Borrow for 5th Investment Property

Hi

I'm currently with CBA and have 4 investment properties. I would like to borrow for a 5th investment property. I know I can service the loans given my income and current committments, but CBA for some reason won't lend me.

I have seen a few ads where brokers says you can have 5-10 investment properties in 10 years with the kind of income me and my wife are one (130k and 100k repectively).

Can someone please help who know a reputable and trusted broker that can help me?

Regards

 

Don't believe those ads! It's not a broker's job to tell you have many properties you can acquire

But do see a broker to see what you can do.

 

What you think you can borrow VS what the banks serviceability calculations show you can borrow are two VERY different things - you most likely can't service any further debt according to CBA servicing.

You needed to see a broker yesterday, before going down this road with only one lender. It would be worth finding out if any of your properties are cross secured with CBA and then search for some brokers on this forum who can assist you.

 

yes they are Cross securitised with CBA. Any good brokers you can recommend?

 

Well that's not a good start if you're looking to build a portfolio...
@Rolf Latham is a good one, he will be able to re-structure your existing portfolio and structure it correctly to move forward in the future which is really important if you want to reach 10+ properties.
Plenty of other good brokers on here too, just need to do a bit of searching.

 

There are heaps of great brokers on the forums - have a read and see who you resonate with.
That said, if you no longer service with CBA you WILL be able to buy more, but it's going to need great risk management and your existing loans will need to restructured as they'll be locked in place moving forward. Your current loans will also need to be structured a certain way to ensure you can move forward - if they're not done correctly, your borrowing capacity won't be improved.

There's a lot to do to move forward from here, so be sure you align with someone who knows what they're doing and are thinking of a lot more than just the loans.

 

OMG, all loans with one bank. That is miles to risky for me.

I would get help and get it quick. One should never get their finance structuring advice from a bank.

 

The first thing that needs to be done is the existing loans need to be un-crossed. It might be possible to do this within the CBA or it might be necessary to move loans to alternate lenders. It may be possible to purchase another property without doing this, but sooner or later this is going to be a major roadblock. The sooner it's corrected, the easier (and cheaper) it will be.

Keep in mind that an add stating they'll allow you to buy 'x' number of properties is really just advertising that tries to appeal to your greed and ego. There's no context in that add about what your financial situation is, nor does it have any indication of the values of those properties. The number of properties you have or you aspire to have is irrelevant. What counts is the outcomes that your portfolio gives you. Personally I'd rather have 4 properties in blue chip suburbs that are long term performers, than 10 properties in regional areas with no growth potential.

 

Plenty of good brokers on this forum, even the ones who responded in this thread would be good ones to start with. As others have said, you should be prioritizing to un-cross the existing loans, and work with the broker of your choice to help you forward.

As Peter said, it is not the quantity of the properties you own, rather the quality that matters.

 

Will all depend on the specifics, but there's a number of finance strategies investors can use to maximise funding. All depends on goals/fit/etc.

Given your portfolio size, its probably worth spending a little bit of time understanding how finance works and then speaking to lenders/brokers to find solutions to what your looking for. Always worth talking about risk management as your portfolio size grows - this becomes far more important when you have a substantial holding and are more susceptible to changes in your debt terms.

 

All loans with 1 bank is not a problem.

Cross securitization is an issue. But just because you are with one order does not mean that at all.

Also having track record and large portfolio with a lender give heaps of advantages and some pulling power.

 

You're right, until something goes wrong. Then it's a disaster.

The advantages of lending a lot with a single bank evaporate at about $1.5M these days.

 

All loans with one ban and not crossed is a surrogate crossing.

See my legal tip on all monies clauses in loans. One property mortgages to a bank secures all loans to that bank

 

Yes it is. I would suggest you read up on the “All Monies” clause.

I assume that is why @Peter_Tersteeg wrote this:

It amazes me how many (experienced) investors haven’t heard of this Clause. We came across it very early in our property investing journey when we read the loan documents.

During the height of our accumulation phase, we had loans with 4 banks. Since retiring nine years ago, we are on a path to reducing our debt and initially reduced this down to 3. Last month we refinanced an IP loan and finally got it down to one. This loan has a 25 year term so we will probably stick to this one until we reach 88.

That is an even bigger problem. Normally I find it is inexperienced investors who fall for this trap.

 

here is a link
Legal Tip 130: What is an All Monies Clause? Legal Tip 130: What is an All Monies Clause?

 

@varun80 I've seen this rookie mistake been done many times. The broker can help you fix your loans mess to some extent. But moving forward only you can take the initiative to educate yourself from the basics up with regards to residential RE investing. That will make the biggest difference to your overall success imho.

 

I think people grossly underestimate the all monies clause. I was reading yesterday about someone who'd fully paid off his house but took a $10k credit card to buy some furniture shortly before retirement.

Got into a little trouble, then quite quickly a debt collector is filing bankruptcy against them. Fairly quickly fees and interest are added, they owe about $12k, the debt collector is trying to sell their home to pay off the debt.

Not quite the same thing, but it demonstrates how quickly things can blow out of proportion in finance. Having everything with with a single lender exposes everything to that lender and it makes it very easy for them to throw a fire sale with everything you have.

I don't think there's substantial advantage to having a lot of debt with one lender. I'm getting the same pricing on loans of $750k as I am with loans of almost $2M.