firstly, are people going to get annoyed if keep asking so many questions? I don’t want people to think I’m spamming…
this question is, will banks continually lend you as much money as you need? like, assuming you can show you can pay (i.e. from rental income of other properties) can you just keep borrowing more and more (e.g. 100 houses+) or do you have to do something different once you’ve borrowed a certain amount?
email: g e n e r a l g h e r k i n @ y a h o o . c o m
phone: 0405 411 098Nathan,
I’m sorry I dont have an answer to that question as it is a question I was going to ask myself. We currently have 3 properties and the finance for a fourth, but I am worried that the bank will soon say “no more!”
I appreciate all the information provided on this site and the more people who ask questions, the more we all learn.
Thanks everyone.
Hi,
The following points are important when wanting to make sure you will be able to continue to secure finance.
– You are purchasing your properties in an appropriate structure (i.e company / trust setup).
– The properties you buy must be positive cash flow from day one – puting money in to your pocket rather than taking it out.
– You are borrowing with the correct LVR (preferably 80%).
We have a company structure – we buy all of our properties using this structure. As directors to the company we become guarantors for the loan. i.e our personal asset’s and income secure the loan.
If you are also in a situation like us where you also run another seperate company and are also directors to that company you can have that company go as guarantor to the property investing company / strucutre. It just means you have upped the stakes a little
So long as you can sleep at night!!
Eventually the company will be generating enough income for us not to do this.
In the event that we max the first structure out we will move along and setup another structure and start again.I’m no expert but these are some of the tactics we are using in our investing to ensure the bank keeps on lending us money.
My recommendation would be to put in place the correct structure form the word go – and keep a close eye on your acceptable risk (don’t take on more than you can chew).
Sorry for the quick overview but I am a little pushed for time – Maybe some others will be able to fill in the gaps for you.
Regards,
Tim Wilson.
“Poverty is not an option”
Thanks Tim, that’s a great idea, I’ll look into it.
email: g e n e r a l g h e r k i n @ y a h o o . c o m
phone: 0405 411 098Good question Nathan! I have often wondered how far a single bank will go or if you have to end with numerous “Financial Institutions” to bank roll all the properties. And as you suggest, what is their basis for all the lending? Is it as simple as once the property is considered as cashflow positive, you can move onto the next one?
Cheers,
CanuckI think, but not too sure, as I am still a newbie, when the banks consider lending you money, they work out your total income (income from job, rent, and all else) and then work out all your debts (credit cards, car loans, mortgages, etc) and then they work out how much money you have left over each week. They use a percentage of this figure (cause normally people have living costs that they have to pay for as well) to calculate how much you can afford for repayments each week and that is how they come up with how much you can borrow. They also take into account all your other existing houses to figure how much existing equity you have. I think that there are other factors as well, but that is as much as I gathered from borrowing from the bank.
So in the end, the more positive cash flow property you have, the greater your borrowing power! You must always buy property to increase your power to borrow more (so you can buy an infinite number of properties)… otherwise, if you buy negative cash-flow property, you have less money to play with, your borrowing power decreases and you will be only able to buy a limited number of properties
Cheers,
angie!#####################
Tomorrow, you might wish you started today.
#####################Angie,
Well said re: your comments and I love your signature!
My experience is that lenders will provide a maximum lend, since they review all loans based on risk.
The more money that you borrow, then the so too does the risk for the lender in that if you go under then they have a higher exposure.
Just what that maximum lend figure is… who can tell? It depends on policy, the nature of the security and the strength of your network.
I wouls say though that by only borrowing 80% of the purchase price I have found it easier to return to the money well time and time again as lenders know that I have something to lose if things don’t go to plan.
Nathan: Keep posting questions mate. It’s not spamming at all and you are getting some excellent feedback and comments for suggested improvement.
Regards,
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
Guys,
My broker gave me a rule of thumb which i refer to always. He said that banks base all your repayments on 2% higher than the standard variable. P&I . And only take into account 75% of your rental income as income. What this means is if you have $50,000 in loan repayments each year on 6.1% either IO or P& I they will access your $50,000 on 8.1% P&I. And if your rental income is $100,000 per year they will only take $75,000 as income.
Hope i havent confused any one, We have 11 houses now and i always refer back to this formula.Happy new year
AndyAs said Nathan, structures are the key. I asked the same sort of questions and Steve explained a basic structure to me (which is in his Wrap Pack I think). Also I have a good broker who is keen to help me achieve my goal by playing hardball with lenders, etc. This makes my life easier as I have someone I can ask not Why can’t I do it….but how can we do it? and she provides possibilities ….
Enjoy
AD [:0)]A great deal of talent is lost to the world for want of a little courage. Every day sends to their graves obscure men whose timidity prevented them from making a first effort.
-Sydney SmithI have also lately been making sure I say not, “why can’t i?”, but “how can i?”. As a result, I’ve now gotten in contact with a mortgage broker (David and Hilary O’brien) and the wheels are now turning to try and see what I can qualify for. I’m also learning about wraps and how the contracts work and stuff like that, so hopefully it’s full steam ahead, even if I still feel like I don’t know what I’m doing!
Actually my biggest concern right now is lack of understanding in regards to why my calculations always always put me in the negative instead of the positive. I want my first property to positive cashflow from the word go, as I am not interested in all that negative gearing stuff. Also, I need to study my chosen area(s) more in detail so that I have a better chance of putting a good deal together. Problem with that is, of course, it helps to know what to look for when doing that studying! But it’s all a journey I guess, and as I keep hearing, if you don’t jump in and be willing to make some mistakes, you’ll never progress.
email: g e n e r a l g h e r k i n @ y a h o o . c o m
phone: 0405 411 098
So long as you can sleep at night!!
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