All Topics / Help Needed! / Borrowing Capacity for Multiple Properties?

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  • Profile photo of mattstamattsta
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    @mattsta
    Join Date: 2011
    Post Count: 604

    What are your thoughts about borrowing capacity for multiple properties. If I get a portfolio of more than 2-3 +ve cash flow properties, then how can I get lenders to lend to me to buy even more?

    I had read that lenders will only let me borrow 30% of my total income… won't there be a limit to how much I can borrow? How do I overcome it?

    Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 135

    Mattsta, i have been thinking about posting the same question. With the numbers i ve been playing with, it seems like i would hit the wall with about 3 400k ish priced houses even if they were neutral or slightly positive, lets hope we get some answers!

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

    The lenders will take into account rental income as well and you will be able to claim some negative gearing benefits with some lenders – even if not negative geared, this takes into account deductions for depreciation and interest etc.

    Your biggest problem may be coming up with the deposits.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    There's no set rule – there's certainly no 30% of income rule.

    All lenders determine your borrowing capacity differently – some will allow 100% of rental income whilst others will only allow 75%

    Some will take the repayments you make with other banks at their actual value whilst some will add an "assessment rate" to them – which inflates the actual repayment.

    Maximising borrowing capacity is all about careful structuring. It's about using the right lenders at the right point of time.

    A good, independent broker that understands how to structure finances for multiple property purchases will be able to work out a plan with you.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 135

    Thanks Jamie and Terryw, would you use any of the big four towards the start of your property buying and smaller lenders when coming close to "the wall" or vice versa?

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Solomon10 wrote:
    Thanks Jamie and Terryw, would you use any of the big four towards the start of your property buying and smaller lenders when coming close to "the wall" or vice versa?

    Depends on the circumstances.

    As a general rule, we aim to use the least generous lenders first and save the most generous lenders to last.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 135

    Thanks, haven't used a broker so far, handled it myself but i think next time i jump i ll be giving you a call. Haven't done a Canberra road trip for a while!

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    No worries. Most of my clients are interstate so everything's done via phone and email – but you can always pay a visit to Canberra if you like. It's beautiful here this time of year :)

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099
    Solomon10 wrote:
    Thanks Jamie and Terryw, would you use any of the big four towards the start of your property buying and smaller lenders when coming close to "the wall" or vice versa?

    Generally having one of the big 4 for your first 1-2 is ok especially for your PPOR as they have decent policy, rates and access to more ATM’s etc…once you start to build a sizable IP portfolio/ managed funds etc we would start to consider using lenders with better serviceability model ( from a investors point of view) and utilizing different type of techniques ( When to fix, P/I , Interest in advance, equity release ).

    Mick C | Shape Home Loans
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of EngeloRumoraEngeloRumora
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    @engelorumora
    Join Date: 2010
    Post Count: 618

    All of my loans are through CBA. I am on a low income but managed to borrow $800,000 so far. As Terry said the banks take into account the rental income. I am maxed out with CBA so will have to look at other lenders when I decide to purchase more.

    To come up with the deposits I recommend using Nathan's strategy of buying below market, reno and pull out the equity to buy again.

    Engelo

    EngeloRumora | Ohio Cashflow
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    Great in theory buying below market, reno and pull out the equity to buy again but not always possible.

    Whilst Nathan uses Westpac for his deals they would be in the lower quartertile of lenders when it comes to serviceability and most
    lenders and certainly both mortgage insurers will not allow equity to be extracted on a regular basis.

    There are some lenders that have very generous serviceability models compared to the Big 4 and some that are very investor orientated.

    i think matts comment in the original post relating to the 30% rule was in relation to the rent reliance.
    We havent see this applied for a while post GFC but i certainly could see it coming in again for Professional Investors.

    Merely plan ahead, structure your loans accordingly and as long as you can find equity if you bought the right property then financing it shouldn't be a problem.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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