Finance to get to 100+ Properties

[PTILoveYou]

Maybe you find it difficult to concentrate on reading for more than 20 seconds Gary, and hate to hear the truth from others, rather you'd be living in the fantasy world that you seem to live in most of the time.

I think most of your readers would wish you'd just do your job at the council and not post at all.
Isn't that what people paying their rates are doing, helping support you by paying you to do your job at the council Gary?
You seem to spend more time not doing any work and posting on here, than actually working. Does you boss know about all this?

As for your followers, you are leading them like lemmings to a cliff, how could anybody do that with a clear conscience, and also take money from them?
I bet you won't be willing to be with them all when it all comes crashing down around them. Maybe not so much you as your Dad will save you, but will you be there for all the others that you are leading down such a dangerous path to financial ruin?

See, here you go again.

[snobilo]

Not sure what 'personal development' really means.

I have always interpreted it as education + knowledge + experience. They say knowledge is power, the best of which is that which comes from experience.

But I agree with Gary on this one, this is one thing I think that is very important for success no matter how your view it. If success is finances - educate yourself bout wealth creation. If success is happiness with you and your loved ones - spending your time learning about their lives, dreams and how to best get involved and contribute to their happiness.

In terms of the purpose of this thread I feel it has gone a bit off track. FOr 100 + properties wouldn't Orion/Graeme be one of the better people to talk to as he does quite a lot of volume investing down south...? Just a thought.

[Wayne]

Re this thread my 1st question would be 'Why 100?'

Why would the goal be a number of properties rather than a free cash flow?
I suspect the 100 is just a way of quantifying 'how do I get finance to grow my portfolio large'

[marknfs]

You guys are a pretty awful lot. What a negative, passive-aggressive, judgmental read that was. The poor guy has had stuff all of his questions answered.
I'm sure you'll even have some droll reply to my comment too

[orion]

Re this thread my 1st question would be 'Why 100?'

Why would the goal be a number of properties rather than a free cash flow?
I suspect the 100 is just a way of quantifying 'how do I get finance to grow my portfolio large'

Yes I think you're right Wayne.
The guy who posted it seems very clued up for a 19 year old and asks lots of very good questions.
I got him to post it on my Facebook group the questions he asked here and so several of us answered it on there.

Here is my reply below -

Hi Jonathan, if you are doing P & I loans over 20 years on no deposit i.e. recycling the equity by either buying well, or adding value and refinancing you will need a yield of approx. 10% p.a. or net yield of 7.5% p.a. If on 25 year loans, you will need to get about an 8.6% yield or 6.5% net yield. You should be able to keep doing this with one bank until reaching their commercial lending requirements that varies between banks.
It may be $1 million, $2 million or more borrowing, then generally all would go to 65% rather than 80% lending. Mine with ANZ is at 65% maximum with about $4.5 million lending with them and still at 80% with BNZ with over $2 million lending.
So once you get just below that limit you may be able to use another bank if wanting to stay near the 80% LVR. I would recommend however (if you read the LVR article in the Files section) to reduce your LVR as your debt increases. By doing this, you should be able to get to your goal of 100 properties if that is what you still want.
Read all the articles on here or in PT and it may answer some of the other questions you have too.
Those figures will of course change as interest rates change, but I based that on an interest rate of 4.2% p.a.
So if rates go back up again, you would need a higher gross and net yield.

[Wayne]

You guys are a pretty awful lot. What a negative, passive-aggressive, judgmental read that was. The poor guy has had stuff all of his questions answered.
I'm sure you'll even have some droll reply to my comment too

I could try but can't think of one.
You are new - welcome.
You may have noticed that this happens a lot - theads often go way off track.

[Don't believe the Hype]

Hi Everyone,

Just thought I would make a post tonight/this morning as I have arrived home from slaving the night shift, which earns me just over $20 per hour.

Reason being as I currently have 2 properties and should be able to spend a further $750k based on 80% LVR of recent valuations, but I don’t want to get stuck moving forward.

I have come up with a list of some of my questions that I have. The aim with these questions is to develop a more in-depth understanding of how the banks assess serviceability to support more loans. I think understanding serviceability requirements and how to structure loans will be the key to getting sufficient leverage to get to financial freedom and past this. Not sure if there is a broker out there who would have the answer to all of these questions, so I thought I would just post them on here and hope to get feedback from people who might know the answers to particular questions. No doubt I will develop more questions as time goes on.


1. What have people calculated to be the required rates of returns/cash flows for property purchases, in order for them to be completely cash neutral in different ‘banks eyes’?
E.g. For ASB it seems like 75% of rental income needs to be able to cover principal and interest payments using their current 5 year fixed interest rate on a 100% mortgage. Is this the sort of thing other people have found for lending criteria still within ‘retail’ limits?

2. When you haven’t got sufficient income to support a line of credit in the banks eyes, is there a way to get around cross-collateralising your loans for future purchases?
E.g. If you have a couple of properties with rental income and personal income, but this income in not enough to support a line of credit to get cash as a deposit for another property, can you use proposed rental income from a potential purchase to support a line of credit and then get the cash out and not cross-securitise the new loan? – Don’t think this can be done, so not sure if there is a way to solve this one. Is there a workaround? E.g. cross 3 properties, then refinance the third somehow and remove the cross? – If so, how would this work?
- If you can’t do this, how easy is it to break up say 10 properties that are all cross-collateralised, into individual loans? –Anyone had experience with this?

