Creating an Investing Business Plan... For the Bank

It's always recommended to create a Property Investing Business Plan in general but I've read that a few suggest going as far as developing one specifically for the bank to show them you're a bit more serious about the process than most of the other investors.

It would contain a cashflow forecast and feasibility analysis of the IP along with the reasons why you're investing in that particular area (Gov spending, pop growth etc), fture plans for the IP and best/worst case scenarios and how you'd be prepared for them.

Would it make much of a difference at all or could it help get a loan over the line and maybe a bit more $'s? Has anyone done this? I do intend on using a broker for my next IP but can't help but think the mortgage assessor would be impressed by a more professional approach. It is a business after all.

 

Methinks you over-estimate the ability of the bank's credit department staffers to read such a report. They have their own methods of assessing your application - personally, I'd leave it at that.

 

Realistically the bank doesn't care. They want to see the numbers meeting their criteria for the deal in front of them. They've already got their own growth statistics and other data built into their risk assessment calculators, they believe their data is more detailed (and it almost certainly is), your own predictions aren't of any use to them. Their calculators also factor in what they see as the more likely worst case scenarios.

If anything, a detailed investment plan might scare them off. Banks are more conservative than many investors, I've seen them decline deals not because it doesn't stack up today, but because they're not comfortable with what it represents later.

Don't let this discourage you from writing such a plan however. A detailed plan that's constantly reviewed and updated is probably the second most likely thing to help you to achieve your goals. The most important thing is to actually take action and execute your plan.

 

Thanks guys, wasn't sure if it would be worth it so had to ask. I suppose if they have their own assessment metrics they're not going to stray far from them or be influenced by what I think/hope will happen. Would be awesome if their risk assessment calculators were as easily accessible as the mortgage repayment ones.

I've started writing up a more detailed plan so I know what to focus on for the next IP. Basics would be to look for an established house with minimum 5% annual CG with 5% yield for around $450k with the option to add value (adding a bedroom seems to be the 'easiest' way for a big equity gain). Good to finally have something to focus 100% on! Now to try and not be distracted by everything else

 

As a broker I would say this would have no effect on getting a residential loan approved.

 

I like the idea!

In terms of lenders, realistically residential lenders for most deals tick boxes and make sure you meet benchmarks. Servicing OK, Income can be used OK, Security OK, Val OK, etc etc. If you don't meet these, then its unlikely you'll get a loan. For example, if you can't service, you can't show them a business plan and hope they'll accept it. They won't. Commercial acumen and common sense flexibility approach don't really apply to much, that was all done in the creation of the banks own policy setting - its more like a rulebook (with some small flexibility).

In fact, when we speak to lenders, they often ask us to not provide anything more than whats required to approve the loan and full disclosure. E.g. don't provide banking credits if their not asked for, don't provide 3 months worth of payslips if their not required, etc. If anything, it may work against you as the credit assessor may see your longer term intentions to purchase 10 other similar properties and include them in servicing!

Useful/required as part of commercial deals though - e.g. purchasing a business, etc.