This is the part I don’t understand.
If I’ve used up my assets and ability to repay in my first investment property, why would a lender give me a loan for a second investment property or a third? How does it work that you can grow your mortgage portfolio and your loan repayments beyond your own assets and ability to repay? How does that work? I’m talking loan criteria here.
For example, in 0 to 130, Steve and Dave would not have had the assets to cover that many properties, let alone the ability to repay 130 loans.
I imagine lenders would take the rent and wrap repayments into account, but at the end of the day it’s not the tenant’s or the wrap customer’s ability to pay which gets you the next loan and the next after that, is it?
I can well imagine that a lender might think highly of someone who has over 100 investment properties. But when you’re trying to get just your second property, you’re probably already stretched beyond the lending criteria. So how does it work??
Thanks in advance,
AndrewHi Andrew,
Basically it works by using the income from your new property to support your ability to repay your debts. Each time you purchase a rented investment property, three things happen:
1. You increase your assets
2. You increase your income
3. You increase your liabilitiesNumber 1 has to be more than number 3 and number 2 has to be enough to repay number 3 as well as your general living and other expenses.
The lenders will discount the rental income and only use between 70-80% in most cases. Some lenders will use the lot. Other lenders will even allow for deductibility of investment properties to improve your ability to service.
Basically it comes down to knowledge about how to structure your investment portfolio. Finding a GOOD mortgage adviser who also invests will help a lot in this situation.
Good luck.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdThanks Robert,
I’ll chew that one over for a while.Hi there!
I can relate to your question!
How can I borrow more money for next investement property if my 1st investement property is negatively geared and property what I am living in is mortaged up to 65%?
Anyone????
Pleeese!!!!!!regarding first post. I think from reading Steve’s 2nd book he didn’t actually have 130 properties but had purchased that many and sold many to buy bigger investments, I could be wrong, try asking Steve??
I’m sure banks take inconsideration the rental you’ll get from your properties and they’re cash posative then you should be ok to buy more properties. Sounds like a question for mortage adviser!This is the main problem with negative gearing, it can greatly affect your servicability. With positively geared properties it increases your servicabliity, hence if you can still get deposits you can buy an almost unlimited amount (you may have to go to different lenders, etc).
In terms of assets banks usually only want the mortgage over the property you are buying (unless it is the NAB – beware!!), in the worst case scenario you might have to put up a 20% deposit ((depending of course on area (city vs. regional/rural) and the cost of the property (million dollar properties will prob. require higher deps.))
BasinView you should be able to borrow at least 15% of your PPOR relativly easily (unless your serviceability is bad – i.e. no, or very low income (meet up with a broker on this forum)).
Rgds.
Lucifer_auDear Lucifer,
Thank you for your reply, we are definitely going to find a way.
Marija
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