Dazz there must be someone above this decision maker that can override this decision. What if you threaten to move all your business away? I think you need to be speaking to someone above whoever it is you are speaking to. If it were me I would find out who that was and make a point of going to see them.
X-coll is not good
- Thread starter Dazz
- Start date
Dazz,
Here's my opinion for what it is worth.....Do Nothing. If you must - find another job for a year or so - its no big deal in the overall scheme of things.
In May 09 many things may have happened.
Rents will have increased.
CG may have increased also.
Sub-Prime fear mongering may be coming to a close and credit may be less crunchy.
Interest rates may be lower (or not).
You have already decided that you don't want to buy more at this stage - so just sit tight, take your learnings and know that these things have a habit of sorting themselves out. Do nothing in haste.
Some of the bunch of bankers may have moved on & you will have different people to deal with. This is a long term play - don't get excited by one speed bump in the road of life.
I'm taking the same view (my own advice) as well in relation to some very high interest rates on my last 2 low doc loans.
Cheers,
Aimjoy
Here's my opinion for what it is worth.....Do Nothing. If you must - find another job for a year or so - its no big deal in the overall scheme of things.
In May 09 many things may have happened.
Rents will have increased.
CG may have increased also.
Sub-Prime fear mongering may be coming to a close and credit may be less crunchy.
Interest rates may be lower (or not).
You have already decided that you don't want to buy more at this stage - so just sit tight, take your learnings and know that these things have a habit of sorting themselves out. Do nothing in haste.
Some of the bunch of bankers may have moved on & you will have different people to deal with. This is a long term play - don't get excited by one speed bump in the road of life.
I'm taking the same view (my own advice) as well in relation to some very high interest rates on my last 2 low doc loans.
Cheers,
Aimjoy
Last edited:
Given your bank's concerns (refer previous and varied discussions re: credit crunch)......
..... suggestion 1. will make it worse....
The less a bank knows, the more nervous they get, particularly if you have added debt to a level they were not prepared to provide you themselves. It's worth remembering that they make their money from debt...if they don't want to give you any and your history is good...they may be right.
Reminds me of the old story:
Once upon a time there was a newly hatched bird in a nest high in a tree.
The sun was coming up on a very cold day and the little bird struggled to the edge of the nest to watch it rise. It slipped on the dewy branches and fell to the ground.
The ground was hard, the air cold and the poor little bird sat shivering, knowing it wouldn't last long.
A passing cow saw the pitiful hatchling on the ground, reversed up and dropped a giant steaming cow pat right on top of it. Shocked and insulted (in a bird way), the chick stuck it's head up through the manure and watched the cow meander away.
As the heat of the cow poo permeated it's little frame and the sun rose, the deathly cold abated and the bird started to sing in celebration of the close call.
A passing fox heard the bird's song, wandered up, picked it out of the cow pat, dusted it off and swallowed it whole.
Which goes to show:
the person who drop's sh*t on you isn't necessarily your enemy;
the person who pulls you out of the sh*t isn't necessarily your friend; and
if you're safe and warm and up to your bottom lip in sh*t, keep your mouth shut.
..... suggestion 1. will make it worse....
The less a bank knows, the more nervous they get, particularly if you have added debt to a level they were not prepared to provide you themselves. It's worth remembering that they make their money from debt...if they don't want to give you any and your history is good...they may be right.
Reminds me of the old story:
Once upon a time there was a newly hatched bird in a nest high in a tree.
The sun was coming up on a very cold day and the little bird struggled to the edge of the nest to watch it rise. It slipped on the dewy branches and fell to the ground.
The ground was hard, the air cold and the poor little bird sat shivering, knowing it wouldn't last long.
A passing cow saw the pitiful hatchling on the ground, reversed up and dropped a giant steaming cow pat right on top of it. Shocked and insulted (in a bird way), the chick stuck it's head up through the manure and watched the cow meander away.
As the heat of the cow poo permeated it's little frame and the sun rose, the deathly cold abated and the bird started to sing in celebration of the close call.
A passing fox heard the bird's song, wandered up, picked it out of the cow pat, dusted it off and swallowed it whole.
Which goes to show:
the person who drop's sh*t on you isn't necessarily your enemy;
the person who pulls you out of the sh*t isn't necessarily your friend; and
if you're safe and warm and up to your bottom lip in sh*t, keep your mouth shut.
Dazz thank you for sharing so that we can all learn something.
Now to apply my puny brain.
Your bank has refused you on the basis of credit risk. Credit risk comes in many forms and guises but I suspect what is at the back of your bank's mind is not so much your personal credit risk but the risk in an economy where the Australian dollar has gone ballistic and inflationary pressures are driving up the cost of funds, one of your near and dear tenants may carp it due to decreased revenue and increased costs (which you yourself are so keen to increase reflective of your cost of funds).
