Forums / Getting Technical / Finance / Need help – which structure should pay my income

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of Robbie VenterRobbie Venter
    Participant
    @robbieventer
    Join Date: 2017
    Post Count: 2

    Hi All,

    I have been developing my portfolio over the last seven years and have now reached the point where I have enough passive income to stop working.

    Here is my challenge:

    I have been using the income from my job to get loans. Given that the banks don’t really regard rental income as a legit form of income, how can I use the income I am getting from my properties to pay myself a wage which the bank will see as a solid income?

    My options are 1. Start a Company and ay myself a wage 2. Pay myself from a trust 3. Start a company in someone elses name and pay myself a wage.

    There may be other options that I am not aware of, however I would love to hear from you.

    Thanks in advance

    Robbie Venter

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    a) Hire yourself as property manager for 2 years.
    b) only take out commercial loans, or deal with the commercial lenders so they can assess your loans as actual, not at 7.2% etc.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    You cannot pay yourself a wage, only another entity can. If you set up a company but you own the properties how do you get the income into the company? Even if you do start a company you will be self employed so the lender will want to see the company financials.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Sorry Robbie that is not correct lenders certainly consider rental income when assessing your serviceability for future loans.

    Many lenders merely take 80% of the Gross rental income and then deduct your usual expenses (assume you don’t have any loans against the properties) and your living expenses.

    I built a $30 M unencumbered property on rental income alone.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Robbie VenterRobbie Venter
    Participant
    @robbieventer
    Join Date: 2017
    Post Count: 2

    Hi Richard

    Thanks for your comments. Yes understand rental income is considered, however I have been told banks calculate loan repayments at a higher percentage and reduce income by 20%. I will send you an email with more info as I see you are a mortgage broker, maybe you can help.

    Thanks again.

    Robbie

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Robbie yes received your email although as mentioned i am currently in Iceland with limited internet access.

    All lenders take a percentage of rental income (usually 80%) due to the fact you have expenses such as Council rates, insurance, strata levies etc deducted before the net income.

    In many cases lenders also cap the rental yield at circa 6-6.5% so if you have a property which you are getting 9% out of then only 6% yield will be considered.

    Most lenders also sensitize your existing debts in accordance with the APRA guidelines so if you have a loan at 4.5% interest only then loan is considered a liability at 7-7.5% on a principal & interest basis.

    In saying all of this it would make no difference whether you had PAYG income or not the formula calculation is still the same.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of JaxonJaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 282

    Robbie Seems super simple.

    Call every Loan option till you find the shoe that fits???

    assuming you call every bank, lender, etc to no avail.

    Then work out who will lend and what are their critera.

    Then spend the next year stil working and spare time structuring this.

    Simple?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,065

    I have been using the income from my job to get loans. Given that the banks don’t really regard rental income as a legit form of income, how can I use the income I am getting from my properties to pay myself a wage which the bank will see as a solid income?

    Which bank doesn’t regard rental income as a legitimate form of income?

    All the lenders I know of take anywhere between 75% to 80% of gross income.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 113

    I had a similar experience since my contract job is
    finishing up and that means no main stable source of income.
    When I spoke to my broker recently his comment was most
    lenders will not approve finance with sole income from rents
    alone.
    Anyway he suggested I will need to go low LVR to be able to
    get finance to keep investing without a job salary.

    Rgds
    FXD

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