Maximising Property Investment Potential: Julia's Success Story
Meet Julia—a savvy, self-employed property investor with five properties. Ready to expand, she faced challenges with her lender. Through strategic financing and recent policy changes, Julia navigated these hurdles and looks forward to growing her portfolio. Here’s how we helped Julia and how you can apply similar strategies.
Julia’s Challenges:
Julia's main bank, a major lender, posed hurdles due to strict serviceability criteria. With rates for new purchases over 9%, borrowing more was impossible. COVID-19 setbacks halved her 2022 income. Despite this, Julia's determination to grow her portfolio remained strong.
Lending Policy Changes:
If you’re serious about building your property portfolio, the lowest interest rate isn’t always the best route. Different lenders have policies that can help grow your investments more effectively:
It’s about spending smart now to save a lot later.
Increased Maximum LVR: Some banks raised their maximum Loan-to-Value Ratio (LVR) for investments from 90% to 95%, reducing the upfront capital required.
No LMI on High-Value Deals: Certain banks now offer no Loan Mortgage Insurance (LMI) on deals over $2 million in specific postcodes, resulting in significant cost savings.
Servicing Calculations Using Actual Repayments: Some lenders use actual repayments NOT the standard 3% buffer for servicing calculations, increasing borrowing capacity.
Increased Allowable Rental Income: Lenders now use 90% of rental income in servicing calculations, up from 70%, enhancing borrowing power.
New Tax Rates Enhancing Borrowing Capacity: Recent tax rate changes boost borrowing capacity, especially for high-income but low-savings investors.
Tailored Financing Solutions:
To help Julia, we identified a lender with flexible policies:
1% Buffer for New Investments: The lender offered a 1% buffer, much lower than her current lender.
Single-Year Income Consideration: The lender used just one year of income, which is crucial given COVID-19’s impact on Julia's earnings.
Higher Rental Income Consideration: The lender used 90% of rental income, boosting her serviceability.
Actual Repayments on Existing Debts: The lender used actual repayments, not a standard buffer, improving borrowing capacity.
Thanks to these solutions, Julia was approved for her sixth investment property. Her business has recovered, and she is enjoying high taxable income offset by negative gearing.
She plans to buy her seventh property next year, aiming for ten by retirement. Her strategy involves selling half her portfolio to pay off debts, using rental earnings to supplement retirement income
Julia's story shows how strategic financing and understanding policy changes can unlock new opportunities in property investment.
Facing similar challenges? Work with us to navigate diverse lender policies and find tailored solutions.
Book a consultation with us today to achieve your financial goals.