3. Does anyone know how quickly you can bring a new registered valuation to certain banks and borrow on increased equity? E.g. Straight away/whenever you want for one particular bank, 3 months for one bank, 6 months for another etc. This question applies to properties that have not had work done to them, just increased in value or bought below market value to begin with.

4. Do renovated properties need to be rented i.e. providing an income, before applying for more finance, or can a current rental appraisal sometimes suffice? – (so you don’t have to wait to move tenants in etc. before you can move on to the next deal).
Been thinking about this one, because when you propose a new deal, the bank can accept a rental appraisal, so would have thought this could be the same for properties already held that have just been renovated. Suppose it might depend on how risky you are to the bank – e.g. they might only want to assume you will obtain the appraised rent on one, rather than two properties?

5. In the plan of building a large portfolio, I have been told that if you have properties cross-collateralised/securitised and you want to revalue one of them to borrow on your gain in equity, you can be required to revalue all of your properties and the banks will only loan on any change in the value of your entire portfolio. So if you have two properties, one goes up by $50k in value, one goes down by $50k, you won’t be able to borrow any further capital. Has anyone had this experience and could share their knowledge?

6. When looking to see if I could get a loan for renovation, it was looking like I would have needed a registered valuation done prior to getting the loan to get evidence of what the value would come to after the reno, then the bank would lend on this value. Is this the only way to do it or is there some faster/easier way to do it? - Besides getting a line of credit, or funding from cash (what I just did).

7. Has anyone been able to buy a property below market value and finance this with a particular bank, get a registered valuation done straight away with an increase in equity and then refinance with another bank? If so, have you been able to do this on multiple properties or is it not possible?


My apologies to anyone who senses my ignorance with some aspects, only 19 so still learning the ropes with this stuff.

Any responses would be much appreciated!

Cheers,
Jonathan

How are you getting on Jonathan?

[Beano]

Hi Everyone,

Just thought I would make a post tonight/this morning as I have arrived home from slaving the night shift, which earns me just over $20 per hour.

Reason being as I currently have 2 properties and should be able to spend a further $750k based on 80% LVR of recent valuations, but I don’t want to get stuck moving forward.

I have come up with a list of some of my questions that I have. The aim with these questions is to develop a more in-depth understanding of how the banks assess serviceability to support more loans. I think understanding serviceability requirements and how to structure loans will be the key to getting sufficient leverage to get to financial freedom and past this. Not sure if there is a broker out there who would have the answer to all of these questions, so I thought I would just post them on here and hope to get feedback from people who might know the answers to particular questions. No doubt I will develop more questions as time goes on.


1. What have people calculated to be the required rates of returns/cash flows for property purchases, in order for them to be completely cash neutral in different ‘banks eyes’?
E.g. For ASB it seems like 75% of rental income needs to be able to cover principal and interest payments using their current 5 year fixed interest rate on a 100% mortgage. Is this the sort of thing other people have found for lending criteria still within ‘retail’ limits?

2. When you haven’t got sufficient income to support a line of credit in the banks eyes, is there a way to get around cross-collateralising your loans for future purchases?
E.g. If you have a couple of properties with rental income and personal income, but this income in not enough to support a line of credit to get cash as a deposit for another property, can you use proposed rental income from a potential purchase to support a line of credit and then get the cash out and not cross-securitise the new loan? – Don’t think this can be done, so not sure if there is a way to solve this one. Is there a workaround? E.g. cross 3 properties, then refinance the third somehow and remove the cross? – If so, how would this work?
- If you can’t do this, how easy is it to break up say 10 properties that are all cross-collateralised, into individual loans? –Anyone had experience with this?

3. Does anyone know how quickly you can bring a new registered valuation to certain banks and borrow on increased equity? E.g. Straight away/whenever you want for one particular bank, 3 months for one bank, 6 months for another etc. This question applies to properties that have not had work done to them, just increased in value or bought below market value to begin with.

4. Do renovated properties need to be rented i.e. providing an income, before applying for more finance, or can a current rental appraisal sometimes suffice? – (so you don’t have to wait to move tenants in etc. before you can move on to the next deal).
Been thinking about this one, because when you propose a new deal, the bank can accept a rental appraisal, so would have thought this could be the same for properties already held that have just been renovated. Suppose it might depend on how risky you are to the bank – e.g. they might only want to assume you will obtain the appraised rent on one, rather than two properties?

5. In the plan of building a large portfolio, I have been told that if you have properties cross-collateralised/securitised and you want to revalue one of them to borrow on your gain in equity, you can be required to revalue all of your properties and the banks will only loan on any change in the value of your entire portfolio. So if you have two properties, one goes up by $50k in value, one goes down by $50k, you won’t be able to borrow any further capital. Has anyone had this experience and could share their knowledge?

6. When looking to see if I could get a loan for renovation, it was looking like I would have needed a registered valuation done prior to getting the loan to get evidence of what the value would come to after the reno, then the bank would lend on this value. Is this the only way to do it or is there some faster/easier way to do it? - Besides getting a line of credit, or funding from cash (what I just did).

7. Has anyone been able to buy a property below market value and finance this with a particular bank, get a registered valuation done straight away with an increase in equity and then refinance with another bank? If so, have you been able to do this on multiple properties or is it not possible?


My apologies to anyone who senses my ignorance with some aspects, only 19 so still learning the ropes with this stuff.

Any responses would be much appreciated!

Cheers,
Jonathan

How is your progress in reaching the magic 100 properties Jonathan ?