1 00:00:05,839 --> 00:00:09,000 this is the Financial Freedom series2 00:00:09,000 --> 00:00:12,000 designed to show you how to cash flow3 00:00:12,000 --> 00:00:16,020 your way to Financial Freedom brought to4 00:00:16,020 --> 00:00:19,560 you by Lagos Financial the road to5 00:00:19,560 --> 00:00:23,840 Financial Freedom starts today6 00:00:24,660 --> 00:00:27,240 welcome to the Financial Freedom series7 00:00:27,240 --> 00:00:30,359 my name is Andrew bean and I'm here with8 00:00:30,359 --> 00:00:33,480 top mortgage broker and financial expert9 00:00:33,480 --> 00:00:36,059 Victor Lagos from Lagos Financial how10 00:00:36,059 --> 00:00:37,920 are you mate11 00:00:37,920 --> 00:00:39,840 good Andrew mate how are you I'm12 00:00:39,840 --> 00:00:42,360 fantastic buddy we have an absolute13 00:00:42,360 --> 00:00:45,180 Ripper of a show today really excited14 00:00:45,180 --> 00:00:48,000 about this one are you as pumped as me15 00:00:48,000 --> 00:00:51,379 yeah this one's a tough one16 00:00:51,379 --> 00:00:53,700 Victor was just telling me before that17 00:00:53,700 --> 00:00:56,100 I've got a few tough questions for him18 00:00:56,100 --> 00:00:58,199 so I'm putting him on the pump today to19 00:00:58,199 --> 00:01:00,660 uh basically give the listener and20 00:01:00,660 --> 00:01:02,940 everyone else the the tools to be able21 00:01:02,940 --> 00:01:05,640 to crack the lending code and that's the22 00:01:05,640 --> 00:01:08,820 real theme of this particular podcast is23 00:01:08,820 --> 00:01:12,000 how can we uh actually do what we need24 00:01:12,000 --> 00:01:14,520 to do to give the banks or give25 00:01:14,520 --> 00:01:16,979 ourselves a more borrowing capacity so26 00:01:16,979 --> 00:01:19,320 Victor's going to explain to us exactly27 00:01:19,320 --> 00:01:22,439 how the banks evaluate us as the28 00:01:22,439 --> 00:01:24,900 borrower and then give us a few tips and29 00:01:24,900 --> 00:01:28,380 tricks on how to actually make that a30 00:01:28,380 --> 00:01:30,420 larger sum because at the end of the day31 00:01:30,420 --> 00:01:32,759 you know property is just a game of32 00:01:32,759 --> 00:01:34,740 Finance with a few pieces of real estate33 00:01:34,740 --> 00:01:37,259 you know thrown in there so if you can34 00:01:37,259 --> 00:01:39,780 get more money more access to Capital35 00:01:39,780 --> 00:01:43,040 um happy days keep on going36 00:01:43,040 --> 00:01:45,900 yeah yeah exactly I think today uh37 00:01:45,900 --> 00:01:47,880 you're really gonna be getting all the38 00:01:47,880 --> 00:01:49,799 secrets out of me all the stuff that I39 00:01:49,799 --> 00:01:51,659 share with my clients uh40 00:01:51,659 --> 00:01:54,360 if you're listening yeah take some notes41 00:01:54,360 --> 00:01:57,299 awesome mate so this is a really really42 00:01:57,299 --> 00:02:00,180 big subject so can you just give us a43 00:02:00,180 --> 00:02:03,240 quick overview of how the banks actually44 00:02:03,240 --> 00:02:05,700 like make their assessment on borrowing45 00:02:05,700 --> 00:02:07,860 capacity per applicant46 00:02:07,860 --> 00:02:09,000 right47 00:02:09,000 --> 00:02:12,300 yeah so I mean very simply put they're48 00:02:12,300 --> 00:02:15,239 just trying to work out that once you uh49 00:02:15,239 --> 00:02:17,760 cancel all of your expenses so your50 00:02:17,760 --> 00:02:19,739 living costs as well as all of your51 00:02:19,739 --> 00:02:20,940 debts52 00:02:20,940 --> 00:02:24,060 is there money left over to service your53 00:02:24,060 --> 00:02:26,760 your new loan and is there a surplus54 00:02:26,760 --> 00:02:29,520 after that so that's overarching what55 00:02:29,520 --> 00:02:31,140 they're trying to work it out but then56 00:02:31,140 --> 00:02:34,200 the numbers in which they calculate that57 00:02:34,200 --> 00:02:36,180 differ they don't look at what the58 00:02:36,180 --> 00:02:38,940 actual cost is they use buffers and59 00:02:38,940 --> 00:02:40,920 stress tests and we'll get into a little60 00:02:40,920 --> 00:02:42,480 bit more of the details on that as you61 00:02:42,480 --> 00:02:45,120 ask the questions yeah awesome so I mean62 00:02:45,120 --> 00:02:47,519 when I'm assessing a property63 00:02:47,519 --> 00:02:49,560 um I have a metric that I put in64 00:02:49,560 --> 00:02:52,440 um for the debt coverage ratio because I65 00:02:52,440 --> 00:02:55,019 believe that a bank or Banks like to see66 00:02:55,019 --> 00:02:56,879 like a good one and a half two percent67 00:02:56,879 --> 00:02:59,640 of a debt coverage ratio from the68 00:02:59,640 --> 00:03:01,920 positively geared property do they have69 00:03:01,920 --> 00:03:04,319 their own like debt coverage ratio per70 00:03:04,319 --> 00:03:07,920 applicant that they they use71 00:03:07,920 --> 00:03:11,340 yeah so so when you're looking at uh72 00:03:11,340 --> 00:03:15,180 lending serviceability calculators every73 00:03:15,180 --> 00:03:18,680 bank or lender has got their own uh74 00:03:18,680 --> 00:03:22,440 methodology in what they account for so75 00:03:22,440 --> 00:03:24,060 if they're looking at a debt servicing76 00:03:24,060 --> 00:03:29,940 ratio it's usually between say 1.2577 00:03:29,940 --> 00:03:32,280 up to two times cover78 00:03:32,280 --> 00:03:35,700 and this is based on principle and79 00:03:35,700 --> 00:03:38,340 interest on all of your loans80 00:03:38,340 --> 00:03:40,140 on a higher interest rate than what81 00:03:40,140 --> 00:03:42,659 you're actually paying so say that rate82 00:03:42,659 --> 00:03:44,940 is six percent83 00:03:44,940 --> 00:03:47,239 um and the bank has a three percent84 00:03:47,239 --> 00:03:50,159 buffer on that they'll they'll calculate85 00:03:50,159 --> 00:03:52,200 it at nine percent and they'll want to86 00:03:52,200 --> 00:03:54,480 see that you can actually cover that you87 00:03:54,480 --> 00:03:56,940 know two times cover well not so much88 00:03:56,940 --> 00:03:58,560 two times that's pretty high but I'd say89 00:03:58,560 --> 00:04:01,680 you know 1.25 times that can you cover90 00:04:01,680 --> 00:04:04,140 that with your with your income91 00:04:04,140 --> 00:04:06,420 so is the spread that the bank always92 00:04:06,420 --> 00:04:08,760 puts on is is that a specific number or93 00:04:08,760 --> 00:04:11,040 does that change bank to bank like the94 00:04:11,040 --> 00:04:12,599 spread of the interest rate that they95 00:04:12,599 --> 00:04:14,939 can actually give you to the the stress96 00:04:14,939 --> 00:04:19,199 test that they you know put on you97 00:04:19,199 --> 00:04:21,180 so if you're a98 00:04:21,180 --> 00:04:23,280 a bank and you're a deposit taking99 00:04:23,280 --> 00:04:25,919 institution you're regulated by apra100 00:04:25,919 --> 00:04:28,380 yeah and apra says you have to put three101 00:04:28,380 --> 00:04:31,440 percent above the actual interest rate102 00:04:31,440 --> 00:04:33,780 so today's rates103 00:04:33,780 --> 00:04:36,300 are around six percent so they're104 00:04:36,300 --> 00:04:38,940 calculating at nine percent but if105 00:04:38,940 --> 00:04:42,180 you're a non-bank then you don't report106 00:04:42,180 --> 00:04:45,780 directly to apra you report to Asic and107 00:04:45,780 --> 00:04:48,600 the stress test rates can vary they can108 00:04:48,600 --> 00:04:50,400 be sometimes109 00:04:50,400 --> 00:04:53,400 um one time one percent above that or110 00:04:53,400 --> 00:04:55,199 two percent above that so there's a bit111 00:04:55,199 --> 00:04:59,100 more breathing room and also the way112 00:04:59,100 --> 00:05:00,540 they treat principle and interest113 00:05:00,540 --> 00:05:03,960 repayments versus interest only is114 00:05:03,960 --> 00:05:06,479 different as well so a bank115 00:05:06,479 --> 00:05:09,600 a bank will always look at the principal116 00:05:09,600 --> 00:05:11,699 and interest payment for the remaining p117 00:05:11,699 --> 00:05:14,220 and I term so say you've got a 30-year118 00:05:14,220 --> 00:05:16,080 loan and you've got a five-year interest119 00:05:16,080 --> 00:05:18,120 only A bank's going to say all right120 00:05:18,120 --> 00:05:20,759 well there's 25 years remaining so we121 00:05:20,759 --> 00:05:23,820 need to calculate p i or principal and122 00:05:23,820 --> 00:05:26,520 interest on 25 years and we're going to123 00:05:26,520 --> 00:05:28,259 stress test that124 00:05:28,259 --> 00:05:31,259 up say nine percent so that's obviously125 00:05:31,259 --> 00:05:33,479 a difficult fee because now you're126 00:05:33,479 --> 00:05:35,940 you've got a shorter loan term and the127 00:05:35,940 --> 00:05:37,620 repayments are higher128 00:05:37,620 --> 00:05:40,620 whereas a non-bank can potentially look129 00:05:40,620 --> 00:05:43,139 at the interest-only repayment and just130 00:05:43,139 --> 00:05:45,120 say put two percent above that131 00:05:45,120 --> 00:05:47,460 that's a significant difference they're132 00:05:47,460 --> 00:05:49,080 not looking at the current principle and133 00:05:49,080 --> 00:05:50,400 interest repayment they're not looking134 00:05:50,400 --> 00:05:52,740 at 25 years remaining they're saying135 00:05:52,740 --> 00:05:55,320 what's the actual repayment today and if136 00:05:55,320 --> 00:05:57,240 it is interest only then let's just137 00:05:57,240 --> 00:05:58,860 stress test that and see that you can138 00:05:58,860 --> 00:06:00,780 afford that and if you've got a few139 00:06:00,780 --> 00:06:02,340 properties and they're all interest only140 00:06:02,340 --> 00:06:04,800 that could work in your favor for a141 00:06:04,800 --> 00:06:07,440 non-bank to borrow more but if you're142 00:06:07,440 --> 00:06:10,139 going to a bigger bank for you know143 00:06:10,139 --> 00:06:11,160 overall you're going to get a better144 00:06:11,160 --> 00:06:13,620 interest rate lower fees then it can145 00:06:13,620 --> 00:06:15,300 hinder you by having a longer146 00:06:15,300 --> 00:06:17,340 interest-only terms147 00:06:17,340 --> 00:06:20,160 so can you just um basically explain to148 00:06:20,160 --> 00:06:22,500 us like like what a non-bank is like149 00:06:22,500 --> 00:06:24,240 maybe just name couple of the businesses150 00:06:24,240 --> 00:06:25,740 that are a non-bank because I mean I151 00:06:25,740 --> 00:06:27,539 guess if a lot of people just think if152 00:06:27,539 --> 00:06:28,440 they're lending me money they're153 00:06:28,440 --> 00:06:30,180 obviously a bank but that doesn't seem154 00:06:30,180 --> 00:06:32,160 to be the case155 00:06:32,160 --> 00:06:34,740 yeah they're just called non-banks or or156 00:06:34,740 --> 00:06:38,160 non-adis non-deposit taking institutions157 00:06:38,160 --> 00:06:40,979 so some of the more known lenders out158 00:06:40,979 --> 00:06:43,940 there uh Liberty Financial paper money159 00:06:43,940 --> 00:06:47,520 uh resymac first Mac160 00:06:47,520 --> 00:06:49,199 these are the ones that a lot of people161 00:06:49,199 --> 00:06:50,699 know of especially if you're a property162 00:06:50,699 --> 00:06:52,680 investor but then there's other163 00:06:52,680 --> 00:06:54,960 non-banks or mortgage managers out there164 00:06:54,960 --> 00:06:57,020 that many people may not have heard of165 00:06:57,020 --> 00:06:59,880 uh I'm even learning about new ones and166 00:06:59,880 --> 00:07:01,259 I'm getting accredited with a lot of167 00:07:01,259 --> 00:07:03,840 them so yeah you know a lot of them168 00:07:03,840 --> 00:07:06,360 don't have any type of advertising or169 00:07:06,360 --> 00:07:08,940 direct to Consumer channels so you can170 00:07:08,940 --> 00:07:10,500 only get to them through the broker171 00:07:10,500 --> 00:07:11,280 Channel172 00:07:11,280 --> 00:07:13,020 and that's why sometimes it's really173 00:07:13,020 --> 00:07:16,259 important to work with a broker that can174 00:07:16,259 --> 00:07:18,060 actually navigate that and find the175 00:07:18,060 --> 00:07:20,340 right lender because otherwise customer176 00:07:20,340 --> 00:07:21,900 doesn't even know they exist they don't177 00:07:21,900 --> 00:07:23,460 advertise and that might be the right178 00:07:23,460 --> 00:07:25,740 lender to help you get the next property179 00:07:25,740 --> 00:07:28,380 yeah right so with the three percent180 00:07:28,380 --> 00:07:30,840 interest that the bank does put on or181 00:07:30,840 --> 00:07:34,199 apra has put on for the bank has that182 00:07:34,199 --> 00:07:36,300 always been three percent and183 00:07:36,300 --> 00:07:38,340 um has that is that enough for this184 00:07:38,340 --> 00:07:40,500 particular you know time around where I185 00:07:40,500 --> 00:07:43,740 think are we on 12 or 13 rate hikes186 00:07:43,740 --> 00:07:45,720 um you know now is that is three percent187 00:07:45,720 --> 00:07:47,819 enough back before the interest rates188 00:07:47,819 --> 00:07:49,020 we've probably already gobbled that up189 00:07:49,020 --> 00:07:51,060 right now190 00:07:51,060 --> 00:07:53,280 yeah it's an interesting time that we're191 00:07:53,280 --> 00:07:55,979 in so when the three percent it used to192 00:07:55,979 --> 00:07:59,340 be higher I believe it was 3.25 a few193 00:07:59,340 --> 00:08:01,740 years ago but they they dropped it down194 00:08:01,740 --> 00:08:05,340 because interest rates were around two195 00:08:05,340 --> 00:08:07,259 percent at one point or even