Finance

[WebBoard]

From: Mike .


Too rent reliant?
From: Jude
Date: 24 Feb 2001
Time: 01:51:52

I am confused. My mortgage broker is saying that I might be becoming too rent reliant for the banks to lend more money. Isn't this a good thing? Doesn't it indicate that I am recieving a good income from my IP's? Would someone care to throw their two bobs worth in. Are you there Rolf? Please advise. Low on equity at the moment but very good disposable income. Thanks yet again. Jude

 

[WebBoard]

Rolf

Reply: 1
From: Mike .


Re: Too rent reliant?
From: Rolf
Date: 24 Feb 2001
Time: 07:03:28

Hi Jude

In todays job environment what carries the greater risk?

1. Being Self employed
2. Having a JOB
3. Rental Income from a number of different sources.

Assuming you have a good biz I would feel 1 and 3 would have to be the most consistent performers.

Personally, I can not think of anything more risky in the income stakes than a good steady job, most lenders though ?

Your broker is right, you (he/she and you together) have to present further requests for $ on a business case basis. The money is there, although perhaps not through your normal channels.

When the level of exposure for the lender gets to a certain level, say > $ 500 to 1 000 000 in total borrowings they like to reduce your LVR regardless of many security properties you have, and how well spread your tenancy risk is.

One way to help this scenario is to only buy well under market, since this will help your already light equity. How ? No idea - there are others out there that do it though, and I had a finance deal this week where the market on panel valuation was ~ 690 k and sale was 610 k.

Stick to your broker if the relationship is good and you get what you need.

Regards, Rolf

[email protected]

 

[WebBoard]

Michelle R

Reply: 1.1
From: Mike .


Re: Too rent reliant?
From: Michelle R
Date: 24 Feb 2001
Time: 21:59:59

Rolf,

I'm glad you have mentioned the misconception of a good steady secure job. Not to alarm anyone I'm certain many do exist. I have often reflected upon my own life experience as a self employed person. Most banks do not appear to favour my situation. Several years ago I became very ill and to a degree I now live with a chronic poor health. Despite this my business has not suffered, hence my income has remained steady.

Luckily I'd spent years fine tuning my retail business. I don't have to roster myself to work set hours. I can have a lot of control from behind the scene. Being in a partnership has been very helpful but not vital. My partner also has a severe chronic health problem. Together we manage to keep it all flowing.

Banks rarely write down my business in the asset column. I live in an unusual town where big money is paid for commercial leases with a prime location. Recently we signed a new 10x10 lease which would be more liquid than the business itself. When Jeremy expressed his opnion about investing in commercial property, I couldn't agree more. This is a more likely a way to get a positive cash flow. Tenants pay ALL the outgoings and have very long leases with annual rental increases of $4%. It's a better deal than wrapping if you score the right property. I don't think a shop in Robina shopping centre on the gold coast would be a hot buy, though.

Cheers Michelle

 

[WebBoard]

Donna

Reply: 1.1.1
From: Mike .


Re: Too rent reliant?
From: Donna
Date: 24 Feb 2001
Time: 09:04:38

I'm interested. Someone mentioned this further down the list. Which bank is it? I mentioned "too rent reliant" to my bank yesterday and the loans officer looked at me blankly!