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From: Even Steven


I'm sure a lot of investors have reached the point where they cannot get anymore finance from the banks due to lack of equity or lack of serviceability (or both). It does not take very long to get to that point. What do you do for finance after that?
 
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Reply: 1
From: Donna Larcos


See

www.navrainvest.com.au re cash bonds
 
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Reply: 2
From: Michael Yardney


A word of warning from someone who has traded through 3 property cycles over 25 years.
If you have run out of serviceability or equity the banks will not lend you further funds because ....you have run out of equity or serviceability. Think about it.
Sure there are some creative ways of financing further property investments, but they are usually shortcuts to financial disaster.
If the banks won't lend you further funds, and remember this is their job, they are just money shops, maybe it's time to take a breather and catch up a little before you buy more properties.
How are the investors who borrowed 90 or 100 or 110% of there investment properties or off the plan purchases coping now that property prices are dropping?
I know of one contributor to this forum who tried to on sell his properties that he bought off the plan a la HK formula.
He was meant to settle on 9 units today (NOT from me!) and couldn't. He only settled on one on sale today .....Interesting!

Michael Yardney
Metropole Properties
 
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Reply: 2.1
From: Even Steven


Michael
A sensible bit of advice there, thanks.
The banks are ultra conservative though and just because they are not prepared to take on any risk doesn't mean that no-one should, don't you think?
Steve
 
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Borrowing

Reply: 2.1.1
From: Gee Vee


Hi! I am completely new to this forum, and only very new to property investment. I have been reading a heck of a lot over the last twelve months and my wife and I took the plunge and now have a neat new townhouse that is tenanted for the next twelve months.
My point...we are looking at more property and have gone into the bank with printout from PIA and some other formula's but currently up against it. The bank manager says heaps of equity, but need more income.
So I'd be interested in some other peoples formulas too. Many thanks.
 
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Reply: 2.1.1.1
From: Steve Piggott


Ok a couple of ways to get extra funding.
All the major banks do non-recourse lending at 70% LVR. This means that the loan is not recorded against your debt servicability. Which means you can use multiple financiers and not be financially 'debt strapped'.
The other way is to set up a corporate structure either a trust or company and use these structures as stand alone asset holding facilities. Again no personal debt servicability restrictions on your own name.
I know this works because I am currently doing it. As I said all the major lenders do it... you just need to talk to the right person in that institution.

Happy Investing
Neb :)
 
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Borrowing

Reply: 2.1.1.1.1
From: Even Steven


Steve
I like the sound of having a trust. How does one set a trust up - through a lawyer or through an accountant? Exactly how does a trust give one more capacity for borrowing?
Steve
 
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Borrowing

Reply: 2.1.1.2
From: Rolf Latham


Hi Godfrey

Dont worry about the bank. Find a good independent broker, if nothing else they will be able to help you make use of that equity to get around your service problem.

No docs type loans can work but are a bit exxy for most borrowers.

Ta

Rolf
 
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Reply: 2.2
From: Rolf Latham


Hi Michael

In general I agree with your sentiment.

There are circumstances though where one's client is equity rich but income poor. Standard lenders will say go away, yet the risk profile of such a person is minimal.

I would suggest your description is more of a gearing problem rather than a serviceability issue, since borrowing extended amounts at >80 % LVR is unsustainable regardless of your income. Buying volumes off the plan will always have inherent risks, the longer the settlement period the greater the risks.


Ta

Rolf
 
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Borrowing

Reply: 2.1.1.1.2
From: Rolf Latham


My experience is that no New company or trust can borrow of its own accord (without personal guarantees of it trustees or directors) under normal rates and LVRs, unless it can show unusually strong cashflow figures.

Ta

Rolf
 
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Borrowing

Reply: 2.1.1.1.3
From: Michael G


Hi,

You mentioned using trusts to boost your borrowing capacity. I'd be interested to learn how you avoid signing a personal guarantee to cover the trust loan?

I currently borrow via a trust, and am having to sign guarantees on the loans the trusts take out. I'm borrowing via ANZ and Adelaide Bank.

Your feedback would be most appreciative.

Regards
Michael G.
 
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Reply: 2.3
From: The Wife


Hi all the newcomers to the forum,

I have to agree with Michael Yardney on this one, if the banks so no, theres a reason.

I dont believe this means you have to stop everything, I belive this means you have to take a side step to continue to go forward.

How many people believe multiple streams of passive income means just property?

And here is my trade mark opening line that I have said at every event I have ever spoken at;
" You cannot get rich from property alone"

Ok, 'rich' is open to interpretation I know, but I am talking about a sizable wealth, so that you no longer need to work a day job, all you need to work is your portfolio, be a full time investor, thats the kind of 'rich' I am talking about.

So....the bank says, you need to increase your income, what can you do to increase it?

If you have any fabulous money making ideas, make sure you email me first ok! :eek:)

I love a ground floor concept.

Cheers and good luck,

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 2.1.1.1.1.1
From: Steve Piggott


Probably forgot to mention that whatever entity you buy IP's in is that the property needs to be able to sustain its debt.
That means either neutrally geared or better positive. My criteria for property is that it needs to have positive cashflow or usable equity in a LOC. Also that the IP has a CG factor that can at least maintain the interest rate repayments.
Put all this in a corporate structure and you will have success.

Happy Investing Neb :)
 
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From: Steve Piggott


Ok ... I earn less than 50K pa. I have a company, a trustee company for my Unit trust which sporns a Discretionary Trust.
I have properties at a total Val of about $1.25 mill. How can I service this amount with my income? I own nothing but control everything at arms length. I am also about to undertake a $4 mill development. There are ways the bank will look at giving more finance. I have developed a good working relationship with my principal financier and as long as a deal 'stacks up' I can get finance. You really just have to show that you know what you're doing.
Look it surprises me too.... 18 mths ago I couldnt get a loan because of my transient history of self employment. Maybe I am just fortunate!
I am enjoying this forum and hope to see a lot more become financially liberated through property investment.
Happy Investing
Neb :)
 
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Reply: 3.1.1
From: Roderick Aguilar


Neb,

If you're not careful, instead of the 30-house man from New Zealand, you could be the next 40-house man from Adelaide! :)

Well done!

Who says it couldn't be done?! Thanks, you've just inspired me to try even harder!

Cheers,

Roderick Aguilar
 
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