Some tips to ensure you never run out of borrowing horsepower again

1. PropertyInvestmentFinance
Fundamentals

2. We help investors
build and manage
their property portfolios

3. This presentation contains general information only and does
not take into account your personal objectives, financial
situation or needs.
You should consider whether the information is appropriate to
you before acting on it.
Before acting on any information you should consider seeking
advice from a qualified financial adviser and / or accountant.

4. • 3,000 current subscribers
• Mix of personal users, brokers, buyers
agents and accountants
• 200,000+ members use us for market
information, calculators, investment news
and updates
Real Estate Investar

5. In Partnership With…

6. 1.9m
Australians
1 Property
2-4 Properties
5+ Properties
• Pays shortfall for
5 years+.
• Eventually sells
and pays down
personal debt.
• No retirement
income.
• Strategy &
numbers.
• Self funding
portfolio.
• $100-$250k+
passive income in
retirement.
• Has high income
or buys every few
years.
• Freehold in
retirement.
• Min. retirement
income.
Source ATO/ABS
3 Levels of Property Investment

7. 1.9m
Australians
1 Property
1.4m
73%
2-4 Properties
470,000
25%
5+ Properties
30,000
2%
• Pays shortfall for
5 years+.
• Eventually sells
and pays down
personal debt.
• No retirement
income.
• Strategy &
numbers.
• Self funding
portfolio.
• End up freehold
• $100-$250k+
passive income in
retirement.
• Has high income
or buys every few
years.
• Freehold in
retirement.
• Min. retirement
income.
Source ATO/ABS
What Level are you Aiming for?

8. • Banks will cross collateralise everything if they
can.
• Banks won’t help you maximise LVR as you grow.
• Banks have a single funder.
• Often you are not dealing with the decision maker.
• It’s the banks money and they don’t care about
your problems when they want it back.
Bank or Broker, what’s the
Difference?

9. • The Property
• Equity
• Cash Flow
• Credit Record
• Your Character
5 Barriers to Finance

10. • Equity;
• Up to 80% LVR is easier to finance.
• Above 80% LVR requires Lenders Mortgage
Insurance (LMI).
• *On $500,000 loan;
• 85% LVR - Add 1% ($5k)
• 90% LVR - Add 1.5% ($7.5k)
• 95% LVR – Add 3% ($15k)
• LMI adds leverage, cost and risk.
Never Run Out of Borrowing Power
Again

11. • Income
• Target a DSR (Debt Service Ratio) of at least 1.3,
e.g.
$130 in rental income per $100 of mortgage
payments for a self funding portfolio.
• Minimise consumer debt and credit card
balances.
Never Run out of Borrowing Power
Again

12. • Capital growth creates wealth, but cash flow is
your oxygen while you wait for it to occur
• Balance high growth with high cash flow investing
• Increase your income
• Eliminate high interest debt and credit card
balances
• Convert property debt to interest only
• Annualise your household costs, are you getting
value?
Equity Rich and Cash Poor is a Road
Block

13. Cross Collateralisation

14. Risks with Cross Collateralisation
• Bank contracts enable them to pool
secured assets across multiple debts
using an “all monies clause”
• "If you have multiple loans with one bank,
they can take funds out of the one
account to clear any arrears on any loan
using an "account combination" clause
• Your equity can be tied up and ability to
reinvest restricted

15. Individual Collateralisation

16. Benefits of Individual Collateralisation
• Separate security for each loan -
spreads your risk
• Easier to top up multiple loans for a
small amount
• Easier to buy/sell/refinance
• Avoids domino effect if you have
difficulty in one area
• Financiers more negotiable if they
can see assets they can’t touch

17. The Power of the Offset Account –
Example Scenario

18. Investment Loan Payments
Investment
Offset Account
In: Rental Income
Separate
Offset Account
General
Spending
Home loan
Account
Main Offset
(Savings)
In: Salary
Out: Loan
Payments
Investment
Property Loan
Account
Spending Money
The Money Flows
Top up if negatively geared
Home Loan
Repayments

19. The Money Flows
• Keeps savings available, and
minimises interest.
• Enables you to save or pay off
debt years faster.
• Keeps loan amount at its
maximum while minimising
interest costs.
• Easier to access equity without
refinancing.

20. Arrange a Free Finance
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info.realestateinvestar.com.au/finance