Would increasing your security vis a vis your good tenants (should by chance they have a stumble) on the next review increase your standing in the eyes of the bank at no cost to yourself? Perhaps not but worth considering in its own right in this newly dangerous world we live in.
I know you are in a hurry to move on but we both know that in a jam the best move is not to do anything drastic. Your situation will miraculously cure itself when credit conditions improve - either because one of the nine faceless riders of the apocalypse hereforto mentioned will have a change of heart or because an angel will descend from heaven (in the form of an alternative lender).
In short suck it up and wait it through. All the fancy pants lawyers in Sydney will not be able to unpick that Xcoll if the bank was half way competent. I have read plenty of bank security documents and they are tighter than a mouse's bottom.
Now to apply my puny brain.
Your bank has refused you on the basis of credit risk. Credit risk comes in many forms and guises but I suspect what is at the back of your bank's mind is not so much your personal credit risk but the risk in an economy where the Australian dollar has gone ballistic and inflationary pressures are driving up the cost of funds, one of your near and dear tenants may carp it due to decreased revenue and increased costs (which you yourself are so keen to increase reflective of your cost of funds).
Would increasing your security vis a vis your good tenants (should by chance they have a stumble) on the next review increase your standing in the eyes of the bank at no cost to yourself? Perhaps not but worth considering in its own right in this newly dangerous world we live in.
I know you are in a hurry to move on but we both know that in a jam the best move is not to do anything drastic. Your situation will miraculously cure itself when credit conditions improve - either because one of the nine faceless riders of the apocalypse hereforto mentioned will have a change of heart or because an angel will descend from heaven (in the form of an alternative lender).
In short suck it up and wait it through. All the fancy pants lawyers in Sydney will not be able to unpick that Xcoll if the bank was half way competent. I have read plenty of bank security documents and they are tighter than a mouse's bottom.
Dazz,
I'm a far smaller player than you (and so don't take my comments as if I 've seen/done it all coz I haven't)
I'm also throwing a wild idea out there (you need to brainstorm with a few ideas on the off chance something useful comes up).
This is not too well thought out but would the bank be interested in onselling all their loans with you to a third party...maybe even to your cashed up debt free mentor? Would whoever buys the loans be willing to free up one or more x'colled properties to let you move ahead? (I suppose this is tantamount to re-financing the lot which you can do at anytime-maybe that is your ace card-I will take the lot away if you are going to play hardball with me)
I still cant' understand at 48% lvr what is worrying your bank? Have they lost faith in your decision making? Is there something that has spooked them (apart from the tight credit market)?
Ajax
I'm a far smaller player than you (and so don't take my comments as if I 've seen/done it all coz I haven't)
I'm also throwing a wild idea out there (you need to brainstorm with a few ideas on the off chance something useful comes up).
This is not too well thought out but would the bank be interested in onselling all their loans with you to a third party...maybe even to your cashed up debt free mentor? Would whoever buys the loans be willing to free up one or more x'colled properties to let you move ahead? (I suppose this is tantamount to re-financing the lot which you can do at anytime-maybe that is your ace card-I will take the lot away if you are going to play hardball with me)
I still cant' understand at 48% lvr what is worrying your bank? Have they lost faith in your decision making? Is there something that has spooked them (apart from the tight credit market)?
Ajax
Hi all,
Just quickly read it.
Once you could release this security, was this to be sold?? And sale proceeds to produce future income??
What is there reasons for not releasing any securities?? Was this a security
point of view, or do all properties provide an income used in servicing?
If it was from a security point of view, if you were able release and sell a property. A deal could be reached to say, provide anywhere up to 50% of the property proceeds, or whatever the 'current' LVR is. This would NOT increase the banks position.
Also, when was the banks valuations last done for your properties??
It just seems very inflexible.....
Just quickly read it.
Once you could release this security, was this to be sold?? And sale proceeds to produce future income??
What is there reasons for not releasing any securities?? Was this a security
point of view, or do all properties provide an income used in servicing?
If it was from a security point of view, if you were able release and sell a property. A deal could be reached to say, provide anywhere up to 50% of the property proceeds, or whatever the 'current' LVR is. This would NOT increase the banks position.
Also, when was the banks valuations last done for your properties??
It just seems very inflexible.....
Agreed there is that risk, which can be managed if you still give them all the information they ask for at review time. If you don't they may assume the worst. The main benefit is for the investor's psychology. In a similar (but much smaller!) situation, my reaction was to feel the bank "owned" me and it's not a good feeling. While a small step, it all helps to feel more in control of your financial destiny and consequently not make rash decisions.
By the way, I loved the bird story - kudos for that!
Link please?