lower for196 00:08:07,259 --> 00:08:11,300 fixed and the three percent buffer was197 00:08:11,300 --> 00:08:14,880 accurate and a lot of loans now cracked198 00:08:14,880 --> 00:08:17,039 over that so there hasn't really been199 00:08:17,039 --> 00:08:20,340 much distress even for loans coming off200 00:08:20,340 --> 00:08:23,160 it's fixed into into variable because201 00:08:23,160 --> 00:08:26,039 people are paying what the banks are202 00:08:26,039 --> 00:08:28,139 stress tested anyway around that five203 00:08:28,139 --> 00:08:30,720 percent so now that we're cracking over204 00:08:30,720 --> 00:08:32,039 to six percent205 00:08:32,039 --> 00:08:34,200 now it's starting to squeeze the206 00:08:34,200 --> 00:08:36,059 household much more and on top of that207 00:08:36,059 --> 00:08:38,099 you've got inflation so the cost of208 00:08:38,099 --> 00:08:40,620 living is going up as well but because209 00:08:40,620 --> 00:08:42,899 there was such a short a period of time210 00:08:42,899 --> 00:08:45,360 where people were able to pay these low211 00:08:45,360 --> 00:08:47,700 interest rates they were then also able212 00:08:47,700 --> 00:08:50,399 to build up cash buffers so build up213 00:08:50,399 --> 00:08:51,899 their offset account their savings214 00:08:51,899 --> 00:08:55,140 account uh build up the loan redraw so215 00:08:55,140 --> 00:08:56,580 that's a lot of people living off of216 00:08:56,580 --> 00:08:58,860 that stuff at the moment just to um hold217 00:08:58,860 --> 00:09:02,760 on to their property so right now if218 00:09:02,760 --> 00:09:04,740 you're entering the market and the banks219 00:09:04,740 --> 00:09:07,200 are assessing it at say nine percent I220 00:09:07,200 --> 00:09:08,880 don't think nine three percent buffer221 00:09:08,880 --> 00:09:10,860 makes sense with today's rates because222 00:09:10,860 --> 00:09:13,320 if interest rates were at nine percent223 00:09:13,320 --> 00:09:17,220 today uh and where the prices are right224 00:09:17,220 --> 00:09:19,680 now there'll be very small amount of the225 00:09:19,680 --> 00:09:22,080 market they'll be able to borrow and own226 00:09:22,080 --> 00:09:25,740 property anymore so yeah so I think it's227 00:09:25,740 --> 00:09:29,040 actually going to drop uh you know the228 00:09:29,040 --> 00:09:31,320 some banks have got special rulings a229 00:09:31,320 --> 00:09:33,899 lot of them got because of this mortgage230 00:09:33,899 --> 00:09:35,640 Cliff they're calling it where people231 00:09:35,640 --> 00:09:37,080 are coming off into these two percent232 00:09:37,080 --> 00:09:39,720 fixed rates and they're calling it a233 00:09:39,720 --> 00:09:41,339 mortgage prison because they're stuck234 00:09:41,339 --> 00:09:44,519 with the same bank that they're with and235 00:09:44,519 --> 00:09:46,380 they've given them this ruling where236 00:09:46,380 --> 00:09:47,940 they can instead of assessing three237 00:09:47,940 --> 00:09:49,560 percent above the actual interest rate238 00:09:49,560 --> 00:09:51,660 they're assessing at one percent Above239 00:09:51,660 --> 00:09:53,700 So then as long as you've got clean240 00:09:53,700 --> 00:09:55,980 credit the loan to value ratio is I241 00:09:55,980 --> 00:09:58,140 think below 80242 00:09:58,140 --> 00:10:00,480 um and you put a one percent uh stress243 00:10:00,480 --> 00:10:02,700 test buffer on top then there's an244 00:10:02,700 --> 00:10:04,920 option for these people to refinance to245 00:10:04,920 --> 00:10:06,540 to a lower interest rate potentially246 00:10:06,540 --> 00:10:09,000 than that same bank is offering247 00:10:09,000 --> 00:10:11,820 so I guess that means that the banks248 00:10:11,820 --> 00:10:14,339 aren't assuming or they're they're bet249 00:10:14,339 --> 00:10:15,480 they're betting that there aren't going250 00:10:15,480 --> 00:10:17,519 to be too many more interest rate hikes251 00:10:17,519 --> 00:10:19,080 where they're going to easily take up252 00:10:19,080 --> 00:10:21,660 that one percent buffer253 00:10:21,660 --> 00:10:24,600 yeah yeah exactly right they're they're254 00:10:24,600 --> 00:10:27,720 kind of aware that we're at that higher255 00:10:27,720 --> 00:10:30,600 range right now and I've noticed as well256 00:10:30,600 --> 00:10:32,580 that the gap between257 00:10:32,580 --> 00:10:33,420 um258 00:10:33,420 --> 00:10:35,519 owner occupied interest rates and259 00:10:35,519 --> 00:10:37,800 investment rates is closing so it's not260 00:10:37,800 --> 00:10:40,380 as as large as it used to be so what261 00:10:40,380 --> 00:10:43,019 that means is that the banks are likely262 00:10:43,019 --> 00:10:45,240 um eating into their margins their263 00:10:45,240 --> 00:10:47,040 profit margins just to keep the interest264 00:10:47,040 --> 00:10:49,920 rates at a somewhat affordable level if265 00:10:49,920 --> 00:10:51,839 they were really trying to maintain the266 00:10:51,839 --> 00:10:53,760 same margins that they've had then267 00:10:53,760 --> 00:10:56,040 customers will be paying probably seven268 00:10:56,040 --> 00:10:59,100 percent right now so they're and above269 00:10:59,100 --> 00:11:01,200 so they're sort of keeping it at a270 00:11:01,200 --> 00:11:03,120 relatively affordable level271 00:11:03,120 --> 00:11:05,399 so that they can still get business272 00:11:05,399 --> 00:11:06,779 so if273 00:11:06,779 --> 00:11:09,120 if the rates were jumping up to eight274 00:11:09,120 --> 00:11:11,279 percent nine percent and no one could275 00:11:11,279 --> 00:11:13,680 borrow well that's the entire economy276 00:11:13,680 --> 00:11:15,779 gone right no one's no one's able to buy277 00:11:15,779 --> 00:11:18,120 and borrow anymore so and Banks aren't278 00:11:18,120 --> 00:11:19,620 making profit at all so they're better279 00:11:19,620 --> 00:11:21,959 off you know having a lower margin but280 00:11:21,959 --> 00:11:23,579 still getting a lot of customers than281 00:11:23,579 --> 00:11:26,459 high margins and no customers yeah yeah282 00:11:26,459 --> 00:11:28,740 definitely so I guess because the banks283 00:11:28,740 --> 00:11:30,779 have had such a good run or you know the284 00:11:30,779 --> 00:11:32,880 the interest rate or the cash rate has285 00:11:32,880 --> 00:11:35,880 been so low for so long they've had such286 00:11:35,880 --> 00:11:37,740 a good run of making money getting more287 00:11:37,740 --> 00:11:40,200 loans you know putting out debt288 00:11:40,200 --> 00:11:41,820 um that they really don't need to be289 00:11:41,820 --> 00:11:44,279 having that really big spread of the the290 00:11:44,279 --> 00:11:45,720 best times291 00:11:45,720 --> 00:11:47,399 um you know