Hi,
Myself my brother and my uncle have recently got into the investment game and are only novices.
We have pooled our collective incomes and personal properties which equates to around $900000 to create a pool of about $250000 in redraw facility to be used how we wish on investments.
The only problem is that the institution we are using says once we reach maybe 2-3 properties that is all we will be able to secure.
Obviously I am looking at this as a long term arrangement and am looking at options to get around this.
It would be much appreciated if anyone had any info.
Thanks
Hi Mouse1,
Thanks for your post and welcome to the forum.
By pooling your equity and resources you certainly have access to more money than as individuals.
To ensure that you can secure finance after you have maxed out, it’s essential that you have an effective accounting/tax structure.
At this point, provided that all the debt is in one entity (and not your individual names), once you’ve maxed out then just replicate the structure (ie. set up a new entity).
It’s expensive in accounting fees, but that’s the way that Dave and I have been able to secure ongoing finance.
Have a wonderful day,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Mouse,
Institutions look at two main criteria when you apply for a loan. Capacity/servicability and Equity/Deposit. These are the limiting factors when you are trying to expand your portfolio (before being maxed out & using Steve’s advice).
The capacity/servicability side of things is all about the question of what size loan can you afford with the income you have, and your current debt commitments. By increasing your income, or the more likely reducing your debts, your potential maximum loan amount increases.
The second criteria is equity/deposit. Great borrowing capacity aloan does not ensure a loan approval. You have to make sure that you have enough deposit, or equity to draw on to cover deposit + costs of these property purchases.
The weaker of these two will ultimately be your limiting factor before looking at accounting structures.
Two last things to mention:
1) Although you are hoping to pool resources with your family, it may be worthwhile looking at your maximum borrowing capacity as individuals (sometimes it is higher this way).
2) Institutions use a servicing interest rate higher than the current interest rate to qualify customers on their maximum lending. ie a banks standard variable rate may be 6.57%, but to qualify a customer for a maximum loan amount it may be 8.07%.
This is only done for internal loans. So if you were to spread your loans with a few dirrerent institutions that would increase your maximum loan amount from a capacity perspective. Also be aware that some institutions are more liberal than others with the amount of lending they will offer.
Hope this is of some value to you.
Cheers and happy investing,
Nathan.[
]Hi Mouse, Nathan is probably correct. I have access to many of the lenders servicing calulators and would be more than happy to work several scenarios with you. Please email me at [email protected] if you are interested
]
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