Finance broker for large portfolios

[Christianlaws]

Terry, thanks for your input.

Firstly, I haven't ever said that my strategy is to get 20 properties but more so that the broker I choose to work with has financed portfolios greater than 20 properties. Every broker out there can probably help someone finance a 4 property portfolio but someone who has experience with clients with 20 portfolios is what i'm looking for. The question isn't "what's better, 20 properties or 4?" because as previously mentioned, its about how your properties are helping you achieve your goals. Now you're probably thinking, "yeah but it's about the investor's choices they make which will determine their success" and you would be right in thinking that - I don't dispute that. For example, if a investor is making poor investment decisions that will hurt their borrowing capacity, even the best broker in the world can't save their serviceability. Think of it like this, as an employee you want to employ candidates with the best experience possible and people who are much smarter than you in their field. In interviews (lets take a sale role for example), even if you were the number 1 sales person consistently for several years in your previous role, if you don't have experience closing $1m deals and that's what they're after, then you're not likely to get the job. This is no different, I'm wanting to find someone who has experience with financing a 20+ property portfolio. My strategy may well be to buy 4 properties but, again, I wasn't asking how many properties people think i should buy.

And of course it's not a race to see who can get the most properties, it's about my financial goals and how i will reach them.

 

[Terry_w]

Think of it like this - you are after a chef and go on a food forum and ask if there are any Chefs out there who have made 200 dishes in one night. You know it would be rare for a restaurant to have so many orders on any one night, but you believe this shows the skill of the chef.

It may to a certain extent - they could cope under pressure. But that doesn't mean they can make nice food.

 

[wylie]

Firstly, I haven't ever said that my strategy is to get 20 properties but more so that the broker I choose to work with has financed portfolios greater than 20 properties. Every broker out there can probably help someone finance a 4 property portfolio but someone who has experience with clients with 20 portfolios is what i'm looking for...

This is no different, I'm wanting to find someone who has experience with financing a 20+ property portfolio. My strategy may well be to buy 4 properties but, again, I wasn't asking how many properties people think i should buy.

And of course it's not a race to see who can get the most properties, it's about my financial goals and how i will reach them.

Seems to me you would be better to state your financial goals and find an appropriate broker who fits?

Why not just ask what you are aiming for, what you have, and get the answer to an "actual" question rather than fluff about like this with veiled questions?

 

[Christianlaws]

I love the analogy. Think of it like this though - MacDonalds is one of the most successful restaurants in the world and can make a profit from a 1 dollar burger because of their processes. Part of their success is the speed in which they can serve customers, hence fast food. Each restaurant probably makes much much more than 200 meals a day and there are over 35,000 macdonalds. They are not looking for chefs that will make nice food and win them a Michelin Star because that's not their strategy, but they are a company that make a 5.5 billion dollar profit. Food for thought

 

[Terry_w]

I love the analogy. Think of it like this though - MacDonalds is one of the most successful restaurants in the world and can make a profit from a 1 dollar burger because of their processes. Part of their success is the speed in which they can serve customers, hence fast food. Each restaurant probably makes much much more than 200 meals a day and there are over 35,000 macdonalds. They are not looking for chefs that will make nice food and win them a Michelin Star because that's not their strategy, but they are a company that make a 5.5 billion dollar profit. Food for thought

But which hamburger would you rather eat?

 

[Christianlaws]

This is where investors run into trouble, when they buy properties that they love the look of and would live in rather than making decisions on the numbers. Just like burgers, it's not necessarily about making the nicest burger but more importantly the profit you make. I would like to make profitable burgers and it doesn't matter what I want to eat.

 

[pinkboy]

Think of it like this:

*You have $1.2mil in property. (How many properties is it? PPOR and 1 IP?).
*You only have $70k income from salary
*You want 20 properties, but you want a broker to get you there.


You say you have 'outgrown' your broker, or is it your choices of current property with a combination of a median income the problem?

If you are wanting to aggressively expand a portfolio than you really need to get it right from the start. Its no good lashing out on a PPOR and a B&H IP with no development or sweat equity possibility if your goal is upwards of 20 properties in a tight timeframe. Perhaps you're the problem and not the broker? Ever considered that?

There are many, many people in your exact/similar situation, and the variety of brokers here are all qualified to answer your situation, but cant do so accurately without all the facts.

You say here:

Peter, I have suggested 20 properties not as my goal but a qualifier for a broker. I do have 10 years as my timeline for this.