profitability they can they292 00:11:47,399 --> 00:11:49,019 can dial it back because you know293 00:11:49,019 --> 00:11:50,519 obviously they still want to have loans294 00:11:50,519 --> 00:11:52,920 coming in business coming in to keep the295 00:11:52,920 --> 00:11:55,560 um the economy and everything going296 00:11:55,560 --> 00:11:57,959 exactly right and they've invested a lot297 00:11:57,959 --> 00:12:01,019 of money into uh lending so they've got298 00:12:01,019 --> 00:12:02,760 a lot of new bankers and credit299 00:12:02,760 --> 00:12:05,399 assessors and Technology uh they're300 00:12:05,399 --> 00:12:07,440 shutting down branches so that more301 00:12:07,440 --> 00:12:09,240 people are going online to apply for302 00:12:09,240 --> 00:12:11,700 loans so they need to get a return on303 00:12:11,700 --> 00:12:13,740 investment on this yeah and they need to304 00:12:13,740 --> 00:12:15,420 cut you know if they're if they're305 00:12:15,420 --> 00:12:17,100 increasing rates so high that no one can306 00:12:17,100 --> 00:12:18,480 borrow well they're going to have to307 00:12:18,480 --> 00:12:20,940 start getting rid of a lot of jobs and308 00:12:20,940 --> 00:12:23,519 start downsizing so it's a it's an309 00:12:23,519 --> 00:12:25,260 interesting time to rent right now yeah310 00:12:25,260 --> 00:12:28,260 100 so can you explain to me what um311 00:12:28,260 --> 00:12:30,360 what shading is for the listeners that312 00:12:30,360 --> 00:12:31,800 don't know what banks do or they don't313 00:12:31,800 --> 00:12:34,560 know what what shading is314 00:12:34,560 --> 00:12:37,500 yeah so shading is when315 00:12:37,500 --> 00:12:41,760 say you're collecting rent of316 00:12:41,760 --> 00:12:43,680 um a thousand dollars a week317 00:12:43,680 --> 00:12:47,579 they'll usually shade that by 10 to 20318 00:12:47,579 --> 00:12:48,600 percent319 00:12:48,600 --> 00:12:50,940 so instead of using a you know a320 00:12:50,940 --> 00:12:52,139 thousand dollars a week towards321 00:12:52,139 --> 00:12:53,399 serviceability322 00:12:53,399 --> 00:12:56,279 they'll use eight hundred dollars or323 00:12:56,279 --> 00:12:57,480 nine hundred dollars324 00:12:57,480 --> 00:12:59,940 and they do this because properties for325 00:12:59,940 --> 00:13:02,180 example aren't going to be326 00:13:02,180 --> 00:13:05,459 rented out every you know week of the327 00:13:05,459 --> 00:13:07,680 year there might be a week or two where328 00:13:07,680 --> 00:13:11,220 it's vacant or longer depending329 00:13:11,220 --> 00:13:13,279 um when tenants leave and whatnot330 00:13:13,279 --> 00:13:15,540 they're also aware that there's going to331 00:13:15,540 --> 00:13:18,540 be some costs that come up that they332 00:13:18,540 --> 00:13:20,040 were unaware of so things is going to be333 00:13:20,040 --> 00:13:22,380 maintenance or repairs and things like334 00:13:22,380 --> 00:13:26,519 that and so if they accept 100 then335 00:13:26,519 --> 00:13:28,560 they're putting themselves at risk that336 00:13:28,560 --> 00:13:30,480 yeah that you can't afford to loan so337 00:13:30,480 --> 00:13:32,579 they shade it to make sure that they're338 00:13:32,579 --> 00:13:34,620 they're being more conservative and it's339 00:13:34,620 --> 00:13:36,420 not just rental income that's one thing340 00:13:36,420 --> 00:13:38,160 that they showed it's it's also certain341 00:13:38,160 --> 00:13:39,600 types of income342 00:13:39,600 --> 00:13:42,540 such as overtime or bonuses or343 00:13:42,540 --> 00:13:44,839 commissions344 00:13:44,839 --> 00:13:47,579 right you might get really good bonuses345 00:13:47,579 --> 00:13:49,980 this year and last year346 00:13:49,980 --> 00:13:53,160 but the year after it drops so by them347 00:13:53,160 --> 00:13:55,079 shading it by 20 percent348 00:13:55,079 --> 00:13:57,540 it gives them comfort knowing that if it349 00:13:57,540 --> 00:14:00,000 does drop that they were conservative350 00:14:00,000 --> 00:14:02,279 and obviously the amount that they use351 00:14:02,279 --> 00:14:04,680 towards uh servicing the debt that they352 00:14:04,680 --> 00:14:07,680 gave you and is that 20 is that a353 00:14:07,680 --> 00:14:09,660 standard thing across across all banks354 00:14:09,660 --> 00:14:11,639 and all non-banks or do they have their355 00:14:11,639 --> 00:14:14,160 own percentages they use for their own356 00:14:14,160 --> 00:14:16,740 particular business357 00:14:16,740 --> 00:14:20,100 no they all have their own so and it all358 00:14:20,100 --> 00:14:24,180 they call them niches right in in in the359 00:14:24,180 --> 00:14:26,100 lending World they all have their own360 00:14:26,100 --> 00:14:28,500 niches and some of them will use a361 00:14:28,500 --> 00:14:30,720 hundred percent of overtime for certain362 00:14:30,720 --> 00:14:33,000 industries like essential workers for363 00:14:33,000 --> 00:14:35,279 example you know if you're if you're a364 00:14:35,279 --> 00:14:38,579 doctor or or a nurse or ambulance365 00:14:38,579 --> 00:14:40,260 something like that and you work a lot366 00:14:40,260 --> 00:14:42,540 of overtime well that can boost up your367 00:14:42,540 --> 00:14:44,880 income significantly but if you go to368 00:14:44,880 --> 00:14:47,160 One bank and they shade it by 80 or 20369 00:14:47,160 --> 00:14:49,560 and only use eighty percent that's370 00:14:49,560 --> 00:14:51,420 limiting how much you can borrow so371 00:14:51,420 --> 00:14:53,040 there might be a lender or a bank that372 00:14:53,040 --> 00:14:55,980 will accept 100 of the overtime because373 00:14:55,980 --> 00:14:58,320 they're aware that this industry it's374 00:14:58,320 --> 00:15:00,240 very common to have Avatar375 00:15:00,240 --> 00:15:02,160 um so they're happily taking on the risk376 00:15:02,160 --> 00:15:04,139 because they know it's more likely going377 00:15:04,139 --> 00:15:05,519 to continue that you're going to do378 00:15:05,519 --> 00:15:07,560 those sort of hours379 00:15:07,560 --> 00:15:10,500 and um you know when it comes to380 00:15:10,500 --> 00:15:11,760 property381 00:15:11,760 --> 00:15:15,600 because we've had a lot of low vacancies382 00:15:15,600 --> 00:15:18,000 in terms of rent you know as we're aware383 00:15:18,000 --> 00:15:20,279 the population's growing migration is384 00:15:20,279 --> 00:15:22,940 increasing there's a lot of people that385 00:15:22,940 --> 00:15:25,680 uh are in a position where they're386 00:15:25,680 --> 00:15:27,480 obviously having to pay more rent to387 00:15:27,480 --> 00:15:29,399 stay where they're at in their current388 00:15:29,399 --> 00:15:31,320 place and people are paying more and389 00:15:31,320 --> 