Buying Multiple Properties

Currently own 2 houses. Live in one the other is returning 740 per week, current loans are 200k owner occupier 600k investment. Have approximately 400k+ equity with 200k left over for another loan. Total repayments 750 per week. Looking to buy another property, no dependents combined income of 150k. And our bank CBA said they will only offer us 300k which is nowhere near enough to get another house. Ideally we want another 1m to buy a house but the loan officer said there was no way unless we both tripled our incomes which is not possible.

Just wondering how people get approved for loans for multiple investment properties like number 3,4,5,6. We have enough equity and plenty of serviceability as our current rent pays our whole mortgage?

 

Agree - times of organic portfolio growths have long gone!

 

It's not uncommon for people to hit a serviceability roadblock at a lot earlier than they expect to. Contrary to popular belief, most people on this forum don't have 5 or 6+ properties.

It's also not uncommon for people with 1 or 2 to want to build a massive portfolio very quickly. Don't worry about it, property investment is a marathon, not a sprint.


The other think worth pointing out is there are quite a few very competitive lenders that are significantly more generous than the CBA (or any of the Big 4 banks). There's quite a few excellent brokers here that can give you a much broader understanding of what your options are.

 

These days 2 properties and the limit is hit, generally.

You have to then start employing some strategies such as getting rid of non-deductible debt, debt recycling, extending loan terms, getting cheaper rates, converting PI to IO etc.

 

No way with CBA as their servicing is middle wrung with property investors, there are other lenders that may fit the bill.

Pre APRA/ASIC poking their noses in it was possible to build 5+ property portfolio on 100k, now that's about 2 as @Terry_w mentioned above.

 

Thanks this is very helpful information. I think I will focus on increasing my income, reducing debt and will try a mortgage broker towards the end of the year to hopefully squeeze a third property in. I'm under 30 so I guess I need to be a bit more patient.

 

What kinda jobs do you have ? Ie, Any scope for promotions ? Any chance of starting a business either on the side or instead?

I was at my limits back when I was an employee and now that I’m a business owner with a few years of growth behind me, i can borrow again.

Gist of it is either increasing income or decreasing debt, especially the non deductible variety. It’s possible some overtime may even help with the latter?

 

As others have said, speak to a broker.
Personally, I have ~ 2mil in loans with CBA (all IP loans post APRA). PAYG income is similar to yours. Something doesn’t seem right.. do you have other debt, credit cards, hecs.. etc? Is your OO paid down to $200k..or is there money sitting in the offset?

 

Why is 300k not enough to buy a house?? Why do you want 1m to buy a house probably a lot better things to do with I m.

 

Very hard and pretty much impossible to compare yourself to other people when you dont know their whole financial situation. People that have 3,4,5,6 might be high income earners or they might be buying properties of lower value compared to you.

How you assess the repayments is different to how the banks assess it.

If your cba officer says your limit is $300k then majority if your major lenders would be around that mark unless you go to smaller lenders who may be able to give you a little more.

 

Definitely get a broker to check for you - sometimes lenders miss simple tweaks that can improve borrowing capacity quite a lot.

 

Talking to my bank there are many variables but roughly
A lvr of 50% and a 3.5 times interest cover (net rent (after cost) to interest ) after borrowing
The net rent has my salary removed from it .
Your two ratios are
Lvr 66% loans $800k current value $1.2m (is this correct)
Interest cover 2 (interest $16k net rent $32k)
So I would say your income is too light

 

Agreed. A big salary is one of the best security to banks, although you can be sacked the next day. Nonetheless…

 

Lots of variables, but I'd suggest that you are targeting expensive homes with low yield. If your existing IP is returning $740pw, and you want to borrow over $1m for the next one, my presumption is that the existing one is of a similar value.

It's easy to buy more than 2 properties if they are lower value with higher yeild and $300k combined with the equity you already have will still get you something decent, just maybe not in the suburb you are looking at.

 

They use a Mortgage Broker and don't go direct to their bank, not all lenders assess borrowing capacity the same, good to spread exposure as well, not ideal to have all securities and loans with the one lender.

 

I went direct to a main bank and gradually brought one after another.
Because all (well in the early days , nowadays I buy unencumbered from cashflows) the loans were with the same bank so I found it easy to buy one after another. (Averaged one every six months over the past thirty years )
Just one phone call to my manager and I had a pretty good guide if I could buy another one.
If I had my time again I would again go direct and deal with just one bank.

 

have you heard of the "all monies clause"?
Using one bank for all your lending is not the best idea, worked for you 'in the early days' but not the best advice for someone looking to build a portfolio in todays world.

 

Go with a non-bank lender. they service high, but often not great rates.