I have hit a standstill.

I feel like I have hit a standstill and am not sure where to go from here. We moved into our IP (better location) and sold our old PPOR (had contaiminated the loan and decided it was the best step forward). We were planning on buying a larger house in this new location, as an investment, and then moving into it a couple of years down the track.
But since then changes to servicibility have really shot us in the foot with regards to our plan, especially as a bigger house in this same area would cost at least 600k (that's for a 4bedroom. The 5 or 6 bedroom we would really want is actually between 750-900k.) Our servicibility is only around 200k currently (give or take).

So that plan is currently off the table,at least for the next 3 - 5 years.

Ive looked into shares and managed funds, etc, but find myself hesitating. I don't feel confident in that area, and feel the money is probably better sitting in the offset in the meantime.
Thinking I may need to start considering a different strategy for property investment instead. Maybe units instead of houses, or finding that elusive positively geared house somewhere.

Just finding myself at a place where the road splits in many directions, and I am hesitating over taking any of them.
I feel like I need a clear idea of where I am planning to go, before I start along a path, so I don't start heading in the wrong direction. But another part of me is screaming that any direction is better then going nowhere at all, even if I do find myself having to make a detour or two along the way.

So has anyone else in here ever reached a point where they have stalled and seem to have no idea what they are doing? What did you do to get moving again?
Is there anything you would have done differently in hindsight when you did move on from this point?

 

This is exactly where I am at the moment. Pre-APRA I was able to borrow roughly $400,000 which I should have done back then - now I'm waiting for my broker to get back to me regarding how much banks will lend me. It seems like I take one step forward and 10 steps back. Will be interested in others' responses.

 

This is a conversation I'm having a lot lately with clients. A few months ago we'd map out a plan for clients to purchase 2-3 properties over a period of time. I could see that people would be able to purchase one now, another when they're comfortable with the first, and then a third.

In many cases people would self regulate as cash flow got a little tight, or they'd run out of equity/deposits. It was mostly a matter of time before they were in a position to continue.

Now the conversation is more like they can finance another property in the short term, but until there's a substantial increase in cash flow, that's it. People look at their own budgets, decide that they can easily go further but the banks simply won't let them.

It used to be that if people did an honest budget that accounted for future changes and built their plans on that, we'd be able to get them the finance to meet those plans. Now it feels like investors are going to have extended periods where the only thing they can do to move forward is either pay down significant existing debt, or get very creative in generating more cash flow.

 

Problems are opportunities !

We hit this point just over 10 years back after only 1 property at the top of the Sydney boom.
The only option we had to be able to continue investing in property was to make more money, and in our case started a business that ended up doing very well.
Fast forward just over 10 years and realised that we didn't even need the properties we have accumulated over the years to reach financial freedom, as the business alone achieved that for us.
However, would not have started the business if we were not driven to acquire properties in the first place.
So back to the first line - Problems are Opportunities.

 

I'm with @Ace in the Hole. When an obstacle is in your path, just find another route.

 

I'm probably in the same boat but am going to start saving and consolidate - maybe stop buying at the moment and build up my reserves. If you start lowering your leverage (or find more income), I'm sure your serviceability will improve.

 

The other approach is to do what you can to decrease outgoings. Prior to my investment journey I setup a novated lease. I've just paid out the balance 18 months early so that my serviceability will improve even though I have a strong income. Sacrificed some of my offset to do this, however it should dramatically help my serviceability. Will also help me to boost my savings each month.

 

We hadn't hit a servicing wall but were coming close and so about 6 months ago started looking at business opportunities to strengthen cash flow.

We have taken a risk and now it looks like it's going to pay off. We will have to sell a ip to fund it, but worse case is we will double our cash flow. I think opportunities come around more often when your out there actively looking, researching consistently and continually persevering, actually I think most things are pretty easy, it's your mind that makes it seem difficult

It's also helps to be "very" good at something, then lots of people will want to give you their money- as we are currently starting to discover

 

I have the opposite problem...my work has consumed me lately....no time for property.....

I now have to get other people on the ground to look at it before I buy....

 

Are there any other ideas that you can use the money for? For example could you extend and add on bedrooms to this house so that it could be a long term PPOR?

As frustrating as it is, sometimes sitting tight is the answer. Save more, put it in the offset then you might have enough for 2 deposits when things are easier service wise.

Alternatively is there an option for you to go to a non APRA or APRA lender who doesn't score as harshly on dependants? If you are confident that you can do this, would a lo doc loan work?

The kids/dependants are with you for awhile and most banks score for each child as separate entities when reality is that after 3 kids the 4th and 5th aren't as expensive as the first child.

 

What does the gig pay...may be interested

You did not go through things before selling ?

I got told I could not borrow hardly anything over 2 years ago, did not like that as prior it was always just a matter of how much, anyway, fast forward past APRA, have got much larger loan offers than expected, this has mainly come about, as others say, due to the hurdles, I looked more, read everything and thought out how to do things, also if one person says you cannot get a loan above X, talk to some others to see if you get the same answer.

 

Nothing as real estate agents i trust and people who have invested with sort this out

 

We did go through things before selling. But our servicibility literally changed in a very short period of time. And the truth is, it wouldn't have changed our decision to sell anyway. With the loan contamination and tax issues it made more sense to sell and take the equity to pay off debts and do some minor renovations to the place we are now living in and put the money elsewhere.

Servicibility will not improve until all the kids are school aged and I enter the workforce. I am not will to sacrifice staying home with them while they are young just for money. (Especially as with the cost of childcare, before and after school care and holiday care for 5 kids, any money I did earn would simply be paying for someone else to raise my kids. The banks would see it as more 'income', but in reality it wouldn't be).

But a lot can happen in a short amount of time, so we will keep an eye on the market and see if any oppertunities present themselves. My youngest is 2, so worst case senario we do nothing but save for 3 years. Not an ideal situation, but at the least I guess it will be offsetting the mortage.