API = Australian Property Investor magazine. I think you have to buy the mag or at least browse at your local newsagent.
So Daz in summary the bank does not wish to release any security because last time they did so you went against their advice and purchased another property which they saw as weakening your postion and thus theirs? You have not been willing to open your books to them to relieve any of their fears.
They assume, based on past history, that if they release further titles you will repeat the process. They are not prepared to take the risk. Your LVR is irrelevant in this line of thinking. The difference between 49% and 51% in their eyes in not 2% but the liklihood of the whole pack of cards tumbing down. They are feelong less and less in control.
They will also be reviewing your situation next year when your repayments will be higher (hopefully offset by rents) and perhaps worstening economic position. They will assess you on whatever their risk parameters are at that point of time regardless of the specific risk of your personal properties. They may not even know themselves now what those risk parameters are as it is constantly under review.
They assume, based on past history, that if they release further titles you will repeat the process. They are not prepared to take the risk. Your LVR is irrelevant in this line of thinking. The difference between 49% and 51% in their eyes in not 2% but the liklihood of the whole pack of cards tumbing down. They are feelong less and less in control.
They will also be reviewing your situation next year when your repayments will be higher (hopefully offset by rents) and perhaps worstening economic position. They will assess you on whatever their risk parameters are at that point of time regardless of the specific risk of your personal properties. They may not even know themselves now what those risk parameters are as it is constantly under review.
Got to remember too that the bank may have a more accurate picture than Dazz in that the bank may also be dealing/banking with some of his tenants! If so they might have a better idea of the risks, on those properties/tenants anyway. Probably unlikely that this is the primary cause of their concern, but you would never (and couldn't expect to) know.
Ah yeah, that'd have to be one of my ealier ones I probably wouldn't persue it either, but just have a short and fun 'what if I stick it to the bank' type dreaming session
Ah yeah, that'd have to be one of my ealier ones
I probably wouldn't persue it either, but just have a short and fun 'what if I stick it to the bank' type dreaming session 
Officially I haven't no - but I did approach them initially to support the property purchase, and thus furnished them with all of the fin. details. They have the lot.....as does every swinging cat in Australia now....
Their conclusion was we couldn't afford to buy the shed, and hence rejected our application. I still don't agree with their conclusion, and I'm determined whilst owning the asset to definitely prove them wrong.
We've owned it for the past 8 months now, and everything is going swimmingly. Yes it was a big lump to swallow, but so far we are chewing madly on it and who knows - with a bit of good management - we may just prove them wrong. This Bank is notoriously conservative, so just because they think it's an unacceptable risk, doesn't mean an investor with a bit of experience and the backing of another financier can't make a good fist of it.
Agreed - but then being the opposing side of the contract - that's good for us if they are feeling less and less in control. That's our sole objective right now, arrange things such that we have more control. My aim is not to make the Bank feel comfortable. Bugger their comfort levels. What about my comfort levels.....15 years of never having missed a payment, with quite a few loans pre-paid 12 months in advance and it's still not enough - they can go whistle Dixie with their comfort levels.
Exactly - and how can I work with that ?? It's all so vague and wishy washy. My specific rents and specific expenses are hard known facts. These other "general market parameters" are all so rubbery that they keep applying.
I don't care if some loser in the US took out a dodgy loan and now can't pay it back. What's that got to do with me ?? Credit risk my a$$, the Banks were the ones loaning funds to those dodgy characters, and then use their mistake to come back to Oz and whack us around the head with 7 or 8 rises in IR's over the past 2 years. They made the mistake, why do we get punished for it ??
I have all of my loans with one lender (who does not have an All Monies clause). Most of them are stand alone, but 2 are cross collateralised with a freehold property, which allowed me to finance these two additional properties with no cash input from me.
My LVR is around 70%, but they won't lend me any more at the moment as I am, apparently, heavily "rent dependant". It's a portfolio of residential rental properties. Of course it's rent dependent!!!
Anyway, Because the majority of my loans are locked at the mid 7% for 5 years and 2 are x-coll with my freehold property, moving institutions isn't really an option for me right now. Not that I can service any more debt, but if I did want to do a deal and capitalise the interest, I wouldn't be able to do so. I am at the behest of the lenders Mortgage Insurers, in a nutshell.
Having said all that, there is another side to the coin, as there always is.
The very mechanisms that lock me into this lender and seemingly stifle further growth are the same mechanisms that have allowed me to grow my portfolio to the point that I have.
My current lender has been extremely supportive in providing finance to fund my growth and no other lender that I have dealt with previously has indicated that they would provide the funding that my current lender has.
For me, it's all about leverage. The more property I control with a given amount of cash/equity, the more capital growth I can enjoy over time.
OK, so I've hit a wall for the moment (which I will overcome!), but in doing so, I've accumulated a portfolio which would otherwise not have been possible.