A property worth 400k is no better than a property worth 100k and vice versa. It's what the property is adding to your portfolio and how it will get you to your end goal. Lower valued properties tend to have a higher yield. It's uncommon to have a property worth 400k and rents for $800pw but it's not as uncommon for a 100k property to rent for $200+PW. So if cashflow is part of your strategy then that might be part of your strategy.

However this statement suggests otherwise:

Thanks. It defintely won't be easy, which is why I need a very skilled broker who's had experience with these sized portfolios. Obviously that's not the only component to a large portfolio but I want to have the best people for my goals. My broker is a great broker but not the right broker for me.

No one is obliged to answer your questions, but a little bit of courtesy and etiquette should be exercised when these professionals are trying to give you some guidance especially when you are the one asking the questions and then not comprehending what is being said. Might want to consider knocking the chip off your shoulder because brokers are going to want to work with someone who is on the same team instead of someone who is telling them that what is not possible is possible when they see this vanilla stock question everyday.




pinkboy

 

[tobe]

I think the trouble here is the Donald Rumsfeld conundrum. You dont know what you dont know. An investment journey that includes 20 residential properties isnt the quickest way to financial freedom. 20 is superflous to the real goal of property investment, which is financial freedom.

Whether its 20 low priced high yeild or high priced low yeild, or 20 neautral properties, theres no reason to have that many.


5 average family houses unencumbered can replace an average income. (if rent is 25% of average income and 25% to ongoing repairs and maintanence)

Investors might want to get to 10 so they can sell 5 off to pay down debt, but going to 20 is silly.

After 10 if your not going to sell to pay down debt, and your happy to keep working, getting to 20 wouldnt require the services of an exceptional broker.

 

[wylie]

This is where investors run into trouble, when they buy properties that they love the look of and would live in rather than making decisions on the numbers. Just like burgers, it's not necessarily about making the nicest burger but more importantly the profit you make. I would like to make profitable burgers and it doesn't matter what I want to eat.

You can do this and still make good profits, you know. In my experience, the houses we would happily live in (though not as high spec as we do live in) make very good rent.

 

[Christianlaws]

Pinkboy, I guess tone is lost in text but I most certainly don't have a chip on my shoulder. I have considered that it may be the choices I've made so far that are the problem but I also have looked at my brokers decisions, such as using a 3rd tier lender such as Widebay for early on in my portfolio. Some of the problem is that i was on a high pay role but now i'm not. But yes I have considered that.

I was asking if anyone knew a broker with that experience, I'm sorry if that's too vanilla. I wasn't really asking if people could access my strategy though.

And personally, I want to work with a broker who can tell me how things can be done rather than what can't be done.

I'm grateful for the answers so far though

 

[chilliblue]

I love the analogy. Think of it like this though - MacDonalds is one of the most successful restaurants in the world and can make a profit from a 1 dollar burger because of their processes. Part of their success is the speed in which they can serve customers, hence fast food. Each restaurant probably makes much much more than 200 meals a day and there are over 35,000 macdonalds. They are not looking for chefs that will make nice food and win them a Michelin Star because that's not their strategy, but they are a company that make a 5.5 billion dollar profit. Food for thought

According to Forbes, McDonalds profits are down and continuing so.

 

[sanj]

I love the analogy. Think of it like this though - MacDonalds is one of the most successful restaurants in the world and can make a profit from a 1 dollar burger because of their processes. Part of their success is the speed in which they can serve customers, hence fast food. Each restaurant probably makes much much more than 200 meals a day and there are over 35,000 macdonalds. They are not looking for chefs that will make nice food and win them a Michelin Star because that's not their strategy, but they are a company that make a 5.5 billion dollar profit. Food for thought

What on earth does this have to do with the suitability of a mortgage broker??

I'm with pinkboy on this btw, a bit of humility would go a long way imo.

 

[willair]

. It's uncommon to have a property worth 400k and rents for $800pw but it's not as uncommon for a 100k property to rent for $200+PW. So if cashflow is part of your strategy then that might be part of your strategy.

I see properties all the time on the net in Brisbane with those numbers ,the only problem is they cater for o/s students but $200.00 a room is quite common for a 400k plus entry ,,where as the 100k property out the back of nowhere with high maintenance,rates,water insurance costs and may well be the same value in ten years from some of the posters that post in this site talk about every now and again,plus ask yourself this simple question
what is better 1 or 2 properties worth 4 million with the serious upscale g-c
or 20 out the back blocks with zero c-g and the problems that come with 20 properties??,..and btw worldwide fast food outlets have been in the decline phase for a while now no matter what anyone tells..

