Apologies for the repetition. I will remember in future to only press post comment once.

Three stories…

I bought a three bedroom house in Edgewater near Maribyrnong in April last year for $331,000. Did a $2000 reno (patching up cracks on walls, ripping out carpet and polishing the existing floorboards, agents came along and valued it at $550k

Previous to this though, I bought a double storey house with a coin-laundry in the front. Paid $41,000 for a deposit with the purchase price $410,000, the income from the coin laundry covers the mortgage and bills.

A client of mine purchased a vacant shop in Footscray for $390,000 earlier in the year that was vacant for more than 6 months. Somehow found a tenant in there immediately who was willing to pay $4000 per month. $48,000 per year, and tenant pays outgoings values it at close to $1 million.

Consider fixing for 1 year at about 5.5 – 5.6% and when the fixed period expires you may find yourself in a lower interest rate period so then you can fix it for longer.

Current variable rate for commercial is around 8% so it just depends how far you think the variable rate will go down by (if it will go down).

It depends how you get paid – If you can substantiate your income via 2 pay slips (and a group certificate if possible) this will qualify as a full-doc loan. Otherwise if you are a subcontractor running your own business, you may have to get a lo-doc loan.

Low doc loans are generally for business owners who may not be up to date with their financials (ie because of their accountant or because they need the last 2 years tax returns and they have not necessarily lodged it, or they have only been in business for 18 months).

The bank asks them to sign a declaration stating how much income they make.

If you've got a permanent position earning a $95k salary, get a full doc loan.

Agree with Terry. He wasn't your client at the time he purchased was he?

I will say that the asset protection theory is a myth, because the bank can sue you to chase your assets even if they don't have a mortgage on it. It just removes an additional step in the process of them getting their money back.

Say you have a portfolio that mixes residential in with commercial. Rates can vary massively from different lenders with some offering fantastic fixed rates for commercial,  but the big banks are currently pretty hard to beat with residential; previously I was paying 9.49% with one of the majors (for a business loan) and got it refinanced to under 6% with another lender. My lender could not match the rate and features. If it were cross collateralised, I would not have been able to do this so easily, and the bank would want revalue the whole portfolio as soon as you took the commercial chunk out. This would have cost about $100 per $100,000 in value, and an additional $300 admin fee for each property. An unnecessary additional cost, and if you own a fairly large portfolio with multiple properties, it can be a MASSIVE unnecessary additional cost.

Avoiding cross collateralisation not only gives you flexibility to sell when you need to, it also gives you flexibility to change banks and refinance when you see some better deals around! You can avoid cross collateralisation and still access the same amount of funds, so why would you do it?

Just go see a solicitor – in Victoria you can transfer assets from husband to wife or vice versa and make gifts out of "love and affection". I imagine it would be the same in Tassie but not 100% sure.

Good luck.

Go and see a good property lawyer who knows how to structure these things.

Back in my real estate days we sold a vacant warehouse to a national retailer, entered into a $1 lease so it would be sold as a going concern, and the lawyers created something like a put option at the same time as a call option. When the respective options were exercised, the lease was extinguished.

The finer details are all a bit fuzzy as it was a number of years back but if I was to buy anything vacant again I would look into that first.

Hey RL,

The commercial lenders will generally offer around 65-75%. They used to be a bit better but this week some of the major lenders have tightened their commercial credit policy and these guys will now only fund you up to 65%.

At least two other lenders are currently offering very competitive rates for commercial loans: we're talking below 6.50% which is CHEAP as I find the returns on commercial quite a bit higher than resi, plus tenants pay outgoings. You will also get this about 70% LVR.

Drop me an email if you want some further details.

Cheers,

I second and third the above statements.

A quick footnote though, some lenders like ANZ have a policy that you have to know your client and meet with your client face to face. I'm not sure if this differs in other states? Who knows what the future will hold with webcam chats and whatever else though?

lukentel – I don't believe there's anything wrong with trying to drum up as much business as possible though, as long as it is done in moderation and you don't shove your services down people's throats!

Richard Taylor seems like a very trustworthy and knowledgeable broker judging from the quality of advice that he gives on these forums so he definitely earns this broker's tick of approval. I would refer anyone interstate to him as I'm from Melbourne and as my way of doing business simply prefer to meet with my clients to do a face to face. It will also depend on how complex the deal is as well.

Most brokers can provide the same function as the banks ie write a home loan and follow up paperwork, but the truly great brokers that stand out from this bunch will provide additional property advisory and effective loan structuring advice. Effectively, he/she should act as a personal trainer with your mortgage!

Finally, whilst fast approvals are good news for brokers and clients alike, I don't believe one should ever badmouth a bank for this reason, because one day you WILL have to use them again, and I think it also removes a certain level of objectivity that clients trust us to maintain.

Apply some positive and rational thinking: slow approvals can also be indicative of the bank having the market leading deals at a particular point in time, which may cause more brokers to push their deals through a particular lender. Therefore a bit of pain and anxiety short term could be worth having the right loan during the intervening years.

If travel, time commitments, and communication are an issue, I would suggest negotiating as long a settlement period as possible to allow for a good buffer.

You're not wrong there mate! I own a coin laundromat at the front of my house, which is the next best thing!

Even better actually, because you don't have the guilt…