It's a two edge sword, but I'm very happy with my current position. There's always another way of looking at these situations.
My LVR is around 70%, but they won't lend me any more at the moment as I am, apparently, heavily "rent dependant". It's a portfolio of residential rental properties. Of course it's rent dependent!!!
Anyway, Because the majority of my loans are locked at the mid 7% for 5 years and 2 are x-coll with my freehold property, moving institutions isn't really an option for me right now. Not that I can service any more debt, but if I did want to do a deal and capitalise the interest, I wouldn't be able to do so. I am at the behest of the lenders Mortgage Insurers, in a nutshell.
Having said all that, there is another side to the coin, as there always is.
The very mechanisms that lock me into this lender and seemingly stifle further growth are the same mechanisms that have allowed me to grow my portfolio to the point that I have.
My current lender has been extremely supportive in providing finance to fund my growth and no other lender that I have dealt with previously has indicated that they would provide the funding that my current lender has.
For me, it's all about leverage. The more property I control with a given amount of cash/equity, the more capital growth I can enjoy over time.
OK, so I've hit a wall for the moment (which I will overcome!), but in doing so, I've accumulated a portfolio which would otherwise not have been possible.
It's a two edge sword, but I'm very happy with my current position. There's always another way of looking at these situations.
Hi all,
Dazz, when you were first going down this path with CIP, did this type of situation you are now in occur as a possibility?? What were you thinking you would do when the banks said no more??? Can you revisit the early plans??
The part that I would find unease with is this....
What does "entitled to review our position" actually mean?? Does it mean they could ask you to stump up more equity??? (worse case scenario)
Personally, I would start looking around at other lenders, putting out feelers to swap, if I could find someone willing to take on a X-ed portfolio at 51% LVR. Then when the time is right (before the May review), change if possible, whilst losing only a couple of months interest at the lower rate.
Basically, try and keep your options as open as possible, don't sit on your hands until May, and give them the opportunity to do "whatever" to you. I'd also go back to that CFO who wanted to buy, and squeeze him for an offer.
bye
Good luck
Dazz, when you were first going down this path with CIP, did this type of situation you are now in occur as a possibility?? What were you thinking you would do when the banks said no more??? Can you revisit the early plans??
The part that I would find unease with is this....
What does "entitled to review our position" actually mean?? Does it mean they could ask you to stump up more equity??? (worse case scenario)
Personally, I would start looking around at other lenders, putting out feelers to swap, if I could find someone willing to take on a X-ed portfolio at 51% LVR. Then when the time is right (before the May review), change if possible, whilst losing only a couple of months interest at the lower rate.
Basically, try and keep your options as open as possible, don't sit on your hands until May, and give them the opportunity to do "whatever" to you. I'd also go back to that CFO who wanted to buy, and squeeze him for an offer.
bye
Good luck
Cheers for the input Bill.
Our deliberate plan all along was to get as big as we could, as quick as we could, without putting in any of our own money. That worked. It took all our energy and focus. We knew this "roadbump" was up ahead of us, but it was in the future.
Well, time is upon us now, and we just dodged the first roadbump and can look forward to the next one in May next year.
When the Banks said no more, I guess we had planned on stop buying. They never did say no up until mid-year last year, so it was never an issue. Change of personnel at the Bank was the big difference from where I sit - could be wrong though.
Don't wish to revisit the early plans. Happy with what happened. We are in a bit of a bind, but nothing that can't be tolerated or worked on. I've got 70 years left in my life to work it out. A solution will come.
Sort of. We have to remember they are a Bank. They aren't interested in owning the property or selling it. They are interested in ensuring the interest bill is paid and the debt paid off. They have the power via the mortgage contract to almost do anything to us, but with a good argumentative lawyer....is there any other type - I'm confident we could stall any threatened action for at least 2 years.
Yep - already onto that this afternoon Bill. I have one of the sharpest minds on the case as we speak.....and he's a SS member, so who knows, I might owe someone a beer fairly soon.
Hiya Daz
Change of personnel at the Bank was the big difference from where I sit
Ding .............!
Your banker/broker can make or break many a deal.
Once that Nexus is broken for whatever reason it can be much harder road
ta
rol
Change of personnel at the Bank was the big difference from where I sit
Ding .............!
Your banker/broker can make or break many a deal.
Once that Nexus is broken for whatever reason it can be much harder road
ta
rol
Dazz,
Publish the book. Retire off the royalties. Over the next seventy years of your life, keep an eye out for and pounce on the first opportunity to unlock your IP finance.
Regards - Ben
Publish the book. Retire off the royalties. Over the next seventy years of your life, keep an eye out for and pounce on the first opportunity to unlock your IP finance.
Regards - Ben
