How to grow a multi-million dollar portfolio on an average income

Discussion in 'Property Finance' started by Redom, 4th Mar, 2015.

  1. bwklau

    bwklau Member

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    Thank you Redom - lots of information.

    For someone starting out, and on a lower then "median" income - this is a very inspiring thread!

    Cheers - will be in contact once things are more organised!
     
  2. jamontoast

    jamontoast Member

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    If we go through brokers, does the banks take that into consideration when reducing interest rates?

    I am 90LVR on 1.5m portfolio

    Cba wouldn't even budge on under 1%
     
  3. teddy1

    teddy1 Member

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    great thread!
    i too am looking at purchasing my 1st IP and seeing im using equity from my PPOR that has 2k left on it with NAB (hoUse value 410k) I was looking at refinancing with Bankwest due to nil fees at 4.34% with 80%LVR. Does this sound like the way to start?
    Ive been advised to refinace all equity using part as deposit and balance in offset account as emergency and to reduce interest on PPOR.
    thanks again
     
  4. D.T.

    D.T. Property Lookerafterer

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    Going through broker or not has no effect on what you can be offered.

    A good broker will negotiate rate on your behalf though, and use your existing total as primary reason why you should get it.

    Corey got me down to mid 4's with Westpac
     
  5. sash

    sash Member

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    They know you will find it harder to move as you are at 90% LVR. :)


    Exactly what I do!

    I managed to get 4.38% in 1.5m in borrowings...
     
  6. D.T.

    D.T. Property Lookerafterer

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    I'm on lower than median salary too. Just need a path from a broker on best lenders to use and in what order. Using lenders that use DUA (Dual Underwriting Authority, ie the banks do their own LMI rather than through an insurer) allows you to borrow at high LVR's for longer, allowing people like us to progress through multiple properties with our limited means.

    Corey has been instrumental in getting me 95%, 90%, 88%, etc for various deals, depending on the nature of each deal as he has a solid understanding of all their policies.
     
  7. Redom

    Redom Mortgage Broker

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    We don't get access to preferential treatment when compared to going to the lender direct.

    Nonetheless, most brokers have access to lots of information re pricing and can leverage that information to get the appropriate 'discount'/market rate.

    With that in mind, you should be getting a fair bit better than 1%. ~1.25% in todays market with CBA.

    Cheers,
    Redom
     
  8. red liverbird

    red liverbird Member

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    Thanks Redom! This is a great thread.

    How does IO vs P&I fit into this story?
     
    Redom likes this.
  9. Redom

    Redom Mortgage Broker

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    You're welcome.

    I/O is definitely very important - i based the post on I/O loans only.

    Having a P/I loan will increase your contractual repayment you have to make to the lender. The extra funds that your paying will be considered in your servicing, and reduce the 'surplus' income you have available and hence reduce your borrowing power.

    On a $400,000 mortgage, by going P&I your increasing your contractual repayment by $500 per month. This means a $6000 hit to your serviceability in the 'expense' column per year. Expanding this out, you're talking a $60,000+ hit to your overall borrowing power by going P&I on this loan size. This $60k hit will be further multiplied, as it you'll need to factor in the higher repayments across any lender you go to in future.

    I/O (with the use of an offset for surplus funds) all the way for any investor seeking to grow a large portfolio.

    Cheers,
    Redom
     
  10. blackenator

    blackenator Member

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    Sorry to bump and older thread , but I wanted to ask if your in a position where you have surplus and keep managing to save for deposits using cash will the banks still lend to you even if you hit that invisible lending wall?
     
  11. Rixter

    Rixter $uper Investor (Retired)

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    Eventually over time as all your income sources increase you will drop back into the lenders DSR modules.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    It depends, but if your deposit is big enough, it will allow greater cashflow which will enhance serviceability.

    If you're using small cash deposits and using big LMI, not so much.
     
  13. Redom

    Redom Mortgage Broker

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    Heya - there's two main sides to obtaining a loan, having the deposits available to purchase and the borrowing power to get the funds your require.

    Increasing your cash reserves addresses the deposits side directly and MAY indirectly impact the borrowing power side. Its likely that the cash you have earns you a return somewhere. That return feeds back into serviceability calculators to increase your borrowing power.

    However, if you don't have the income to support a loan, you won't be able to obtain finance and address the borrowing wall. E.g. you can't go to the bank and ask for 100k on a 1million security if you have zilch income to put on the application.

    Cheers,
    Redom
     
  14. lazibones

    lazibones Member

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    How does a big deposit enhance serviceability? Cashflows both ways it is usually out with a new property at least before tax deductions. I am not sure what you mean by cash but I have bought 2 properties by redrawing existing funding. It did not enable me to increase my loans even though it put me in a better financial position.
     
  15. tobe

    tobe Mortgage Broker

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    A big deposit doesn't effect serviceability. You need to demonstrate you have income enough to service the loan.

    Think of it as the A Current Affair test. If the borrower was on ACA complaining how the bank sold repossessed their house, would the bank look bad?

    Technically purchasing 2 new properties would increase your serviceability by the rental amount these two new properties are bringing in. There may be another reason why you cant increase your existing funding.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    My thinking was along the lines of with actual cash (not equity) it's not so much that it will allow you to borrow more, it's more that you are able to borrow less for the same property. A property @ 70% LVR bringing in 'x' might be within your capacity with a certain bank where the same property @ 95% might not.

    So it won't improve servicing but can allow you to do things that a small deposit wouldn't allow. Which maybe didn't really answer the original question and was just me going off on a tangent :)
     
  17. Rixter

    Rixter $uper Investor (Retired)

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    I dont think you're going off an a tangent. Its the way I interpret what redom was meaning as well.
     
  18. C Stewart

    C Stewart Member

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    So what does everyone think the case is now? Can people still grow large portfolios in the 'new world'? Or are people going to need increasingly large incomes (for servicing) in order to accumulate?