As you start or continue to grow an existing property portfolio, you will require the services of multiple professional service providers – solicitors, property managers, landlords’ insurers, etc. The quality of your service providers will often have a material effect on your property investments, so it is important to choose the right ones
This is particularly true of mortgage brokers – a good broker who understands what you are trying to achieve and puts in place a financial structure that will support your long-term goals is an essential ingredient on your road to success. Unfortunately, many brokers have a much more short-term focus and are more concerned about ‘getting you the money’ for the next deal rather than helping you achieve your long-term goals.
Lenders and valuers are two groups who regularly stand between a property investor and their goals, and an experienced mortgage broker will be aware of the issues and will be able to get the best possible outcome for the borrower. One major frustration for borrowers is the sheer inconsistency between different banks, and when it comes to valuers the problem is even worse. Let us take a look at some of the main issues, first with lenders, then with valuers.
Each lender will have a different model that they use to ascertain your borrowing capacity. This can vary widely from one lender to the next. One lender may be more generous to investors, another might favour the self-employed.
Many borrowers who are relying on their own research tend to be more focused on the published interest rate than the actual financial products on offer or the serviceability models of the individual lenders. However, sometimes the published interest rate is not actually the cheapest when you compare the varying fee structures of the different banks. A good broker will be able to match your circumstances to the lender who is the best ‘fit’ for you.
I have come across many examples of valuations that I consider were way below where they should have been. On other occasions the valuations have made absolutely no sense. One particular example that I recall involved the purchase of two apartments by an investor in the same complex. The floor plans were mirror images, and they were next door to each other. She purchased them on the same day, and for the same price. She decided to get one loan to cover both apartments. When the valuations came in, one apartment was valued at contract price, the other at $20,000 below contract price!
It is quite common when purchasing in a particular area that one valuer regularly supports fair market value, and another valuer in the same area always comes in low. Some brokers now order an upfront valuation so that they can have certainty about the valuation before they put in the application. Some lenders will accept valuations that have been ordered by the purchaser in certain cases, so again, if valuations are a concern it may be better to get the valuation first and then approach a lender who will accept your valuation.
Some of these ‘tricks of the trade’ are not widely known, even in broker circles, so it is important to deal with a broker who is up to speed and can get you the best possible outcome.
In order to reach your financial goals as quickly as possible you will need to buy a number of well-researched, well-located properties. You will need to maintain an adequate borrowing capacity with lenders, and you will also need to rely on valuers to attribute a fair market price to your existing as well as your proposed assets. This is not always a foregone conclusion, and many investors who have not put sufficient thought into their choice of mortgage broker have lived to regret it. The additional financial and emotional stress of a deal that ‘goes bad’ can often be avoided, so make sure that you choose all your service providers with care. If you would like any recommendations, please contact me and I will be able to connect you withthe people that can help you achieve your goals.
Ian Hosking Richards
Ian Hosking Richards is a successful property investor with a portfolio of over 30 properties. He is the CEO and founder of Rocket Property Group, a leading independent real estate agency that helps hundreds of people each year enter the property market or grow their existing portfolios. For further information or assistance, please visit rocketpropertygroup.com.au or call 1300 850 038.
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