risky but calculated) and it seems to be paying off. We have made a bit of a (toungue in check) wager - whoever gets to the first mil gets to pick the overseas holiday destination (europe for me, Nepal for him so there is a lot riding on it!)
 
I disagree with the not going through a bank, this is rubbish.

You need to go with someone who you can trust to structure the loans correctly and be honest with you.

I personally have had assisted one client grow his portfolio from 1 property to currently owning 5 in two years (51months to be exact). In that time he has also sold 2 properties.

Current portfolio $1.8M debt $1.4M with $175k in offset.

He started with a $70k pa income and ~$50k deposit.

Now has loans structed through personal, company and trust.

All not x-coll.


He has said many times that he wouldn't be able to have done what his done without my assistance, not saying another broker or banker could...

But you are saying that a banker cant...

Hi Brady,

I ask as I've never had a personal Bankster

Who is involved and who is committed from the two?


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