Structuring and Financing for Positive Cashflow Portfolio

There is no real difference with structuring loans between negative and positive cash flow property. You should still borrow 104% and avoid cross collateralising securities.

For the trusts this is a complex form of legal ownership which you should seek legal advice on.

I am made a thread here on how trusts can improve borrowing capacity. See if you can find it from a few months ago.

If the lender asks you would need to disclose personal guarantees given so the lender would then assess you on the full debt of the 3 trusts. If they don’t ask about personal guarantees then you would be assessed on your personal debt and the debt for the borrower in quesiton.

Terryw wrote:

If the lender asks you would need to disclose personal guarantees given so the lender would then assess you on the full debt of the 3 trusts. If they don’t ask about personal guarantees then you would be assessed on your personal debt and the debt for the borrower in quesiton.

Hi Terry,
Will I be right to assume if all 3 trusts (in OP’s example) take out lease doc loans, then there will not
be personal guarantees required by lenders?

Thanks,
FXD

• This reply was modified 7 years, 2 months ago by  fxdaemon.

Hey David,

You’ll find those days are over – lenders require any loans that you’re guaranteeing/structures you are a director of be loaded into the liabilities of applications so there isn’t a magic bullet in this regard.

fxdaemon – you still need to provide personal guarantees for commercial lending, hence why its generally best to start with exhausting your traditional residential borrowing, then move into commercial property. Be careful not to exhaust it before releasing any available equity however, otherwise you might have no borrowing capacity to release the deposit funds, leaving you in a catch 22 situation.

Ok David,

Well I think that is very possible and realistic (not to say a bigger goal wouldnt be)

The problem I think many people run into with similar goals to you, myself included, is lack of instant equity building, buying below market value isnt enough to then within 3 months revalue and have instant equity to reuse (generally) unless your value adding.

so for e.g. lets say 7 years for your goal from today.

you currently have one property (call it P1)
p1 = 350k value, 170k debt Income 50k a year (save 20k a year)

buy p2 for 230k spend 20k and three months later its valued at 300k

So thats
p1 350k
p2 300k
= 650k over 420k debt
now you use that to purchase another property shortly after
buying p3 for 250k spend 50k on fully redoing the whole house
and now worth 410k and your other properties both went up 10k each
thats
p1 360k
p2 310k
p3 410k
= 1070k over 720k and lets say thats within a year (yes you spend a bit of time building that original equity (years)
but if you bought correctly that could already be around 70-150 per property in return so already over $300 per week in income of the property and all properties could be structured P and I so they are reducing the loan amount.

Now this is a very rough example but I hope it shows a glimer of the breakdown.

There are deals far better than the above out there as well.

Just need to be able to source them and understand the risks.

David Thiu wrote:

@terryw: Thanks for the clarification. I just didn’t understand how an entity could borrow money without proving any source of income.
@jaxon: My goal is to make +$500 positive cashflow per week, and I’m thinking maybe this could be achieved by finding 10 properties yield $50 positive cash flow per week. Maybe renovate and increase the rent? I’m not really sure, but I’m open to suggestions on how this could be achieved.
@corey Batt: Are there any lenders out there that don’t require you to disclose any loans you are Guaranteeing or is it mandatory by law now?

Everyone asks it. Not only because this loophole (it really wasnt one, specific lenders had very specific policies permitting it under certain circumstances) has closed and there’s a standardisation of input of data through a third party channel for most institutions – it’s being asked and to not note it is mortgage fraud.

Lenders are digging into credit hits on your file from 5 years ago now – they will certainly ask questions even if you don’t disclose them.

In reality with the right structuring using the right lenders at the right time you can still achieve quite a reasonable size portfolio – I’ve written about this previously here: http://www.precisionfunding.com.au/diversified-lending-structure/

@david-thiu still works for me – maybe give it another try.

And yes correct, you can still increase your borrowing capacity structuring in this way, it’s all just a case of using a little foresight and planning to make sure you can eek out as much as possible.