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Form a JV partnership with a cash/equity partner. That is providing they can bring serviceability or some other expertise to the table. There’s a lot of qualifiers to get it over the line with banks though and a lot don’t like it when there’s unrelated parties borrowing. Tricky but not impossible (usually!). Some will do it as resi lending (development size dependent) and some may only do it as a commercial lend. There’s a lot of variables to be taken into consideration.
Just need to make sure it’s set up in the correct structures and every step of the way is mapped out beforehand in a contract including contributions, exit strategy, profit share %’s, contingencies etc etc
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Did you have a finance clause in your contract?
Why is your loan not getting approved?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Central west of where?
Regionals are usually good for cash flow and capital growth is usually the sacrifice. There are some exceptions to that rule but not many.
I started out my IP journey with 2 regional cheapies that served me well as a stepping stone. Purchased, did a basic cosmetic reno on both and rented out both for 8% and 10.5% return straight off the bat. Was also able to draw on manufactured equity to leverage next purchases.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Taking a step back, why do you want to be a broker, Charlie?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
You’re on the right path wanting to maximise your tax deductions should it become and IP down the track.
It does depend on your risk profile whether you would be more comfortable with a 10% or 20% deposit. If your deposit is <20% then you will need to add LMI into that equation too.
Another thing to consider too is principal and interest vs interest only as once again, to maximise your tax deductions you don’t want to be reducing the principal.
Other than the apartment and the next PPOR you plan to get in around 5 years time are you planning on any other property purchases in the meantime?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
those who’s on the receiving don’t want to change model, and MFAA is enforcing that model, and lenders are also endorsing the model
the current model is designed is so that it’s the new ones that get screw over !!!
I don’t think the model is broken or there to screw anyone over. It’s an easy industry to get in to considering the potential consequences should something be done incorrectly. Brokers are, in a way, dealing with people’s livelihoods. A mortgage is usually the biggest financial commitment for someone. If a loan is set up incorrectly or wrong credit advice is given then it could cost the client thousands, if not more.
That’s why having someone with years of industry experience mentor you makes the world of difference because as the saying goes ‘you don’t know what you don’t know’.
Put the shoe on the other foot, would you want to be getting credit advice from a broker who has been in the industry for 5 minutes and is relying solely on themselves to provide the assistance?
Your client is your most important asset and it’s your responsibility to do everything that is in their best interests.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
agreed with you that getting a mentor with the same philosophy as me would be awesome, but I have never yet came across any so far. somewhat similar to the university days when you as a student just have to get align with the philosophy of the professor of the class that you want to pass, else you don’t pass the class. if that’s the only professor for that class at the university, and you need to get through that class to graduate then you have no choice but to align yourself to that professor’s philosophy of doing things. this seems to be the way the finance broking industry is now in this country, with the industry association such as MFAA making its own requirements on top of those already done by ASIC. Just more gatekeepers than really necessary?
When I first started out I went with a mentor who in hindsight wasn’t right for me for several reasons. I then found a good mentor and it made the world of difference. This is my business and my livelihood so I didn’t and don’t want to make any compromises. I am in this for the long run and not to make a quick buck (not implying this isn’t you) so want to set myself up for success as much as possible and that includes having an awesome team around me because I know I don’t have the answer for everything, no-one does, but I know how to find those answers.
the aggregator does not get to pick who my mentor will be, that’s my choice. the aggregator just let me know which brokers within their membership base have the quality, knowledge, and qualifications that will make me a better broker.
The MFAA also has a list of certified mentors on their website. Have a look around this forum and the other forum (somersoft) and there are brokers on there who are also mentors. Whether they’re taking on mentee’s or not, I do not know.
I have not found a mentor who wants to do commission splits, all the ones I have interview so far wants their $500 to $1000 per month fee regardless whether I write or not write any loan in that month. if the mentors are truly there to help new brokers into the industry, why are they not willing to take up some risks too, in that if the mentor don’t help the new broker settle loans then no one gets pay?
Agree, I wouldn’t be happy with a fee arrangement as there’s no real incentive to the mentor whether you write loans or not. I would only seek a mentor who charged a comm split.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
I personally think you’re putting the cart in front of the horse. To me a good mentor is more important than aggregator and I’m not too sure how I would feel having my aggregator select my mentor for me. This is someone you will have to work closely with for 2 years so need to make sure that not only will you have a good working relationship but they’re someone that you can actually work with and have a similar view on lending as you do such as how loans should be structured ie are they an advocate for x-coll? Are they investment loan savvy and know how to structure loans correctly instead of churning and burning clients. Will they help you grow your business?
Like any profession, some mentors are below average some are average and some are above average – how do you one which type you will be aligning yourself with?
If I were in your shoes (and I have been) I would select a mentor that I am happy with (this includes everything from mentoring style, their own broking and business experience to comm splits) then either act as a credit rep under their ACL or have an agreement with the same aggregator as them. Then once you’re finished being mentored decide on the course of action that would suit you once you’ve got a couple of years industry experience under your belt.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Charlie, read the agreements closely. Particularly about ownership of clients and if you terminate the agreement who keeps the clients and/or the trails.
