Creative ways to improve serviceability

What do property investors do when they reach serviceability limit and still they want to buy property? Does insurance bond still work? Any other creative ideas to increase serviceability for investors?

 

Serviceability all depends on income and how lenders treat existing debts. There is no trick around it.

Some lenders have a more relaxed servicing calculator in comparison to mainstream lenders where the put big buffers and have DTI restrictions.

 

For investors with multiple properties, going with non bank lenders who look at existing debt differently is one the easiest ways forward.

Needs to be properly structured and thought out with a longer term plan/exit strategy as it isn't without its risks.

 

Thanks @Morgs and @Tony Xia

So other than shopping around to find which bank will lend you most, anything else can be done? What about insurance bonds? Can it work in current time? I remember that on Somersoft forum, some members were big on that Nd it seemed to work for them.

 

Don't really know how insurance bonds can help with servicing as it's not income.

 

If you've only dealt with mainstream banks, then as Morgs suggests, there's the non-banks that look at lending criteria differently. This can give your overall serviceability a decent boost. Usually enough for an additional property or two.

Annuities are not the way to go IMO. A lot of people went broke using these when the markets were no longer favorable. You're eating your own tail to feed yourself with a net loss. Those who were successful using them were really doing something else, the annuities were only a bit of extra fuel that gave them a boost.

Serviceability is fundamentally an equation of debt and income. To improve it, reduce debt or increase income. For a creative strategy to address serviceability, look for something that addresses this.

 

Buy higher yielding property, sell down those that have had yield compression transfer security to the higher yielding property. Funds from the sale are used to buy some business's with strong balance sheets and with earnings growth of over 30% . When share prices get too far ahead of earnings potential rebalance into high dividend payers or with high dividend growth. So after 3 years growth may have 100% plus growth, half of which maybe invested to give 2 years of high yeild to add to income from rent . A combination of LOC draw dawn, funds from share rebalance, EoY tax planning, share sales, delayed income , expenses paid in advance at the start of a 2 year FY period and the reverse done at the end of the 2 FY period to engineer 2 high income years. I have found I can buy a property or 3 every five years. Buy unconditionaly so get a discount and gain some quick equity. The bit people seem to ignore is that you need to buy a house with at least 5% yield with this and rental growth from other property and growing dividends you can take out a loan to invest in shares again which can give you a high return on equity to fund more property purchases. Most people dont use equity efficiently, they get confused with high returns on assett then need to be a slave to enable limited use of equity.

 

When you say "creative" what do you mean? Lie or dont disclose? LOL

You cant do any of that these days due to comprehensive credit reporting. Have you seen a credit report these days? Its so detailed about each and every loan you have or applied for. Its crazy.

 

No, I did not mean either to lie or not disclosing some details. It's legally wrong and not worth taking risk. I meant particularly things like insurance bonds.