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Income is holding me back

Discussion in 'Property Finance' started by Jmillar, 29th Aug, 2015.

  1. Jmillar

    Jmillar Well-Known Member

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    Location:
    Sydney
    Hi all,

    Struggling at the moment with gaining finance for IP #5. I've got a great MB but we're hitting a lot of brick walls with a couple lenders. My situation:

    - 23 Years Old
    - $50k pa salary (incl super + tax)
    - On track to earn over $150k commission this year (incl super + tax)
    - HECS debt
    - Currently own 4 IPs. Slightly positively geared

    I have enough cash and equity to purchase 1 or 2 properties but serviceability is not stacking up - I think we've done exceptionally well to get to 4 properties, and with the APRA guidelines changing lenders' positions on investment loans, it's looking to be impossible. My base salary will increase slightly next year. I don't have enough history of commissions for most lenders to take into consideration yet either.

    Just wondering if anyone has any suggestions that may involve some 'creative' thinking?

    Is there a way to turn say $80-100k into an income stream that will help increase my serviceability?

    Cheers
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Could possibly get a 2nd opinion on the borrowing. Pay off the hecs debt will help along with any other non investment debt you have.
     
  3. JDP1

    JDP1 Well-Known Member

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    Hang on...your 23 yrs old and have 4 properties already...this makes the rest of us look bad...
    :D
     
    JZ93 and popoobox like this.
  4. Be Developer

    Be Developer Property Developer Business Member

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    @Jmillar

    you have done it well at this age ( i use to read you post on ss too.)

    as @D.T. said get a 2nd opinion on borrowing

    or

    look at H&L packages in some area. low entry point and easy to build up equity chunks.

    Feel free to pm me, i can point you in right direction.

    (p.s. not looking for business from OP, but happy to help fellow young investor :))
     
    cheekykoon likes this.
  5. tomlemke

    tomlemke Well-Known Member

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    Any potential to add value to any of your i.ps?

    With these new lending rules bigger deposits or pay
    increases is really the only way to keep moving forward.
     
  6. Azazel

    Azazel Well-Known Member

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    Can be a bit crappy at the moment with the APRA changes.
    Possible to balance your portfolio with some cashflow positive properties?
    Maybe talk to another broker?
     
  7. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    You need to establish 2+ years of commission earnings to enable them to be taken into serviceability calcs.

    The strategy might be to "wait" which is not what young people want to hear. :)

    BTW you are to be congratulated on what you've done so far. Well done!
     
  8. tobe

    tobe Well-Known Member

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    Get an abn as well. With that sort of comm, many lenders are going to want to treat you as self employed anyway. After a year or two of having an abn there are some low doc options that might suit.
     
  9. wylie

    wylie Moderator Staff Member

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    This is how I got a loan recently, albeit I'm on ten hours per week PPT (but always work more than than). I used my ABN and once I get my tax done this year, I will refinance out of the loan I took for a lower interest rate.

    It didn't seem to matter either that we had other assets and rental income because they are in hubby's name. I have other assets as well, and combined super as well, but that didn't seem to matter either.
     
  10. Jeah_

    Jeah_ Well-Known Member

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    When I was a young'n', I was in a job that paid $18k base, but I was making over $25k a quarter in commissions. The bank wouldn't even look at us for property loans worth a toss. I took a pretty serious pay cut into a job that paid a $55k base and only $10k pa commission just to be able to buy our first home.

    Looking back, it was one of the best moves I made as that kind of job still only pays a crap base and the commissions have dwindled out of it. Not saying your circumstances are the same, but sometimes it's worth taking a sideways/back ways step to make a lot more forward later.

    Congrats on the great position you've already put yourself in though.
     
  11. Soul

    Soul Well-Known Member

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    Read posts from " Rixter". He mentioned cash bond/annuities structures.
     
  12. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yea this is what helped me keep buying
     
    Azazel likes this.
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Related party loans?

    A parent may be able to borrow against one of their properties and then on lend you the money needed, on commercial terms. Or an uncle may have cash sitting on an offset account which could be lent to you, for example. off the top of my head I think the NCCP would not apply to them as they are not in the business of lending.

    later when your income increases you can refinance this loan with a major lender.
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    See if you can get them to restructure your pay to up your base/lower your comms (possibly on face value or for short term).
     
    legallyblonde likes this.
  15. Bayview

    Bayview Well-Known Member

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    Wait until the $150k commission comes in at the end of the year, pay off a huge whack of debt and then go shopping.
     
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  16. Richard Taylor

    Richard Taylor Mortgage Broker & Brisbane Buyers Agent

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    Not enough raw data to make a suitable assessment.

    Commission can be considered depending on your previous years figures.

    Must admit i would surprised you are maxed out at 4 properties.

    I bought 41 in a 10 year period admittedly it was in a different lending environment and i had very little debt but depending on your current situation would have thought something was doable.

    Cheers


    Richard
     
  17. Jmillar

    Jmillar Well-Known Member

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    Thanks everyone for all the advice and suggestions. Answers to some of them below:

    Probably not my type of thing, but I'll send a PM :) Cheers

    My portfolio is already cashflow positive but I believe the banks don't take into account 100% of the rental income. Also, another issue is my rental income outweighs my salary (which I would have thought was a good thing but apparently is an issue in their eyes).

    I was thinking of buying a cash cow, but I don't think it would help all that much anyway. ie I buy something for $80-100k cash in the country, it might rent for $120-150/week after all expenses. $120-150/week isn't going to increase my borrowing capacity by a whole lot, and this will lock away $80-100k +. Doesn't really fit into my strategy well.

    Not sure how this works and how it will benefit me... Would you mind explaining your thoughts behind this?

    Currently working on this. My salary will likely increase as of 1st Jan 2016 but it will probably only be another $10k or so.

    Cheers
     
  18. cheekykoon

    cheekykoon Well-Known Member

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    Where is a good place to look for House and Land package? Is buying a piece of land and looking for another builder a better option or just going through with the entire package deal ?
     
  19. tobe

    tobe Well-Known Member

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    Having an ABN means you might be able to apply for a low doc loan instead.

    As previously mentioned, having more comm income, and more rental income than payg means many lenders are going to view you as self employed anyway. May as well get an ABN and utilize all of your income.
     
  20. Mick C

    Mick C Well-Known Member

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    Solution - Not all lenders need 2 years history for Commission.
    For example, Rams will consider 1 years commission history and some of the non banks as well.

    This will boost your servicing quite a bit.