Out of interest, what’s made you narrow it down to the ones you’ve listed?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
The good buyer’s agents I know charge a fixed fee for their services.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Looks like you’ve done some good research there Troy but how does the properties that you have narrowed down fit within your big picture? Some things to consider is why are you wanting to invest in property? What are you hoping to achieve our of it and what kind of purchases do you need to make to enable you to reach your goals.
In answer to your questions:
1. Short answer is ‘depends’. The minimum rental return for a blue chip inner city property would be different to a regional property. Same with capital growth. If you are willing to accept a low rental return is that being compensated by a high capital growth figure?2. No real problem. You may be faced with a vacancy period but you can start to advertise the property for rent during settlement. RE agent will probably inflate the figure. It’s you who should know how much it will rent for which you will find out during your research. Also worth chatting to property managers in the area
3. Advantage of renting is, like in your situation, you can rent where you can’t afford to live and then invest elsewhere. That way you’re maximising your tax deductions
4. If you do renovations pre tenant vs after letting it out (in between tenants) it is treated differently tax wise so it would be worth getting tax advice on it. It would depend on what state the property is in and how livable it is.
Hope some of this helps.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Very broad question there Mick. What are you hoping to achieve out of investing? What are your short, medium and long term goals? Why Yeppoon and how does it fit in with your plan?
What may work for one person may not for the other.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Charlie, there is a lot more to being a mentor than just checking loans. It’s offering all sorts of guidance too that is involved with running a successful mortgage broking business. It may take them an hr to check through your loan but what about all the coaching up until that point – making sure you pick the right loan for the client, especially if it’s a tricky one.
IIRC correctly you have no previous lending experience so it will take a lot of time to build up that knowledge base and learn all the intricacies and idiosyncrasies of lending in general but how each financial institution works.
You can either hold your own agreement direct with the aggregator and hold a separate agreement with your mentor or you can go under their agreement as a loan consultant assuming they hold an ACL. For mentoring if it’s a % or comms then I would think that anything from 20-40% would be fair depending on their experience and how good they are. Keep in mind if you go as a loan consultant under your mentor’s ACL it will also depend on their agreement with their agg. They may have a 90/10 or 95/5 split so you would be receiving a % or that and not a % or 100%. There are also the mentors who charge a fee for their mentoring which may be anywhere from $500p/m upwards.
I wouldn’t want a mentor with too many mentees as well. They get busy and overwhelmed so it’s one thing to look out for.
It’s not just the mentoring or agg fees you need to consider either. There’s PI insurance, membership fees with the MFAA or FBAA, potentially software licencing fees and other incidentals that add up.
Be prepared to be poor for a long time and have at least 6 – 12 months of living expenses set aside if you’re giving up your job to do this. The pipeline for a mortgage broker is a long one. From first meeting, to when the clients are ready to buy, submitting the loan app, settlement, payment to the agg then the agg passing payment to you. This process can be anywhere from 3 to 6 months and even longer sometimes.
I think writing 4 loans a month to begin with is extremely optimistic. Do you have any networks set up already? How do you plan on getting clients?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Yes, some are assessed on a case by case basis. Particularly when loan is outside of normal guidelines.
If the borrower cannot service the loan it will not be approved – NCCP / responsible lending and all that jazz for resi lending.
Commercial is different where it doesn’t fall under NCCP but why would a bank lend money when the probability of default is high.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Apologies Mikko, missed it earlier in the thread where you stated that.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
You can go for a loan with less than a 20% deposit – it just means you will be up for Lenders Mortgage Insurance. For an IP this isn’t always a bad thing as LMI enables some people to get into the market sooner and also maximises tax deductions. Keep in mind you will also need additional funds for stamp duty, legals and other settlement costs.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Pepper is a niche lender – is there a reason you went with them to begin with?
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
I don’t know the ins and outs of NZ mortgages so not sure fixed rate works the same way it does here is Aus but for the purpose of my response I’ll assume it does.
A lot can happen in 10 years both personally and economically. The break fees for a 10 year loan could be horrendous. I’d feel uncomfortable locking something in for 5 years, but that is just me, as I know my circumstances don’t usually stay stationary.
Banks are in it to make money so taking a loan for that long is like betting against the house but it does give a lot of risk adverse people that SANF.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
What are the demographics of the area?
Best bet would be to call a few of the local property managers and have a chat to them on what their prospective tenants are looking for.
Some instances there is demand for 1 bedders such as close or in CBD for cheap (student?) accom but I know if I was renting as a single person or even couple I would still want 2 bedrooms as one to sleep in and the other as storage / office / guests etc.
Whether it comes with a car park on title would be another consideration too.
Another thing to consider is the finance side. 1 bedders tend to be on the smaller side and banks don’t like it when they’re smaller than 50sqm – makes it harder to get a loan or the LVR has to be lower.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
A drop in income can hurt your borrowing power.
When you’re self employed most banks usually go off your last 2 tax returns and take close to the lowest figure of the 2 so if you have had a bad year or two it can take a little while to have things looking better to the banks again.
There are a couple of banks who are happy with the latest tax return so that can help in some situations if you’ve had a not so good year but then followed by a better year as only the decent one is used and there’s no averaging down by previous years.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
