Best strategy for asset poor cash rich?

Discussion in 'Investment Strategy' started by Russkiy, 22nd Oct, 2019.

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  1. Russkiy

    Russkiy New Member

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    Hi Guys,

    What strategy would you recommend for me?

    I have one PPOR valued around 750K with 500K mortgage which is fully offset. I'm working under my own ABN and I have some additional business funds which I can invest in property, however banks only look at my tax return and my serviceability wall is around 800K total. My mother wants to invest her money through me, so it's kind of another cash pile apart from my money sitting in offset account.

    I want to have some sort of line of credit to start obtaining different properties across different states and I'm happy to cross-collateralise. However, I don't understand how to go above my serviceability wall as lending criteria getting tighter and tighter. Does it mean I need to look for cashflow generation rather than capital gain assets? Is it worth for me to buy something old and ruined and invest cash in renovation?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Get some advice on paying down the loan and redrawing. No need to requalify plus you get investment debt at owner occ rates.

    Maintaining a fully offset loan will hold you back
     
  3. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Why are you happy to cross collateralise? There's no need to do this and it's just taking on more risk than necessary.
     
  4. Russkiy

    Russkiy New Member

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    Technically speaking if I take all my money from Offset and use it to purchase investment property, I could claim interest on these money as investment related. Or do you mean something else?
     
  5. Russkiy

    Russkiy New Member

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    May be bank would be happy to give a better rate for two property's loan? Either way if I have something goes wrong and I have to sell it, I need to cover the loss and it doesn't matter if property is cross-collaterised.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Never off to use more than one property as security for a loan if you are a borrower, but always ask if you are a lender.

    Legal Tip 8: The legal side of avoiding cross collateralising properties https://propertychat.com.au/community/threads/legal-tip-8-avoid-cross-collateralising-security-properties.562/

    Legal Tip 242: Why is it safer to get all loans with a different lenders? Legal Tip 242: Why is it safer to get all loans with a different lenders?
     
    Sackie likes this.
  8. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    Makes no sense to cross and increase your portfolio risk.
     
  9. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Please, please, please don't do this!!! Given the position you're in there's absolutely no reason to cross-collateralise. It only hurts you, takes away flexibility in your lending (which you're likely to need). It might even result in higher stamp duty related costs in some states.

    If you tell a bank you're asset rich and happy to cross-collateralise, there will be a wolf, the sheep and no sheep-dog or sheppard.
     
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  10. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Same rates apply whether crossed or not in nearly all cases. The same thing can be achieved in a much less risky way. Property investment is ALL about managing risk where you can.
     
    Terry_w likes this.