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Feeling stuck financially

Discussion in 'Property Finance' started by Directproperty, 3rd May, 2016.

  1. Directproperty

    Directproperty Member

    Joined:
    26th Jun, 2015
    Posts:
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    Location:
    Adelaide
    Hi all, just after a bit of advice & feeling a little stuck in my property journey. When all was going well in the Adelaide property market and it was easier to get finance I accumulated IPs. Sold a few that were sucking me dry and not performing and bought a house in a nicer area. Anyway, atm I have 5 properties. 3 are houses, 1 maisonette & 1 unit. I pay for these myself and we keep our money separate so won't include my partner's 2 properties. We have a 19 month old son so I now only work 2 days/week and sometimes pick up an extra shift. My goal has always been to buy, renovate & sell houses for income and keep the ones I have for retirement but not sure renovating & selling is feasible anymore! The banks won't lend me any more money because my income is lower now but even when I was working more they wouldn't because obviously the serviceability isn't there! I guess my questions are is my financial situation really crap to an outsider (see below) and are there business loans to enable me to fulfill my goals. Maybe I read too many success stories but how do these people with little money manage to start their businesses renovating/developing properties?

    Total debt - $1,910,000
    Value - $2,325,000
    Net equity - $415,000
    Total rent - $1,955 per week
    Total net expenses - $22,000
    Tax refund last year - $9213 (will be less this year though)

    Thanks all!
     
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  2. Plucka

    Plucka Well-Known Member

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    Was it ever? Seems easy on the renovating TV shows but in reality there's little to made renovating for the average punter. The profits almost always capital growth not the renovation.
     
  3. tobe

    tobe Well-Known Member

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    yep, looks a bit grim. You need an income apart from the rent, at least enough to cover what the lenders see as your living expenses. You also need equity, from those figures you are already at 82% LVR. Perhaps one of your properties has available equity? hard to tell without a breakdown of each one.
    Not sure what you mean by commercial finance? You can get loans to buy commercial premises, and you can get loans to buy businesses, but you still need to verify income.

    Id say many people moving from buy and hold to full time develpers/flippers of real estate did it off the back of profits from previous sales, rather than using traditional lenders for bank loans.
     
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  4. Xenia

    Xenia Adelaide Property Manager Business Member

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    5 properties is a strong position to be in.
    I would not be increasing debt right now.

    Can you do something to the current properties to increase equity? Renovate/subdivide/redevelop?
     
  5. Azazel

    Azazel Well-Known Member

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    Hey @Directproperty ,
    Are all of your IP's in Adelaide?
    If so, might be worth looking at buying in some other markets.
     
  6. euro73

    euro73 Well-Known Member Business Member

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    If you are asking whether you can get unsecured business lending ... for the purpose of running a buy, renovate and flip property business...nope

    Re feeling stuck. Unfortunately, if you cant borrow any more, you cant borrow any more. You're 5 properties ahead of the majority of Australians.... just focus on the fact you have a portfolio, and as long as you can afford to hold it...just let it marinate and mature. Time is your greatest asset, in the end, time will pay off for you.... eventually if you return to FT hours and get some rental uplift, you may be able to start to change your situation, but until then, yes it appears you are stuck at 5.

    The other option is selling down the properties and trying to go again with something potentially more profitable - but this would seem futile as you wont be able to borrow to do that anyway from what you've said...

    Forget about manufacturing equity via renovating, subdividing or redeveloping , for the time being. You need borrowing capacity to do any or all of those things ...and you have said you dont have any borrowing capacity.

    So until that changes, it's either hold on and be patient - as long as you can cover the costs, or if you cant cover the costs to hold, sell up and put your property ambitions in the drawer until you have sufficient income to start over.. Option 1 is obviously the better way to go if you can do so.
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    A great mentor of mine.

    DONT get stuck on one idea or philosophy

    there are LOTS and LOTS of options out there

    ta
    rolf
     
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  8. Directproperty

    Directproperty Member

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    Location:
    Adelaide
    Thanks for your responses. Sorry I took so long to reply! My son is back in hospital :-(
     
  9. ellejay

    ellejay Well-Known Member

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    Oh no! Hope he's feeling better very soon.
     
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  10. TaylorChang

    TaylorChang Well-Known Member

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    Sometimes, the best thing to do in property investing is doing nothing.
    Let the property value grow, let the rent increase over time. The recent rate cut will help your cashflow position.
    Perhaps it's time for you to think of some ways to increase income in other area(s).
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, you are doing very well, the properties must be paying for themselves so just sit back and wait for growth to kick in.
     
  12. Greyghost

    Greyghost Well-Known Member

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    To be honest mate, maybe you are just getting ahead of yourself?

    You have accumulated $2m in property aready.
    Having "10" properties is just vanity....
    What does "X" properties allow you to do?

    How is each property performing? What growth prospects do they have? Does one property have significantly more cashflow than others but it's CG is less?
    So many questions like this to consider.
    You want to flip properties for a living, but in reality you might be only 1-2 properties away from your retirement goals if you paid down some debt. Personally holding geared 2m in debt and trying to turn a buck flipping would be a mugs game..

    Looking at your debt/equity figures you are already over 80% LVR at present.
    1. As far as business loans go, most banks will not lend to you on that basis, plus business loan rates can be quite high
    2. Better option would be a LOC on yiur portfolio. Problem is you are geared highly already..

    I think you are trying to do too much too quickly. Property investment is not the buying of properties, it is they entire journey.

    You need to wait for more growth, reconfigure your portfolio or pay down some debt..

    I know the accumulation of properties itself is addictive, but my advice is get back to your numbers... One thing at a time.

    Good luck
     
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  13. Leo2413

    Leo2413 Well-Known Member Premium Member

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    1. They con someone else into handing over their equity while they 'play developer' with someone else's money having no experience whatsoever and hope to make money.
    2. If you have 'little money', depending how little, you can possibly do a small development with an overall lower Total Development cost.
    3. Most of the small developers I know have invested in property for a period of 5 years or so and built up a nice amount of equity, investment experience and also spent some time to learn about property development, then took their combined equity to do a small or mid size project quite comfortably.

    The reality with development is no money, no project. Unless you are engaging in point 1 above.
     
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