Hi Guys, Do any banks lend money based on assets and not so much income. I started flipping last year. I have just put a property on the market and am looking to buy the next one..........Right now i have borrowings of around 400k which is about 20% of my assets which are mostly tied up in property. I am not taking an income at the minute as i want to reinvest as much as possible. My wife earns about 100k yr. i have just had a very interesting chat with a "Business Bank Manager" who informs me that asset based lending stopped years ago..........i am from uk and new to the way aussie banks work!.....So my question is, where can i borrow from without liquidating assets??? Thanks
The amount you can borrow is based on income. Your asset position is inconsequential to this. Assets on their own can't pay the interest bill and banks don't want to rely on you liquidating an asset to meet that commitment. Assets are relevant to lending insofar as they can be used as security for the loan, but this is a separate consideration to your affordability - that's all income based. At some point there may be an argument that you're earning an income from your flipping. To get to that point you'd need demonstrate that this is a business, which is profitable and paying an income to yourself over several years. That avenue is still probably more than a few years in the future.
I am doing this as a business. I am reinvesting the capital and profit, i dont need to take an income. That is how i will get to the point where i can take a decent income. Having said that, if banks are not prepared to lend against assets, i'll have to liquidate other property and i wont need the banks!!!
If your (or your wife's) income is strong enough, you can lend from anywhere. They'll lend based on your wife's income and treat you as a dependant. They won't love it if you tell them you're flipping the property though. Have you had your borrowing capacity checked by a broker?
Under the National Consumer Credit protection Act a bank cannot lend a person money unless they have show they can afford to meet the repayments on the loan without too much hardship. This act doesn't apply to loans to companies
I've just emailed a broker so he can assess borrowing capacity. Looks like i'll have to liquidate to carry on from these comments.....bewildered!!!
