Has the APRA credit tightening changed your buying plans?

With the serviceability calculations substantially different now than a couple months ago and the investor rates higher, has this changed your short term buying plans or is it business as usual?

 

Business as per usual but have to be abit more creative and less aggressive with the approach.

 

Business as usual for me. Had to swap lenders on the last one, but should be normal from here due to my broker setting me on good course.

 

Our broker is earning his money at the moment .

So far we haven't been told no more , though we've had to change lender midstream on two as st George wanted to include an increased amount for serviceability of our SMSF properties in serviceability of our investment loans .

Having to go to 80 % on LVR on some will end up in limiting the number we decide to buy as I do want a decent buffer left behind

Cliff

 

From my perspective it just means we need to change the way we do business - we've expanded our lender panel and have started using lenders that we didn't send much business to previously.

The changes also presents opportunities - I've had a lot of new clients get in touch because they haven't been able to arrange finance via their current bank/broker.

 

Well done, @Jamie Moore!

 

I am learning more towards more creative MORE aggressive.
All the profits are in the higher end of the investment scale. Hearing 40-60% ROIs from aquaintences playing in that field. So am putting together some business proposals to get funding in. Buy-Reno-Hold is a nowhere game.

 

So making millions of dollars with 100% borrowed money and minimal vacancies is a nowhere game ......

Cliff

 

Not for us, as yet!

I was talking to few investors on forum on same topic and discussion was along this line.

Pretty easy to bit APRA changes,

• Sell off dud properties in current hot market, bring large cash back on table
• Release equity if you can
• Fix rates (where possible)
• Look at out side of square for option of lenders...while Big 4 and some others are tightening the screw, smaller lender are coming out with full swing
• Set up correct buying structure

Those who will be at most disadvantage are

• Investors who are on 2nd and 3rd equity release, banking on equity release to purchase new IP
• Less cash on hand
• Max on servicbility
• Max on borrowing capacity.

This is my theory, may or may not work in your situation.

We opted for 1st option and been told, won't be restricted on our projected path of property development.

 

Many of my clients have had their plans changed radically by this. Some could not qualify for what they have at the moment and have equity which they cannot access.

It might be good to sell in some situations - pay down non deductible debt and restructure into better properties while locking in good gains.

 

I am not diminishing our efforts, I also made considerable funds in the last cycle. However when a friend makes an equal amount in 6 months on one-deal, and another buys at the top of the cycle using half my funds and makes $50k passive income, you start refining your strategy. That what i'm referring to, refining startegy.

 

@NHG

Spill the beans (If you can)

Love to hear real success stories...

 

As we just discussed on the phone. House in forrestville purchased this year, $66k outgoings, $105k incoming. Large house legally split into 3 dwellings for 3 rentals.

Subdivision 1-2 lots in Cherrybrook. Purchased over a year ago, $500k+ profit.

Boarding house in Sydney purchased this year, estimated return 40% ROI at $1.5M/year.

+ many many more. I've been meeting investors lately who state: "I only go for deals 40%+". Mostly in Sydney on top of this market. I called ********, then they rattle off a list of recent purchases. Even with the US purchase, they will pay themselves off quite quickly after I split and grow the portfolio for my dad over the next year even with the exchange rate at 0.70US.

Have started getting agents to go door knocking for me after providing a list of houses that meet my criteria, if there isn't enough good stock on the market, find it.

 

Are u talking about commercial real estate?

 

I think he means, nowhere fast.
How long does it take to make millions from buy and hold under normal conditions, holding an average size portfolio?

 

Hey all,

Business has been normal for me and I think the new changes that are occurring are actually encouraging investors to look at other lenders.

I appreciate the changes occurring as lazy brokers will be pushed out and hard working ones will succeed. In terms of changing plans, of course!!

I review my property portfolio every three months and I think with these changes occurring investors with CASH will do very well.

 

Subdivision in current market and they only made 500 K profit ..... That's a pretty poor return IMHO in that time frame . Our new PPOR has gone up around 850 in the same time frame and we've done nothing .....

Boarding house ... last time I looked that's a business , so you can't compare that with the return on a buy and hold . Also have you looked at finance for those ? Easier said than done

if you think you can consistently get deals like that , i wish you luck .

Sounds like you've been told the version of how I bought 135 properties in three years , without being aware of all the aspects of timing involved in it

cliff

 

See Change, first of all I see you as a very successful investor with lots of experience and good will to share it with us, I am at no point diminishing the efforts we as investors have all made.

I am simply stating with examples, that there are other investment methods which are more profitable that fall within the guidelines of real estate investment. I was under the impression we were here to learn to be financially free, not to compare how many houses we each have.

Stating anything outside buy and hold should not be compared, is like saying we shouldn't speak about investing in real estate because having a Job is good enough (investments which they are holding mind you, just that they also made huge gains at the initial stage so double wins there). I have done buy and hold and quite successfully, and was making my money before the boom, with the luck of a capital windfal afterwards. That does not mean my strategy was a very good one as I LEARN about more profitable methods, which yes, require more skill, creativity, and courage.

I am meeting plenty of YOUNG and successful investors now, and if I was able to manage what I did in 3 years, I would love to see what I can accomplish by learning from such people by the time i'm 35, a total of 10 years in property or 1 property cycle as such, I imagine much more by being pro-active than by simple buy-and-hold (again which is also fine if that's what one chooses) which i'm also doing with family interests now in Sydney, Regional NSW, Brisbane, USA and soon Melbourne.

 

I have seen a few folk go from 10% to 20% deposits as a result of the shifts, meaning bringing entry purchase down a bit. No one has pulled out of purchasing or anything that dramatic.

 

I love the replies in this thread, most of them are basically "no it hasn't changed us at all. Well, except..."