Cant get Bank Finance???

Hypothetical..... but I think we may see this scenario as times are a changing.......

what if you can no longer finance property deals?

What will you do to source finance? Anything creative?

I think we are already seeing investors change asset class, buying shares, but this wont solve the problem?

MTR

 

JVs?

 

I don't have any kidneys left.....

 

I literally loled when i read this.

 

I think people need to be smarter about what they're buying. Ignore yield at your peril; some people hoping for growth are negatively geared to the tune of 5 figures which must play havoc on ones serviceability.

They should also get a second opinion from a finance savvy broker. And even then not choose loans based on rate, but which ones will allow them to move forward 1-2 houses down the track.

Or if they're self employed then this might open up lo doc options.

 

Lo doc in some cases, buying in SMSF, commercial lease doc, develop and sell to reduce debt if not completely stuck - there are a few options to consider.

 

Dividend paying shares would help marginally, with some lenders, 2 years later (or at least one tax return later for most).

Getting finance for shares (margin loans) hasn't been impacted by apra, yet, so that could be an alternative for some investors.

I think for most people it's just a matter of treading water till things change. Lending may change, values and rental yield may change etc

 

This is the dilema I'm stuck in now, do I get finance for an investment that will be negative to the tune of 25k per year or is it better to go into this storm with less debt

 

You must be thinking it's a darn good investment if you're willing to burn almost a quarter mil in cash flow over a decade.

 

Ya get it all back on tax!

 

... I will try getting higher paying job ...

 

Yes I hear you, after tax, it would probably be in the tune of 200k, plus the 70k stamp duty for the initial purchase. So say about 270k over a decade. Really need to think how much GC this can get over the decade. I'm in two world about this one.

 

Yes but it also has low entry requirements. I will soon has bazillion competitors and lower wages

 

grow avocados? Less hipster competition in market gardening

 

They are very easy to grow from seed. I have planted about 10 at my place that I have grown from seed. Not sure if they will survive the winter though.

 

Just use lower LVRs on deals. Not ideal but doable. Anything to keep moving forward.

 

Non bank lenders and private funders

 

Gee the options being thrown around are getting pretty thin....

If the problem is servicing calculators and limited I/O terms... and those are the two problems - the best way to combat those issues is with additional income or debt reduction, or both.

The servicing calc problem is not new. For a good 2-3 years now, with each new application for credit, every dollar owed has been getting assessed at 7.25% P&I or worse, and while so far all that has done is to limit additional borrowing power for most investors. It hasnt really placed any real strain on their holding capacity. But now a second problem is emerging - and fast...

I/O term limits. Many investors are now facing the prospect of their repayments jumping 30-40% per month, per property when their I/O loans revert to P&I

So I'd be forget about expanding in the short term. I'd be concentrating much more on holding on to what you have. For many, it will be an achievement just to service what they have at 30-40% more per month, and not have to sell.

And this is why I have advocated cash cows as being so important. Things I have been arguing for several years now are about to be demonstrated to be as exactly as valuable as I said they would be. This is indeed a decade where deleveraging will be rewarded .

Those who recognised this early, and who took steps to get rid of as much debt as possible , are well ahead of the curve and are well insulated against P&I shock. Those who poo poo'd the idea of debt reduction and havent done their sums based on P&I may well be about to discover how wrong they have been .... unless they have a good amount of surplus cash flow to play with, or are in line for large wage increases, large rental increases or some other windfall, they are quite possibly going to wish they'd injected some extra cash flow

But its not too late. Invest your remaining equity and remaining borrowing power in something that generates sufficient income to see you through this next couple of years ( or more) of extreme I/O tightening, and pay off some extra debt along the way, and you'll come out the other side extremely well placed.... Dont do so, and you may not come out with any of what you have worked so hard to build...