00:15:33,660 more rent just to just to get a place to390 00:15:33,660 --> 00:15:36,660 live right so that's kept vacancy rates391 00:15:36,660 --> 00:15:40,680 very very low so banks have started um392 00:15:40,680 --> 00:15:43,079 trying to find more ways to be to get393 00:15:43,079 --> 00:15:45,300 more borrowing so instead of shading 10394 00:15:45,300 --> 00:15:46,139 percent395 00:15:46,139 --> 00:15:48,779 uh sorry 20 now they're only shading uh396 00:15:48,779 --> 00:15:51,000 10 so they're accepting 90 of the rental397 00:15:51,000 --> 00:15:53,579 income so yeah it's always an398 00:15:53,579 --> 00:15:55,920 ever-changing environment there's new399 00:15:55,920 --> 00:15:57,839 policies coming out all the time and400 00:15:57,839 --> 00:16:00,360 they always send us Brokers the changes401 00:16:00,360 --> 00:16:02,279 and sometimes it's hard to stay on top402 00:16:02,279 --> 00:16:04,740 of but that's what I have to do for a403 00:16:04,740 --> 00:16:06,420 living and I do that uh to help my404 00:16:06,420 --> 00:16:07,560 customers405 00:16:07,560 --> 00:16:09,300 yeah that's really interesting how like406 00:16:09,300 --> 00:16:12,600 the the changing of the assessment can407 00:16:12,600 --> 00:16:15,540 change on you know at any time and I408 00:16:15,540 --> 00:16:17,040 guess that's why you know you have your409 00:16:17,040 --> 00:16:19,740 finger on the pulse and it makes sense410 00:16:19,740 --> 00:16:21,899 um to use someone like you who is always411 00:16:21,899 --> 00:16:24,420 like getting updates like how do you412 00:16:24,420 --> 00:16:26,880 know when a bank has changed their413 00:16:26,880 --> 00:16:29,779 shading policy like how do you know414 00:16:29,779 --> 00:16:32,519 usually they send an email out with415 00:16:32,519 --> 00:16:34,079 policy changes416 00:16:34,079 --> 00:16:37,259 um but emails can get missed uh you know417 00:16:37,259 --> 00:16:39,300 you can imagine how many lenders and418 00:16:39,300 --> 00:16:41,519 banks are out there and how many policy419 00:16:41,519 --> 00:16:43,440 changes especially with RBA hikes and420 00:16:43,440 --> 00:16:46,560 whatnot so sometimes they get missed so421 00:16:46,560 --> 00:16:49,620 every bank or lender has got a422 00:16:49,620 --> 00:16:51,720 relationship management team or a423 00:16:51,720 --> 00:16:53,699 business development manager and it's424 00:16:53,699 --> 00:16:56,699 their job to explain these changes to425 00:16:56,699 --> 00:16:58,740 Brokers so they all get a portfolio of426 00:16:58,740 --> 00:17:01,740 Brokers and they contact contact us and427 00:17:01,740 --> 00:17:04,319 they tell us about the changes and they428 00:17:04,319 --> 00:17:07,020 tell us you know their new dishes or you429 00:17:07,020 --> 00:17:09,240 know special offers that they have you430 00:17:09,240 --> 00:17:10,799 know sometimes if they call them like431 00:17:10,799 --> 00:17:12,780 under the table offers as well so432 00:17:12,780 --> 00:17:14,880 they're not advertised because lenders433 00:17:14,880 --> 00:17:17,520 are aware that434 00:17:17,520 --> 00:17:19,980 um the competition is fierce so if they435 00:17:19,980 --> 00:17:22,020 advertise certain things and other436 00:17:22,020 --> 00:17:24,000 lenders become aware of it437 00:17:24,000 --> 00:17:27,480 customers can you know leverage that and438 00:17:27,480 --> 00:17:30,720 um you know go back to the other banking439 00:17:30,720 --> 00:17:32,580 now for the same same product or the440 00:17:32,580 --> 00:17:34,620 same interest rate or the same Niche so441 00:17:34,620 --> 00:17:36,240 a lot of it is under the table so they442 00:17:36,240 --> 00:17:38,220 tell us that this is something we can do443 00:17:38,220 --> 00:17:40,620 and then we then have to communicate444 00:17:40,620 --> 00:17:43,220 that to the right customers yeah right445 00:17:43,220 --> 00:17:46,260 very very interesting it's just um yeah446 00:17:46,260 --> 00:17:47,880 it's an ever-changing comment I guess it447 00:17:47,880 --> 00:17:49,559 just does really you need someone with a448 00:17:49,559 --> 00:17:52,260 finger on the pulse because like if say449 00:17:52,260 --> 00:17:53,760 there's a bank and they have a shading450 00:17:53,760 --> 00:17:56,460 of like 20 and they're also um you know451 00:17:56,460 --> 00:17:59,280 giving me a a three three percent buffer452 00:17:59,280 --> 00:18:01,500 or if it's a two percent buffer it453 00:18:01,500 --> 00:18:03,240 really does change the amount of454 00:18:03,240 --> 00:18:04,860 borrowings that I could potentially get455 00:18:04,860 --> 00:18:07,380 like it can be drastic have has there456 00:18:07,380 --> 00:18:09,720 been any like like ridiculous amounts of457 00:18:09,720 --> 00:18:11,640 money where you've taken it to One bank458 00:18:11,640 --> 00:18:13,260 and they've given you X and then you're459 00:18:13,260 --> 00:18:14,340 taking it to the other bank and it's460 00:18:14,340 --> 00:18:16,260 been like like 10 times more have you461 00:18:16,260 --> 00:18:18,179 had that with your clients yet462 00:18:18,179 --> 00:18:21,539 uh I wouldn't say 10 times more but you463 00:18:21,539 --> 00:18:23,580 know you know you're talking a few464 00:18:23,580 --> 00:18:25,200 hundred thousand right that's still a465 00:18:25,200 --> 00:18:29,039 lot easier oh yeah oh definitely it's a466 00:18:29,039 --> 00:18:31,740 big difference and a lot of um467 00:18:31,740 --> 00:18:33,900 a lot of customers are unaware of this468 00:18:33,900 --> 00:18:36,480 so they go directly to the bank and that469 00:18:36,480 --> 00:18:38,280 bank doesn't know other bank's policies470 00:18:38,280 --> 00:18:40,200 so they can't even tell you what another471 00:18:40,200 --> 00:18:42,480 lender will offer because they don't472 00:18:42,480 --> 00:18:44,460 have access to it plus it's for them473 00:18:44,460 --> 00:18:45,720 they're kind of you know selling474 00:18:45,720 --> 00:18:48,900 themselves short yeah475 00:18:48,900 --> 00:18:50,400 yeah they don't want you going to the476 00:18:50,400 --> 00:18:52,440 other bank477 00:18:52,440 --> 00:18:53,640 and a lot of times I don't want you478 00:18:53,640 --> 00:18:55,200 going to the broker because they get an479 00:18:55,200 --> 00:18:57,120 incentive you know bonuses and whatnot480 00:18:57,120 --> 00:19:00,179 so if you work with a broker even then481 00:19:00,179 --> 00:19:02,400 that broker might not be aware of all482 00:19:02,400 --> 00:19:04,200 the different policies because you know483 00:19:04,200 --> 00:19:06,179 we're creatures of comfort human beings484 00:19:06,179 --> 00:19:08,520 right we try to we try to stick to what485 