How to keep purchasing Investments

[molly1a]

Hi All
We have bought 5 investments since 2010 we used equity in our PPOR it was worth about 340K up until now we have not put money into any purchases we have our money sitting in offsets against each house only.
Loans are with 1 bank we are wanting to purchase another investment but the bank is asking us to put in full deposit and costs approx 70K some of the investments have not seen the growth yet as they are quite new purchases there are 2 that have some equity No1 about 55K the other about 60K not sure how to continue maybe we have to change strategy we are currently buying to hold. all properties are cash flow and are costing us no dollars. Any Ideas
Thanks

 

[Rolf Latham]

refi one or 2 of your existings to raise a 10 % deposit + costs maybe ?

ta
rolf

 

[D.T.]

refi one or 2 of your existings to raise a 10 % deposit + costs maybe ?

ta
rolf

Wow is that legal?

 

[Aaron_C]

Change lender???

 

[Colin Rice]

What is full deposit? 20%?

Have the properties revalued with another bank and see where you land. Do a combination of desktop, kerbside and full vals if required.

Also consider a 10% deposit rather than 20%.

 

[Peter_Tersteeg]

I think part of your strategy at some point is going to have to be to diversify lenders. By using a single lender you're restricting yourselves to a single set of policies and criteria. This is fine when you can meet those criteria but a major roadblock when you can't. The criteria do change as you accumulate IPs. Other lenders may be more flexible to your situation at this point. You'll also find that lenders can become conservative when you've got a lot of business with them, but less conservative if you spread the risk around a bit.

You may also need to consider that for the time being, it's possible that you've gone as far as you can. If you've exhausted all your equity for new deposits, you've either got to find a way to create some more equity, or save the next deposit. This may take time.

Keep in mind that 5 IPs since 2010 is actually reasonably impressive. Growth of both capital and yield in many areas has been modest during this period. I know there's people who have built massive portfolios from scratch within a short period of time, but there's a lot of people who have had far more modest results as well. 10 properties in 10 years isn't that difficult to achieve, but 5 properties in 5 years can be fairly tricky. Most people over estimate what they can do in the short term but underestimate what they'll achieve in the long term with consistent effort.

 

[jrc77]

How about talking to a good broker who may be able to move forward? At the moment you are restricted to one banks lending criteria - there may be other banks who are willing to lend you more.

You could also consider ordering a few customer ordered vals from different banks to see if you get any favourable results - it might be worthwhile moving some loans just to extract some extra equity using a good valuation.

Jason

 

[jonmardell]

Hi All
We have bought 5 investments since 2010 we used equity in our PPOR it was worth about 340K up until now we have not put money into any purchases we have our money sitting in offsets against each house only.
Loans are with 1 bank we are wanting to purchase another investment but the bank is asking us to put in full deposit and costs approx 70K some of the investments have not seen the growth yet as they are quite new purchases there are 2 that have some equity No1 about 55K the other about 60K not sure how to continue maybe we have to change strategy we are currently buying to hold. all properties are cash flow and are costing us no dollars. Any Ideas
Thanks

I am assuming the full deposit is 20%? Are the loans cross col? We would need some more information to make an accurate assessment. Please let us know what each property is worth and what each loan is. If the bank is happy to do it at 80% then looks like your servicing is ok. One option is to increase the LVR against one of the properties to 90% and use those funds for the deposit and costs for the new purchase.

 

[Brady]

Biggest question. Are the loans x-coll?

 

[molly1a]

Thank you for all the suggestions yes they would be Xcollaterised as we only started out with equity from PPOR this propertty was owned outright when we first started all loans are interest only with offset
Out of all the our investments there are probably only 2 at the moment that could be revalued
At this stage i am waiting to hear back from bank and then will consider all options
Where we have been buy and hold i am also thinking we might have to change strategy not sure ???

 

[Brady]

Thank you for all the suggestions yes they would be Xcollaterised as we only started out with equity from PPOR this propertty was owned outright when we first started all loans are interest only with offset
Out of all the our investments there are probably only 2 at the moment that could be revalued
At this stage i am waiting to hear back from bank and then will consider all options
Where we have been buy and hold i am also thinking we might have to change strategy not sure ???

Just because you used equity from PPOr doesn't mean should be XCOLL, but I would likely suggest this is what has happened. Not good as comes to situations like this when you might have 1 property gone up $50k another gone down $50k and bank wont lend you any money as they are all crossed.

First thing to do would be to get properties valued with current bank if no cost and find where you stand, then would look to get your loans uncrossed as a priority. If the valuations don't stack up I would be looking at comparable sales then look at other banks where you can do upfront valuations.

Just to reiterate un-crossing your loans should be your number 1 proirity, you won't be able to 'keep purchasing investments' without difficulties if you continue like this.

 

[Rolf Latham]

On the surface, it does look like you have run out of puff at 80 % lvr, and theprimary way tomove forward will be to extract one or 2 properties and move fwd

If you are cross collateralised, that will make it very hard and expensive because the LMI premium and exposure will be calculated over the whole portfolio, not just the smaller properties extracted.


ta

rolf

 

[molly1a]

Thank you for all the suggestions will definitley think about what you all have said