Finance

[WebBoard]

From: Mike .


Servicability Issue
From: Shinji
Date: 02 Sep 2000
Time: 22:21:00

I realise this issue has been covered in previous posts, however, can anyone with more than 2 or 3 IPs share their experiences on how they overcame servicability issues with their financiers?

I understand factors including the cashflow projection of the proposed property/properties and the financiers particular formulae may determine the success of the application. However, there must come a point where the financier decides you are simply overexposed and refuse further finance.

I have a successful business with a good income, enough equity in our home and 1 IP yet finding servicability a problem in applying for LOC and my next IP.

Am I missing something or is getting finance for multiple IPs much harder than what it appears to be when reading books on this subject?

Also does the servicability formulae for financiers more commonly relate to your ability to pay the interest only of all your committments or principal and interest?

Any comments welcome,

Thanks in advance Shinji

 

[WebBoard]

DuncanM

Reply: 1
From: Mike .


Re: Serviceability Issue
From: DuncanM
Date: 04 Sep 2000
Time: 09:27:31

I have more than 2-3.

Serviceability has not been an issue to date for us..

We only have cashflow positive properties. We bank with the National whom use 100% of rental income (providing a lease is in place) in their serviceability calculation and 35% of our (eventual) PAYE income

The only sticking point between us and the National is the constant to and fro about our LVR (Loan/Value Ratio). Obviously I'm looking to maximise their valuation of our properties in order to free up more equity for further borrowing.

Previous to the National we were with a Toy Bank, Australian Central Credit Union, no end of hassles on the establishment of new properties.. They dont seem to understand anything but a Mum or Dad looking to borrow for a new Refrigerator.

If you're looking to acquire more than a couple of investment properties I strongly recommend not dealing with anyone but a mature bank (provided they are competitive on rate and all other things are equal).

Regards, DuncanM.

Residential Property Record Keeping Software.
www.otter-software.com.au

 

[WebBoard]

Owen

Reply: 1.1
From: Mike .


Re: Serviceability Issue
From: Owen
Date: 04 Sep 2000
Time: 15:27:18

Hi Shinji,

I'm with Duncan on this. It depends on how your lender calculates your servicability. One way is to add your earned rent to you salary and work it out from there - the other is to offset your earned rent against your loan requirements. If you buy income earning IP's instead of negatively geared ones then the 2nd way means each property is self servicing. This means you can borrow an unlimited amount. If you think this way and present your lender with all the true numbers showing you understand what it is you are doing and why then they should come to the party. If not, knock on another door.

Owen

PS. I happen to be with the NAB too and they took some convincing for my 2nd IP but came to the party in the end. We'll see about the next one though...