00:19:08,520 --> 00:19:11,400 we know and unless you're constantly486 00:19:11,400 --> 00:19:13,620 getting out of your comfort zone and487 00:19:13,620 --> 00:19:16,440 sort of questioning things you end up488 00:19:16,440 --> 00:19:19,200 sticking with one or two Banks right and489 00:19:19,200 --> 00:19:21,120 most Brokers do the same thing they490 00:19:21,120 --> 00:19:23,820 stick to one or two and they they become491 00:19:23,820 --> 00:19:25,679 really really proficient492 00:19:25,679 --> 00:19:27,960 um at offering those products they493 00:19:27,960 --> 00:19:30,179 become very familiar with it so it's494 00:19:30,179 --> 00:19:32,220 very easy for a customer to say oh this495 00:19:32,220 --> 00:19:33,419 broker knows what he's talking about496 00:19:33,419 --> 00:19:34,980 this must be the best bang for me497 00:19:34,980 --> 00:19:36,720 because they know it like the back of498 00:19:36,720 --> 00:19:38,820 their hand but that bank may not be499 00:19:38,820 --> 00:19:39,900 giving them the highest borrowing500 00:19:39,900 --> 00:19:41,520 capacity so if you invest in your501 00:19:41,520 --> 00:19:43,740 growing your portfolio you need to be502 00:19:43,740 --> 00:19:46,559 looking outside of the the norm and and503 00:19:46,559 --> 00:19:49,320 exploring that and that's what I do I504 00:19:49,320 --> 00:19:51,419 try to find different solutions it's505 00:19:51,419 --> 00:19:53,400 it's a game Finance like you said506 00:19:53,400 --> 00:19:55,440 property's a game of finance and we're507 00:19:55,440 --> 00:19:57,360 looking for Solutions first you know508 00:19:57,360 --> 00:20:00,120 interest rates and fees are important509 00:20:00,120 --> 00:20:02,280 but if you're going to pay a higher510 00:20:02,280 --> 00:20:03,600 interest rate511 00:20:03,600 --> 00:20:05,340 but you can borrow an extra three four512 00:20:05,340 --> 00:20:06,480 hundred grand513 00:20:06,480 --> 00:20:07,919 and it's going to get you a better514 00:20:07,919 --> 00:20:09,600 property well515 00:20:09,600 --> 00:20:11,880 what you know what's the cost versus the516 00:20:11,880 --> 00:20:14,520 gain right well yeah so you know that's517 00:20:14,520 --> 00:20:15,419 the things you're going to consider518 00:20:15,419 --> 00:20:17,580 obviously if you're just a typical519 00:20:17,580 --> 00:20:19,500 person just wanting to buy your first520 00:20:19,500 --> 00:20:21,419 time or just refinancing for a better521 00:20:21,419 --> 00:20:23,100 interest rate it's all about costs right522 00:20:23,100 --> 00:20:25,020 it's not really about different type of523 00:20:25,020 --> 00:20:27,059 but your listeners our listeners are524 00:20:27,059 --> 00:20:28,799 investors so they're looking for525 00:20:28,799 --> 00:20:30,059 Solutions526 00:20:30,059 --> 00:20:33,240 100 so we've already kind of touched on527 00:20:33,240 --> 00:20:35,520 it on the opening remarks but can you528 00:20:35,520 --> 00:20:37,559 basically just explain to me in in as529 00:20:37,559 --> 00:20:39,660 much detail or as little detail as you530 00:20:39,660 --> 00:20:41,039 want to531 00:20:41,039 --> 00:20:43,200 um the main thing the bank wants to see532 00:20:43,200 --> 00:20:44,940 if there's one thing the bank wants to533 00:20:44,940 --> 00:20:49,820 see what is it for borrowing capacity534 00:20:49,880 --> 00:20:51,840 honestly they just want to see that535 00:20:51,840 --> 00:20:55,080 there's a surplus like they they use536 00:20:55,080 --> 00:20:57,299 this their calculators and they're537 00:20:57,299 --> 00:20:58,620 working out538 00:20:58,620 --> 00:21:01,500 is there a debt servicing ratio is it is539 00:21:01,500 --> 00:21:05,580 it meeting that so ultimately if we can540 00:21:05,580 --> 00:21:08,700 show a pass like a green tick versus a541 00:21:08,700 --> 00:21:11,700 red that's what they want to see they542 00:21:11,700 --> 00:21:13,980 they usually will work with with us543 00:21:13,980 --> 00:21:17,580 broker to find a solution it's very rare544 00:21:17,580 --> 00:21:18,900 that they're going to look at it and say545 00:21:18,900 --> 00:21:21,780 sorry they can't afford it we're just546 00:21:21,780 --> 00:21:23,700 going to decline it they're actually547 00:21:23,700 --> 00:21:25,380 going to look and say okay what can we548 00:21:25,380 --> 00:21:27,840 do to get the income up549 00:21:27,840 --> 00:21:30,780 an example was you know yesterday I was550 00:21:30,780 --> 00:21:32,640 talking to a credit assessor from one of551 00:21:32,640 --> 00:21:36,000 the big Banks and a customer was552 00:21:36,000 --> 00:21:37,559 um you know getting a note they have a553 00:21:37,559 --> 00:21:40,860 novated list so this is if you have a554 00:21:40,860 --> 00:21:43,559 car loan and the employer pays for some555 00:21:43,559 --> 00:21:44,460 of that556 00:21:44,460 --> 00:21:45,720 um pre-tax557 00:21:45,720 --> 00:21:48,419 it's known as a fringe benefit558 00:21:48,419 --> 00:21:51,179 um the way a bank treats that even that559 00:21:51,179 --> 00:21:53,580 is different so this particular Bank I'm560 00:21:53,580 --> 00:21:55,919 not going to say which bank it is561 00:21:55,919 --> 00:21:59,580 um but this Bank wanted to include all562 00:21:59,580 --> 00:22:02,039 of the pre-tax deductions as a563 00:22:02,039 --> 00:22:03,840 commitment so that means they're going564 00:22:03,840 --> 00:22:06,360 to deduct it from their income565 00:22:06,360 --> 00:22:09,419 even though some of that income566 00:22:09,419 --> 00:22:11,940 that deductions were going to to the567 00:22:11,940 --> 00:22:14,820 customer to let them spend on the568 00:22:14,820 --> 00:22:16,919 mortgage so as essentially tax-free569 00:22:16,919 --> 00:22:19,320 income but that's the bank's policy I570 00:22:19,320 --> 00:22:21,059 said we have to deduct that include that571 00:22:21,059 --> 00:22:23,580 as the financial commitment but the car572 00:22:23,580 --> 00:22:25,440 loan was really the only financial573 00:22:25,440 --> 00:22:28,460 equipment and that was only574 00:22:28,460 --> 00:22:33,120 600 no 770 a month that's the car loan575 00:22:33,120 --> 00:22:34,980 portion the finance lease576 00:22:34,980 --> 00:22:37,200 all the rest of it was maintenance right577 00:22:37,200 --> 00:22:39,360 they call it a fully maintained novated578 00:22:39,360 --> 00:22:40,320 lease579 00:22:40,320 --> 00:22:42,720 so they were essentially doubling up580 00:22:42,720 --> 00:22:44,400 because they're accounting for the581 00:22:44,400 --> 00:22:46,740 expenses for the car in their monthly582 00:22:46,740 --> 00:22:48,840 living expenses which falls under the583 00:22:48,840 --> 00:22:51,260 Hem