Pre-2015 investors and post-2015 - PC

Thanks so much @wylie - that helps. It's not the hand out, but the helping hand, that makes all the difference.

I'm just hoping for two things with my daughter (as she's still very young); (1) that, by the time she's old enough to get into the market, there will actually be the chance to do so (I just keep thinking of the first home buyers in Sydney), and (2) she'll have decided that her mother actually knows something, and is worth listening to occasionally

 

how would a different entities help you? as you would still have to guarantee the loans?

 

No help at all for borrowing capacity. The only thing you might achieve is to avoid some land tax.

 

well pre we had plans for another 2 development sites, post we are investigating any number of other options. Currently speaking to a couple of friends about trying to sort out a JV that would be a cash prospect for buying the property, then put plans & permits on it, presales, then commercial finance.

The change for us means instead of doing 2-3 at once with an aim to keep about half, we need to do 1 at a time faster and keep only 25% if we are lucky.

 

Hey @euro73,
Thanks for the great breakdown. That is a major difference in salary requirement post-APRA.
Another thought, would lenders continue to let you borrow at 88%-90% with $5.4 million in debt?
I was under the impression that most lenders will cut you off from LMI after $3-$4 million in debt..

And also, what does HEM stand for (tried searching for acronym but couldn't find)?


Cheers,

Taku

 

Taku

HEM = Henderson Expenditure Measure. Devised by the University of Melbourne it is a measure of household expenditure and used by lenders in assessing serviceability.

For example:
2 adults = $2050, each dependant = $395

Many lenders however are now using an advanced model which factors in Gross incomes and on a sliding scale.

For example:

2 adults = $2050 when earning $85K or less
2 adults = $2650 when earning $85K - $165K

Cheers


Richard

 

Thanks Richard. I see their justification of the sliding scale - the old adage the more you earn, the more you spend.

 

True, but also the more you earn the less you can borrow.

Makes such a massive difference and emphasis why loan planning is so important so you are not stopped in your investing tracks before you get started.

Cheers


Richard

 

You can still get there at high LVR's if you use different lenders with the right mix of LMI providers. But that's the least of your concerns to be honest... getting the borrowing capacity is the much bigger challenge when you are talking about building a portfolio of that dollar value.

 

yes . Someone who thinks like me . Though we've bought some high returning properties in a large regional city which we will pay down by selling other properties when they've had their growth spurts . These are in trust funds so we can direct the income to individuals and into other trust funds

In part this will give us an indexed income moving forward ( out side super ) . It will also give us cash flow so when the next slump comes , we'll have equity ( From LOC's ) and income so we can buy some more bargains in nicer places and maybe keep more this time .

Cliff

 

Phew - thanks for the calculations!

Takehome: for a $6M portfolio endpoint @90%LVR, old $130k income now needs $375k income to speed towards the same end using the (old) methods.

I assume that even with a serious buy-reno-hold strategy, where the reno is upto 10% of the value and which increases yield from 5% to 6.5%, I don't see this changing - indeed, it would presumably be worse since you would have to find the 10% for the reno ($30,000) and yet only go from $300pw to $375pw.

So the buy-reno-hold strategy won't get there either. @Jess is right - split and sell one (costs extra money), develop (costs extra money), get DA then sell (costs extra money & no CG).

I'm not seeing many good options for beginners (moi!) in this post-APRAcoliptic resi world!
(I don't actually see the APRA changes as terrible, but one shouldn't waste a bad pun ).