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How Two Investors Increase Their Investment Opportunity By $230,000

By Neil Carstairs
Success Story

Promoted by Mortgage Corp

Case Study: Mortgage Corp helped two self-employed investors successfully secure their 3rd investment property (after their bank refused to lend them any more money).

Self Employed Investors’ 3rd Investment Loan Success

Self Employed Loan Case Study | Mortgage Corp

Client at a glance

Executive Summary

Mortgage Corp helped a self employed property investor couple add a third investment property to their property portfolio (total of four houses, including their own home) after their bank refused to lend them any more money.

Loan strategist Neil Carstairs found opportunities to increase their borrowing power by looking closely at their financial statements.

Neil found them a suitable lender and restructuring their loans to allow them to borrow up to $420,000 (after their bank wouldn’t lend them anything!)

Overview

Client: Dan and Rachel, New Client of Mortgage Corp in 2017  

Marital status: Married with 2 children

Income: $200,000+ per year company profit

Occupation: Self employed trade services

Location of new investment property: South Australia

Suburbs of existing propertiesCoburg, Point Cook and Chelsea, Victoria

Objective: Obtain a loan for a third investment property with solid rental returns to build their wealth

Results: Purchased their third investment property using extra borrowings of $420,000

Background

Dan and Rachel were self-employed investors whose business was going well with a large amount of deposit saved up and good income.  They already owned their own home in Coburg, as well as two investment properties in Point Cook and Chelsea.  They were keen to continue to invest and buy a third investment property.

However when they went to see their bank, the lending manager told them they had maxed out their borrowing capacity and couldn’t borrow anymore.  They read our 5 star customer reviews and decided to ring us to see if we had any other ideas.

The Challenges

  • Their bank manager had told them that they couldn’t borrow any more money
  • Even though they had equity in their existing properties, lending criteria required them to show they would be able to service the loan through extra income

Objectives

The Solution

We asked Dan and Rachel to have their accountant send us their latest company financial statements so we had a better idea of what they were earning.

What we noticed was that:

  • Dan was making extra contributions to super from his company – well above the normal amount of 9.5%.  He had been advised to do this to reduce his tax
  • Rachel was actually an employee being paid by the company rather than a director – their previous lender had assumed Rachel was a director which meant they couldn’t take into account 100% of her earnings due to director legal liability
  • We also saw other non-cash expenses that could be added back to increase their profits for loan assessment purposes, such as depreciation and once off capital purchases

After doing the necessary addbacks to increase their business profits, our knowledge of different lenders’ policies meant we were able to recommend another more favourable lender with a good self employed loan to these investors.  

Their previous lender had taken the lowest of their business profits over the last two years as their income for lending purposes. Meanwhile, we knew of a lender that would take into account the average of their profits over the last two years.

Using these techniques and a more appropriate loan structure, we were able to help the couple get pre-approval for another investment loan of up to $420,000.

The final thing we did was help these two investors structure their debt better.  Dan and Rachel had a considerable amount of extra cash of $150,000.  Instead of putting the $150,000 into the new purchase, we advised them to use it to lower their owner occupier loan.  This allowed them to have more tax deductible interest for negative gearing.

It was a good thing that Dan and Rachel came to see us so they didn’t have to miss out on a great investment opportunity – which they would have, if they had listened to their bank manager!

Results

  • Bought their 3rd investment property despite being rejected by their own bank previously
  • Restructured their loans for better tax savings and further investment opportunities
  • Set their long term investment goals and steps to achieve financial freedom

Note: for privacy reasons, names and locations used in this case study are not real client names or locations.

For real Mortgage Corp customer reviews, visit

www.mortgagecorp.com.au/testimonials/  or

www.facebook.com/pg/mortgagecorp/reviews/

What’s Next?

Keep reading How To Increase Your Borrowing Power For Self Employed LoansCase Study- Refinance  Home Loan To Pay Off A $40K ATO Debt

 

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podcast

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1204 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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