TIPS FOR FINANCING PROPERTIES IN TODAY’S ENVIRONMENT
If you are concerned about borrowing capacity and cash flow affecting your ability to build a portfolio of ten or more properties – you are not alone!
Luckily, there are ways to navigate around the current challenges and continue financing properties.
EVERY MARKET HAS ITS CHALLENGES
“In every market place there will always be some challenges” says Binvested co-founder & investor Nathan Birch. He has seen many changes throughout the course of his property investing journey.
CHALLENGES THAT NATHAN FACED
Nathan recalls that high interest rates and low rental yields were a challenge that he had to face when he started investing in property.
He says, a lot of the challenges he faced 13 years ago are no longer challenges to the current generation of investors.
OBTAINING FINANCE CAN BE A CHALLENGE FOR PORTFOLIO BUILDERS
Current investors are faced with a different set of challenges – tighter lending regulations being one of the biggest.
This makes it more difficult to build a portfolio of ten or more properties, as the banks are much more strict how the lend money, and who they lend to.
Borrowing ability has always been closely related to income, however today an investor’s rental income is no longer valued as highly as it once was.
Banks also want to see bigger deposits, and are much less willing to release equity from a property.
All these things make growing a portfolio with a buy and hold strategy much harder than in the past.
STREAMLINE YOUR STRATEGY
But, all is not lost! Although you probably can’t buy property after property right away as once before – it’s still possible to build a large portfolio and generate wealth in a short amount of time.
Today you may find you can buy three to five properties relatively quickly before being limited by access to more finance.
At this time, a pause from purchasing may be necessary in order to raise more capital.
If you are approaching your loan serviceability limit, make sure to get the most from your latest property. A project build may be possible in order to sell for profit.
While many people thing projects are difficult and unlikely to generate profits, this is not true. However we’ve developed a model that reliably replicates success by accessing wholesale prices and selling at retail price to make a profit.
This newly acquired capital could be used to pay down debt, improve serviceability and free up finance to buy more properties.
Then, it may be possible to continue on another phase of acquisition before one again raising some capital.
WILL THIS TAKE LONGER?
While it seems like a more drawn out way of doing things, by making mini-consolidations earlier on, you would be minimising debt along the way.
When it comes time for the final consolidation phase, where you sell down some of your properties to leave a debt free portfolio, you will already be part way there.
The important thing is this – if new challenges make an old strategy achievable, adapting to change will help you stay on track to achieve your results.
Just because a market is different it doesn’t mean that opportunities have dried up. You need to adapt and use the benefits of the current market.
How about you? How have you adapted to this market we are in?