CLIENT WIN! 3 x Properties Loans Restructured + 1 Purchase in 96 Hours
Sounds sensational… But no in all seriousness, we had 3 property re-structured for a client of ours who had a 4th property purchase on the line 4 business days later (and that had to be also approved within that time frame)
Lots of lessons for everyone involved (including myself, my team and the clients) …
We never do this…but by exception, so our clients don’t miss this deal of a life time, the team worked till 11pm last Wednesday night to ENSURE we only logged off till our clients had signed their documents and we had submitted to the lender….
The existing challenges:
- Equity trapped in the owner occupied & investment properties
- Having the valuations stack up so we can tap into enough equity for the 4th purchase
- Ensuring you do it tax effectively (so they prioritise paying off the owner-occupied property before the investment property)
- Ensuring we can actually use the max possible income for the applicants to enable the borrowing capacity
- Receiving valuations in a timely manner
- Finding a lender that will release the equity (with as little questions as possible) for the next purchase
- Finding the NEXT lender for the 4th purchase (because the borrowing capacity won’t work ANYWHERE else!)
Murphy’s Law – when things go wrong – they will go fantastically wrong:
- Valuers not being able to get access to an existing investment property (re-structuring this would enable maximising tax benefits! PLUS extend the borrowing capacity and hence the equity cash out to cover the next purchase outlay tax effectively. It would also mean we would need to access less equity from the owner-occupied property)
- What was thought to be a permanent part time job turned out to be casual! And a few days off dropped the income by 25% on paper
- The original lender we were doing the 3 re-structures with – known to do things in 24 hours, but this time all escalations backfired and what would take us 24 hours took us 72+ hours to get done [Note: these time frames are an anomaly!].
- Unique scenario with company directorships and a few other things you’d normally won’t have! It also means a lot of pre-work and paper work from us and our clients to ensuring we have crossed our t’s and dotted our i’s!
- Lender #1 for the 4th purchase –Valuation TICK, BUT they now won’t do casual income!
- Lender #2 for the 4th purchase à Valuation TICK, BUT they would take 4 to 5 days to even look at it (oh and they would take the LOWER income per the employer letter from pre-credit advice)
- Finance clause on the purchase extended but not enough to allow for Lender #2 to take 4 to 5 days…. (I reckon from speaking with the clients it’s a great deal and property reports show $100k equity built in and a deal you don’t want to miss)
Here is how it was done:
- Ensuring we structure so our clients:
- Prioritise paying off their owner-occupied property
- Maximise the tax effectiveness on the investment properties
- Maximise the borrowing with the way the income was calculated and presented to credit
- Maximise the equity cash out so the next purchase deposit is tax deductible and client savings remain intact
- Upfront valuations…… eventually received for all 4 properties with the right lenders
- Putting our best foot forward – MAXIMISING borrowing and the income for the clients (regardless of the employer letter… making sure we demonstrate what works!)
- Friday night – the lender refinancing – Convinced the assessor to issue conditional approvals on at least ONE of the THREE files so we have some comfort and we can ensure we are ready to lodge the PURCHASE finance on Monday afternoon
- Friday night – ensuring our clients can review the applications so we can submit on Monday
- Monday morning – got the assessor to issue (still conditional!) approvals on ALL 3 refinances so we have the equity for the deposits
- Monday afternoon – submit purchase documents to Lender #2
- Tuesday – ALL 4 deals approved and unconditional………. And soon will be ready to settle
Lessons for ALL involved:
- Look at the finance BEFORE you do the purchase and position yourself to make the best decisions for yourself in a timely manner
- Finance structuring is an art. It’s not just a low rate. You can’t compare apples and oranges. You can’t compare a BMW with a Fiat!
- Having the finance structured in an effective way to YOUR benefit (not the lender) enables you to ensure you are able to maximise opportunity for you
- Most people operate with non advice 😬. But they don’t know what they don’t know. Ensure you’re getting proper credit advice. You can walk into a branch and talk to a banker… But the last time I checked my BANKER advising me on effective loan structuring was NEVER. Is it a job for them or is it a passion?
- Property is only a vehicle to access finance….. And if you can’t access finance due to bad set up you will only go so far before you become unstuck
- You can either let your ego get in the way and do it alone, or value good advice (Finance industry is riddled with NON advice, so I don’t blame you)
- You don’t know what you don’t know, however you can take action to maximise opportunity and minimise risk for you
- Understand that the above scenario is NOT normal, so go back to point #1 above
Need a few days to recover from this one :).
But being a property investor ourselves…. I know what a relief it is, to get THAT next DEAL across the line.
It’s nice to be able to live it through my clients’ purchases EVERY single day.
The thrill of the deal being done for our clients especially where an effectively structured portfolio helps them achieve their financial goals….. trumps it all!
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