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My friend need advice to progress further

Discussion in 'Property Finance' started by ZachAnsel, 30th Apr, 2016.

  1. ZachAnsel

    ZachAnsel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    110
    Location:
    Sydney
    Been thinking and exploring options for my friend the last couple days

    He is father of 3 years old son, wife still taking time off from work (perhaps for another 2-3 years). Both of them have 5 IPs, total loan $1.4m where total val is $2.3m. Based the number provided is positive gearing, around 8%yield (banks still prefer 12%, before positive in their eyes)

    Offset saving level $200k, with monthly saving $1500. Hubby salary $65k per year

    Here is the problem, all properties under both name. His broker mention no serviceability until wife back to work..

    So far my advice is to build buffer, which he showing good progress. But I maybe dont have sufficient knowledge to advice work around this issue. He still want to purchase more

    Any advice ?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    My advice is that they should get some advice.

    There could be a few strategies they could employ such as:

    Wife could buy out the husband, perhaps using the $200k.
    Husband could buy out the wife and borrow to do so - serviceability may work if she is taken off.

    Wife's money released from her sale could then be lent to the husband to buy another property - arms lenght agreement. Interest paid to wife could be deductible to the husband, but may not be taxed in the hands of the wife if her income under $20k.

    Wife could buy another using her proceeds from the sale and perhaps a loan from the husband (he could keep wage separate and lend her, or set up a LOC on his purchase from her) or maybe they have some redraw they could use.

    Once the wife has her own property then all money could be stored in her offset account to divert income to her name (keeping in mind the effect on future strategies).

    etc
     
    wylie likes this.
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Not enough data

    However on the surface that broker advice sounds right

    Keep in mind there are lenders that will lend a bunch more than others that may not be on that brokers radar

    Ta

    Rolf
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
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    Location:
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    Not enough data

    However on the surface that broker advice sounds right

    Keep in mind there are lenders that will lend a bunch more than others that may not be on that brokers radar

    Ta

    Rolf
     
  5. Redom

    Redom Mortgage Broker Business Member

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    Sydney (West) and Canberra
    There'll be a big difference in lender calcs in this scenario from one lender to alternative ones (which may be a pathway worth exploring).

    Nonetheless on the surface with a 65k total salary income, and a wife and kid, the original brokers conclusions seem the most likely outcome.
     
  6. Jason Tyrrell

    Jason Tyrrell Well-Known Member

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    Location:
    Sydney
    8% overall yield sounds high for a portfolio averaging over $450k in value.
    Lender calculators will only allow 80% max of rental income anyway.
    On $65k household income, with a dependent and over $1.4 million debt (even with offset of $200k) at face value the broker is probably on the money.
     
  7. ZachAnsel

    ZachAnsel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    110
    Location:
    Sydney
    Thank you all.. From the beginning, I have the same feeling that is the case.
    Unfortunately he hit the serviceability ceiling, lucky his property portfolio performance is healthy

    This is why I advice him to keep building buffer as:
    1. We don't know when his wife will be back to work, and if worst case come like redundant, urgent major repair, etc.
    2. Rate rise sometime in the horizon..
    3. Property not always get tenanted.

    I'm trying to explore more, if he able to build business, or diversify to other asset class. Thanks once again