All Topics / Finance / DSR ratio

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  • Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    Good people,

    What figure will banks accept you putting in your DSR ratio for rental income? Just yearly rent? or do you also include tax back on your expenses? How about tax back claimed on depreciation? It makes a BIG difference. I’d realy appreciate some feedback on this.

    Thanks

    Cabo Wabo

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Cabo

    Yes dependant on the rental income assessment can make a big difference in increasing your borrowing capacity.

    Most lenders accept between 75-80% of the rental income you receive however in saying that certain lenders take 100% of the rent you receive on properties which they dont take as security.

    Also the negative gearing impact makes a BIG diference as you state. Some lenders include just the interest loss others make an allowance for depreciation.

    What I would suggest is to run your figures past an independant mortgage broker and see what they come up with. However remember whoever you use make sure that you structure that loan correctly as getting it wrong can be an expensive mistake inb the long run.

    Cheers Richard
    Ph: 07 3720 1888
    [email protected]
    http://www.yourstatefinance.com

    Specialising in US & IP finance.

    Richard Taylor | Australia's leading private lender

    Profile photo of hellmanhellman
    Member
    @hellman
    Join Date: 2005
    Post Count: 109

    It really depends. Usually banks take 70% of rental income. Some banks take into account negative gearing (from memory) NAB is one).

    Usually they don’t inc. things like tax back from repairs, etc. Unless you make a special case to them (and you are a wealth indvidual that needs to save alot on tax).

    Hellman

    Profile photo of DazzlingDazzling
    Member
    @dazzling
    Join Date: 2005
    Post Count: 1,150

    I believe it depends on the quality of the income stream.

    I’ve seen big banks take a variety ;

    1. 60% for residential tenants on a rolling monthly lease in a pretty dodgy suburb.
    2. 80% for residential tenants on a fixed term 2 year lease in a top flight well to do suburb.
    3. 100% for a national company locked into a fixed 5 year industrial lease with a strong track record at the site for the past 10 years.

    Banking personnel are usually reasonably accurate in their estimation of the quality of the income stream and set limits accordingly.

    My Lender does not take into account tax refunds. Tax refunds don’t impress him that much, as it means on a cashflow basis you’re asset isn’t a real strong performer…they are interested in, and support things that actually make money.

    Profile photo of brahmsbrahms
    Participant
    @brahms
    Join Date: 2004
    Post Count: 485

    most banks take 75 – 80 % as a given, some will do 100% if all properties are held by them (read mortgaged).

    neg gearing is more and more common today – that is we can build it into the lending calculations.

    But the ‘add back’ is only the interest costs – as you can imagine its way too hard to facilitate all the other crap that ‘happens’ during the year where as the interest cost is at least constant.

    cheers

    brahms
    Purveyor of Fine Finances
    aka Mortgage Broker Brisbane

    Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    I’ve been crunching a lot of numbers lately, and i’ve found (unless i’m stuffing my numbers up), that, if i borrow the whole lot including trans costs, a 60-150k property will still loose me money before tax even if i charge 120pw for the 60K and 300pw for the 150K property.

    If i buy right, my LVR won’t be the killer, it’ll be my DSR! As i’m still a relatively small time (new) investor compared to some of you old time higher rollers, I realy need to be able to include my tax back in my DSR in order to maintain momentum (claiming interest and other fixed costs)…. at least thats what i think at the moment anyway. Maybe you’ll think differently and convince me otherwise….

    What banks do and what banks don’t include tax back in a DSR?

    Thanks

    Cabo Wabo

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Soem lenders that will take negative gearling into account are:
    Bankwest
    St George
    ANZ

    Terryw
    Discover Home Loans
    Parramatta
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of redwingredwing
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    @redwing
    Join Date: 2003
    Post Count: 2,733

    Cabo why dont you post your numbers I’m sure you will get a more insightful response from some of the great brokers and others on the forum?

    REDWING

    “Money is a currency, like electricity and it requires momentum to make it Effective”
    Count The Currency With This Online Positive Cashflow Calculator

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