 

[Christianlaws]

Think of it like this - you are after a chef and go on a food forum and ask if there are any Chefs out there who have made 200 dishes in one night. You know it would be rare for a restaurant to have so many orders on any one night, but you believe this shows the skill of the chef.

It may to a certain extent - they could cope under pressure. But that doesn't mean they can make nice food.

Not much, to similar previous comments

 

[Christianlaws]

I see properties all the time on the net in Brisbane with those numbers ,the only problem is they cater for o/s students but $200.00 a room is quite common for a 400k plus entry ,where as the 100k property out the back of nowhere with high maintenance,rates,water insurance costs and may well be the same value in ten years from some of the posters that post in this site talk about every now and again,plus ask yourself this simple question
what is better 1 or 2 properties worth 4 million with the serious upscale g-c
or 20

One property worth 4 million could be pretty poor investment decision because, not only is it putting all the eggs in one basket but the market for a 4 million dollar house is much narrower than the market for low cost affordable housing. Plus your rent for a resi 4 million dollar property probably won't come close to covering the interest. If cheaper properties didn't rise in value then they would still be 10k from 30 years ago. I would prefer to mitigate risk by diversifying my portfolio and focusing on affordable housing with high yields - if that were the only two options

 

[willair]

20. One property worth 4 million could be pretty poor investment decision because, not only is it putting all the eggs in one basket but the market for a 4 million dollar house is much narrower than the market for low cost affordable housing. Plus your rent for a resi 4 million dollar property probably won't come close to covering the interest. If cheaper properties didn't rise in value then they would still be 10k from 30 years ago.

But I'm not talking about low cost entry properties ,I'm talking about high end properties that people buy in small seaside-riverfront inner city streets in any city in Australia,what you may lose in rental return you make up big time from my own simple experience in serious 13% year in year out raw "C-G",but eack too their own ..

 

[Christianlaws]

But I'm not talking about low cost entry properties ,I'm talking about high end properties that people buy in small seaside-riverfront inner city streets in any city in Australia,what you may lose in rental return you make up big time from my own simple experience in serious 13% year in year out raw "C-G",but eack too their own ..

If you rented a 4m property out for 2k a week, that would be costing roughly 120k a year out of pocket just in I&P. + there aren't many tenants out there in that rental market, so vacancy rates might be high. I don't know who can afford to hold properties like that.
If you had 20 properties worth $4m that put $100 a week in your pocket that makes 172k PA gross passive income.
So on a 70k income buying 1 $4m property is completely unfeasible. So if i ask myself your question; 20 lower cost higher yielding properties that put money in my pocket and stand on their own two feet is a better strategy for me.

 

[Mick C]

Havn't read through all the post, but to achieve 20 properties on 70 payg, beside choosing the right lenders at the right time for the right deal and loan structure...you will most likely need to buy multiple units on one title ( ie duplex/ block of units) + 1-2 capital growth property for deposits and a lot of positive geared properties..

20 is not easy, but achievable ( however consider quality over quantity) and what 's your end goal ie passive income of $50 per year after all expense? etc..

I find the key to achieve a big portfolio is your 1st 1-2 foundation property...ie capital growth / equity...deposit of 10-20% each hit + stamp duty is where you will have issue. Most of our 30+ property investors are either cash up from the start ie enough to do 20% deposit x2 OR they have properties they bought 4-5 years ago with good equity.

Cheers

 

[Christianlaws]

Havn't read through all the post, but to achieve 20 properties on 70 payg, beside choosing the right lenders at the right time for the right deal and loan structure...you will most likely need to buy multiple units on one title ( ie duplex/ block of units) + 1-2 capital growth property for deposits and a lot of positive geared properties..

20 is not easy, but achievable ( however consider quality over quantity) and what 's your end goal ie passive income of $50 per year after all expense? etc..

I find the key to achieve a big portfolio is your 1st 1-2 foundation property...ie capital growth / equity...deposit of 10-20% each hit + stamp duty is where you will have issue. Most of our 30+ property investors are either cash up from the start ie enough to do 20% deposit x2 OR they have properties they bought 4-5 years ago with good equity.

Cheers

Thanks Mick, that was a great response.
I might give you a buzz later tomorrow to discuss further if that's okay?
Cheers
Christian

 

[pinkboy]

Perhaps you could create your own Fact Finder and send it to all the brokers to fill out to see who fits your investing profile.....


......oh wait, that's not how it works......



pinkboy