Cashed Up Low Doc Advice

[MaxRobbins]

Hi there,

Just wondering if someone here can point me in the right direction, or at least on to the path of minimal resistance.

Im a small business owner however have only be trading for 18 months or so. I've got about $200K in the bank in cash and looking to buy some high yielding investments in QLD.

The problem I have is that despite my business growing very well, on paper my (and my accountants) determination to minimise income tax in my first FY was so effective that it now looks like I hardly made anything.

So I have a few questions re Low Doc/No Doc Loans

1.) What docs do I need at a minimum?
2.) Given I have to put down 20% deposit anyway, does that mean I avoid LMI?
3.) Is the interest rate any different from Standard loans?
4.) Whats the average turn around time for low/no docs?
5.) I have always had CBA as my lender when previously employed. If I go back to them as self employed will my past strong track record be looked upon favourably or just ignored.
6.) Even in this 2nd FY I have chosen to reinvest the money back into the business i.e. more staff, systems, equipment etc and have again opted to only pay myself very minimal. Should I just bow down to the ATO and take a tax hit just to bolster my serviceability?
7.) Aside from my business I also have a fair amount of income coming in from sales of personal property which I have chosen to offload. Does this get included in my income for the year or ignored as a one off?

Sorry for all the q's but want to plan ahead, and just worried that if I wait for full doc eligibility I may miss the boat on potential property deals.

Thanks for you help in advance.

Max R

P.s. I also need a new broker as mine retired, so if anyone here specialises in this kind of thing please let me know.

 

[Rolf Latham]

If you really made a decent income in reality, and the dedns are paper based such as depreciation etc, quite a few lenders may look at this on full doc

ta
rolf

 

[Terry_w]

The problem I have is that despite my business growing very well, on paper my (and my accountants) determination to minimise income tax in my first FY was so effective that it now looks like I hardly made anything.

Max, I will give it you you straight.

If it looks like you hardly made anything then one of 2 things applies

1. claiming excess expenses you didn't incur i.e. fraud or
2. you probably didn't make hardly anything.

You will not get a loan that falls under the NCCP without demonstrating you can service such a loan. Low docs are generally gone.

But if your loan falls outside the NCCP then there may be low doc options available. But again you will have to 'prove' your income somehow - BAS statements, bank statements or perhaps an accountant's declaration - which will need a figure on it. If the figure doesn't show an income high enough then you won't qualify.

Sales of personal property generally won't be taken into account as income by a lender as these are one offs - unless you are in the business of buying and selling property. But it may be able to be taken into account when declaring income for a low doc, depending on the wording of the declaration you are signing.

 

[knightm]

Hi there,


P.s. I also need a new broker as mine retired, so if anyone here specialises in this kind of thing please let me know.

Hi Max.

I will leave it to others more qualified than me to comment on your above questions re finance.

I can just confirm that Rolf, Jamie M and several other brokers on this forum are significantly better than garden variety bank branches or mortgage brokers for their specialised knowledge in the area of property investing (ie no just getting 1 mortgage approved but many)

Keep asking good questions and you will learn a lot from the answers you get.

Also perhaps Rolf can expand on what he has alluded to regarding full doc loans with business owners supplying less than 2 yrs financials.

All the best!

 

[Mick C]

So I have a few questions re Low Doc/No Doc Loans

1.) What docs do I need at a minimum?

Accountanst letter
6 month BAS
6 Month Trading statement

^ Choose any (1) of the above...if you can supply any 2 even better ( lower rate and higher lVR)

2.) Given I have to put down 20% deposit anyway, does that mean I avoid LMI?


For Low doc LMI applies from >60% LVR for most lenders ( 1-2 will do NO LMI at 70%)

So may not apply LMI...but will apply a "risk fee in return".

3.) Is the interest rate any different from Standard loans?

0.5-2.5% higher depending on LVR and what docs you can supply + length of ABN....sorry no standard, when it comes to low and no doc there's literally over 50 different products.



4.) Whats the average turn around time for low/no docs?

Depends on Complexity...If you can provide most docs and don't need an "Exception" than the normal 5-6 working days is fine.


5.) I have always had CBA as my lender when previously employed. If I go back to them as self employed will my past strong track record be looked upon favourably or just ignored.

Answer is no. It will be ignored.


6.) Even in this 2nd FY I have chosen to reinvest the money back into the business i.e. more staff, systems, equipment etc and have again opted to only pay myself very minimal. Should I just bow down to the ATO and take a tax hit just to bolster my serviceability?

Best to speak to a low doc broker....last thing you want is to pay more TAX or spend the money wrongly and reason you can't get the loan anyway....

7.) Aside from my business I also have a fair amount of income coming in from sales of personal property which I have chosen to offload. Does this get included in my income for the year or ignored as a one off?

The sale is a once off CAPITAL gain so can't be included into servicing...


Common mistake i see with low doc/no doc
1. 2/10 low doc inquires can actually be done as a FULL Doc...they just dont know it as they chosen the wrong lender.

2. Most think low doc is simple and they can just buy as long as they have the 20% deposit...it;s not that simple- But at the same time it's not a hard as you think....you just need someone to guide you.

3. 5/10 of our low doc inquires we probably can't help straight away as their file is not "low doc worthy...OR the chance of rejection is to high"...so it's common for us to help the client by teaching and guide them over the next 3,6,9,12 month on how to make their file low docs OR full doc friendly.

it's all about applying the right knowledge + a working long term relationship.

4. 3/10 low doc doc inquires we simply can't help OR the client don't want to change or learn.....

 

[MaxRobbins]

Wow thank you, that was amazingly helpful, and has given me a lot of clarity.

Seems low doc is generally a complete pain in the rear end, and puts me at a disadvantage on a few levels so maybe I just wait until the end of the financial year, and instead of reinvesting profits straight back into the business, just pay myself a decent income.

I don't really understand this space,so apologise in advance for the stupid questions but are the banks assessing my ability to service on just my income, or that of the company as this is where I get really confused.

I.e The company will probably turn a profit of around $300K this FY, if I pay this to myself as a salary, instead of reinvesting directly back into the business again, will that not just reduce the profit to $0 for the company? What exactly do the banks want to see to reduce their risk?

 

[Mick C]

YOU ARE the business...so bank looks at bus + your income.
Same end result...

Also we can reserve the accountants calculations ( Take out depreciation and some add back etc..) and banks are happy to use that as long as it make sense...

 

[Terry_w]

I.e The company will probably turn a profit of around $300K this FY, if I pay this to myself as a salary, instead of reinvesting directly back into the business again, will that not just reduce the profit to $0 for the company? What exactly do the banks want to see to reduce their risk?

Yes as Mick said the bank will look at the company's income and your personal income - assuming you are the sole shareholder.

 

[MTR]

RAMS will do lo doc <750K, accountants declaration.
Greater than this and you will require BAS for 12 months.