and we'll talk about the Hem shortly584 00:22:51,260 --> 00:22:54,299 and then they're wanting to double up by585 00:22:54,299 --> 00:22:55,500 deducting586 00:22:55,500 --> 00:22:57,360 um you know I think it was about587 00:22:57,360 --> 00:22:59,280 eight hundred dollars a fortnight in588 00:22:59,280 --> 00:23:01,140 total so that meant the deal doesn't589 00:23:01,140 --> 00:23:02,640 service anymore590 00:23:02,640 --> 00:23:04,080 but he didn't say sorry it doesn't591 00:23:04,080 --> 00:23:06,960 service the deal's decline he said to me592 00:23:06,960 --> 00:23:08,940 I noticed that under the mail applicant593 00:23:08,940 --> 00:23:11,400 he's getting some allowances which we594 00:23:11,400 --> 00:23:13,799 can use for serviceability can you get595 00:23:13,799 --> 00:23:15,720 me the next payslip the consecutive596 00:23:15,720 --> 00:23:18,299 payslip so he's now looking for a597 00:23:18,299 --> 00:23:21,600 solution with me to get more income to598 00:23:21,600 --> 00:23:24,240 show that it actually services so that's599 00:23:24,240 --> 00:23:26,280 the overarching thing that A bank's600 00:23:26,280 --> 00:23:28,860 always going to look if if it takes of601 00:23:28,860 --> 00:23:30,659 course you know your credit history has602 00:23:30,659 --> 00:23:32,880 got to be clean you know your employment603 00:23:32,880 --> 00:23:35,400 has got to be pretty consistent and all604 00:23:35,400 --> 00:23:37,559 of that but overarching it needs to605 00:23:37,559 --> 00:23:40,080 service and if it shows a past and we606 00:23:40,080 --> 00:23:41,640 can find a way for it to pass607 00:23:41,640 --> 00:23:43,980 that deal is going to get approved yeah608 00:23:43,980 --> 00:23:45,840 right that's really interesting so what609 00:23:45,840 --> 00:23:48,600 about security like say I have like you610 00:23:48,600 --> 00:23:49,919 know 10 properties that are all611 00:23:49,919 --> 00:23:52,140 unencumbered and I'll get you to explain612 00:23:52,140 --> 00:23:54,120 what unencumbered means for you know the613 00:23:54,120 --> 00:23:56,460 people who are new to investing but say614 00:23:56,460 --> 00:23:59,220 I have um 10 unencumbered properties and615 00:23:59,220 --> 00:24:01,559 my servicing is a bit iffy it's like you616 00:24:01,559 --> 00:24:04,140 know I'm basically on a line because I617 00:24:04,140 --> 00:24:06,299 can securitize and give them security618 00:24:06,299 --> 00:24:08,640 over those assets does that make any619 00:24:08,640 --> 00:24:11,760 difference in my in my application620 00:24:11,760 --> 00:24:13,620 yeah I'm glad you asked that question621 00:24:13,620 --> 00:24:15,659 because there's a misconception out622 00:24:15,659 --> 00:24:18,299 there that people think that by having623 00:24:18,299 --> 00:24:21,539 more assets that they can borrow more624 00:24:21,539 --> 00:24:23,280 so there's two things that bank's going625 00:24:23,280 --> 00:24:25,919 to look for when calculating your your626 00:24:25,919 --> 00:24:28,320 your ability to borrow one is the627 00:24:28,320 --> 00:24:30,120 security which is what we talked about628 00:24:30,120 --> 00:24:32,580 how much of your asset so they can use629 00:24:32,580 --> 00:24:34,580 as collateral or security they can630 00:24:34,580 --> 00:24:37,380 basically means they can sell off and631 00:24:37,380 --> 00:24:39,600 gives them Comfort to lend you more632 00:24:39,600 --> 00:24:40,320 money633 00:24:40,320 --> 00:24:42,780 but that is not based on how much you634 00:24:42,780 --> 00:24:43,860 can borrow that's your borrowing635 00:24:43,860 --> 00:24:46,200 capacity your borrowing capacity will636 00:24:46,200 --> 00:24:49,260 only come out from income higher income637 00:24:49,260 --> 00:24:51,419 less expenses that's what's going to638 00:24:51,419 --> 00:24:53,220 increase your borrowing capacity so you639 00:24:53,220 --> 00:24:55,200 can literally be asset rich640 00:24:55,200 --> 00:24:57,539 be full of properties all unencumbered641 00:24:57,539 --> 00:24:59,039 and unencumber just means that there's642 00:24:59,039 --> 00:25:02,940 no mortgage there's no encumbrances or643 00:25:02,940 --> 00:25:05,520 interests on the property so it's you644 00:25:05,520 --> 00:25:08,580 know debt free essentially you can be645 00:25:08,580 --> 00:25:10,080 sitting on millions of dollars of of646 00:25:10,080 --> 00:25:12,120 assets if you've got no one living in647 00:25:12,120 --> 00:25:15,120 them no rental income right so you just648 00:25:15,120 --> 00:25:16,740 said you can be sitting on cash right649 00:25:16,740 --> 00:25:19,140 million dollars in Cash A bank's not650 00:25:19,140 --> 00:25:21,539 going to give you a loan for 30 years651 00:25:21,539 --> 00:25:24,059 which is a normal loan term because652 00:25:24,059 --> 00:25:26,640 you've got no income to service it you653 00:25:26,640 --> 00:25:27,840 could say hey I've got a million dollars654 00:25:27,840 --> 00:25:29,760 in cash that million dollars is going to655 00:25:29,760 --> 00:25:31,440 service my debt but that's not how they656 00:25:31,440 --> 00:25:33,059 look at it because they've got no657 00:25:33,059 --> 00:25:34,620 control over that it's not recurring658 00:25:34,620 --> 00:25:36,900 income every time you withdraw the659 00:25:36,900 --> 00:25:39,179 balance goes down you can decide in a660 00:25:39,179 --> 00:25:40,500 moment I want to go gamble I'm gonna go661 00:25:40,500 --> 00:25:42,779 buy a yacht or whatever and it's not662 00:25:42,779 --> 00:25:44,640 income generating so now all of a sudden663 00:25:44,640 --> 00:25:46,799 you've got no income to service the loan664 00:25:46,799 --> 00:25:48,779 that you're applying for so they will665 00:25:48,779 --> 00:25:52,380 always look for recurring income and my666 00:25:52,380 --> 00:25:54,240 suggestion in that scenario would be667 00:25:54,240 --> 00:25:57,059 rental income you know how do you668 00:25:57,059 --> 00:25:58,799 increase the rental income across your669 00:25:58,799 --> 00:26:00,960 portfolios to boost your borrowing670 00:26:00,960 --> 00:26:02,279 capacity671 00:26:02,279 --> 00:26:03,480 um that's going to help you borrowable672 00:26:03,480 --> 00:26:05,760 not the actual value of the assets673 00:26:05,760 --> 00:26:07,260 itself674 00:26:07,260 --> 00:26:09,000 yeah that's super interesting because675 00:26:09,000 --> 00:26:11,220 like you obviously hear all the time you676 00:26:11,220 --> 00:26:13,919 know people are asset rich and and cash677 00:26:13,919 --> 00:26:18,360 poor income yeah income poor so like if678 00:26:18,360 --> 00:26:19,860 I if you have a million dollars in the679 00:26:19,860 --> 00:26:21,059 bank680 00:26:21,059 --> 00:26:23,940 um it to the to the actual bank it that681 00:26:23,940 --> 00:26:25,620 doesn't mean anything for you know your682 00:26:25,620 --> 00:26:27,539 actual serviceability because it's not683 00:26:27,539 --> 00:26:30,299 it's not recurring income so are you684 00:26:30,299 --> 00:26:32,880 like better off putting in this in like685 00:26:32,880 --> 00:26:34,980 um some client kind of fully Frank686 00:26:34,980 --> 00:26:36,539 shares where you know you're going to be687 00:26:36,539 --> 00:26:38,460 getting some dividend back from this688 00:26:38,460 --> 00:26:39,419 share689 00:26:39,419 --> 00:26:41,520 um every single you know month or or690 00:26:41,520 --> 00:26:42,720 quarter691 00:26:42,720 --> 00:26:44,039 um and then that could be your income692 00:26:44,039 --> 00:26:45,720 for servicing even though it's the same693 00:26:45,720 --> 00:26:48,059 million bucks which that that's way more694 00:26:48,059 --> 00:26:50,100 risky doing it that way just to show695 00:26:50,100 --> 00:26:53,179 reoccurring income696 00:26:53,220 --> 00:26:55,980 well if you're putting it in some sort697 00:26:55,980 --> 00:26:58,620 of sort of managed fund or or a share698 00:26:58,620 --> 00:27:00,960 portfolio where you receive dividends699 00:27:00,960 --> 00:27:03,539 and that's recurring income well then700 00:27:03,539 --> 00:27:06,840 it's actually less risky because701 00:27:06,840 --> 00:27:09,059 it's it the value shouldn't be going702 00:27:09,059 --> 00:27:12,020 downwards right703 00:27:12,620 --> 00:27:15,659 now then yes it is riskier because then704 00:27:15,659 --> 00:27:18,419 the income drops but the fact that it's705 00:27:18,419 --> 00:27:20,460 paying that it means it's a it's a706 00:27:20,460 --> 00:27:22,799 pretty strong uh you know share707 00:27:22,799 --> 00:27:25,740 portfolio I don't know if it's ASX you708 00:27:25,740 --> 00:27:27,960 know top 10 or something like that709 00:27:27,960 --> 00:27:30,120 because typically you know companies710 00:27:30,120 --> 00:27:32,159 don't pay you dividends uh small711 00:27:32,159 --> 00:27:34,980 accounts smaller businesses so and712 00:27:34,980 --> 00:27:36,299 you're right that is something that713 00:27:36,299 --> 00:27:38,159 Banks look at they will actually look at714 00:27:38,159 --> 00:27:40,020 dividends that you receive on your on715 00:27:40,020 --> 00:27:41,400 your share portfolio and they will use716 00:27:41,400 --> 00:27:43,860 that income for servicing717 00:27:43,860 --> 00:27:46,260 but if it's all in cash and you're718 00:27:46,260 --> 00:27:48,659 getting you know money from the bank in719 00:27:48,659 --> 00:27:49,919 interest720 00:27:49,919 --> 00:27:51,539 they can even use that by the way but721 00:27:51,539 --> 00:27:54,000 let's face it it's not much yeah charge722 00:27:54,000 --> 00:27:55,200 you a lot but they don't give you much723 00:27:55,200 --> 00:27:57,380 expense724 00:27:57,380 --> 00:28:00,059 so in that in that instance because this725 00:28:00,059 --> 00:28:01,260 is actually really interesting because I726 00:28:01,260 --> 00:28:02,400 never really727 00:28:02,400 --> 00:28:04,320 um really thought about that in my mind728 00:28:04,320 --> 00:28:06,240 where if I just had the money729 00:28:06,240 --> 00:28:07,799 um you know I had money for the730 00:28:07,799 --> 00:28:09,779 servicing like a buffer731 00:28:09,779 --> 00:28:11,100 um that that wouldn't be taking into732 00:28:11,100 --> 00:28:13,140 account because I guess you know you and733 00:28:13,140 --> 00:28:14,880 I are both young we've always had734 00:28:14,880 --> 00:28:16,679 reoccurring income735 00:28:16,679 --> 00:28:18,240 um you know through work so it's never736 00:28:18,240 --> 00:28:19,679 been uh something that I would really737 00:28:19,679 --> 00:28:21,900 think about so in that instance where738 00:28:21,900 --> 00:28:23,580 someone's potentially a little bit older739 00:28:23,580 --> 00:28:25,620 they've done really well but they don't740 00:28:25,620 --> 00:28:27,539 have any reoccurring income and they've741 00:28:27,539 --> 00:28:28,919 just got cash in the bank because people742 00:28:28,919 --> 00:28:30,840 just do like to have cash in the bank743 00:28:30,840 --> 00:28:33,360 like they'll you know have all of their744 00:28:33,360 --> 00:28:35,279 all of their wealth in a bank account745 00:28:35,279 --> 00:28:36,720 for the rest of their life especially746 00:28:36,720 --> 00:28:39,419 they've just retired or just on on the747 00:28:39,419 --> 00:28:41,760 verge of retirement what's a good748 00:28:41,760 --> 00:28:44,700 strategy to be able to show the bank749 00:28:44,700 --> 00:28:47,460 that I've got this asset of money750 00:28:47,460 --> 00:28:49,740 um and it could be paid to me like do751 00:28:49,740 --> 00:28:52,320 they just go hey hey um you know hey752 00:28:52,320 --> 00:28:54,299 Victor I'll give you this million bucks753 00:28:54,299 --> 00:28:56,580 you just pay me every month to make they754 00:28:56,580 --> 00:28:58,679 look like I've got really sharing income755 00:28:58,679 --> 00:29:00,000 um you know and then that'll be good for756 00:29:00,000 --> 00:29:01,799 serviceability like that's almost sounds757 00:29:01,799 --> 00:29:04,500 like that's what they want to see758 00:29:04,500 --> 00:29:06,720 they do want to see it but they want to759 00:29:06,720 --> 00:29:09,120 see it where there's a demonstration of760 00:29:09,120 --> 00:29:11,580 some sort of History yeah it's not just761 00:29:11,580 --> 00:29:13,200 bank accounts and oh look at these762 00:29:13,200 --> 00:29:14,700 deposits they're going to say well where763 00:29:14,700 --> 00:29:16,200 are these deposits coming from and if764 00:29:16,200 --> 00:29:19,220 it's your mate door yes765 00:29:19,940 --> 00:29:22,559 you know if it's a genuine investment766 00:29:22,559 --> 00:29:24,299 that's paying you yeah a return they're767 00:29:24,299 --> 00:29:25,260 going to want to see the investment768 00:29:25,260 --> 00:29:26,600 summary it's not just your bank account769 00:29:26,600 --> 00:29:29,100 so you know they are wanting to see770 00:29:29,100 --> 00:29:31,140 income and the the question you're771 00:29:31,140 --> 00:29:33,299 talking about if someone at that age of772 00:29:33,299 --> 00:29:36,179 retired well should they be borrowing773 00:29:36,179 --> 00:29:38,760 money then right that's the question if774 00:29:38,760 --> 00:29:40,919 they're at retirement the bank's going775 00:29:40,919 --> 00:29:42,600 to say why am I lending the money if776 00:29:42,600 --> 00:29:43,799 they're no longer working you're no777 00:29:43,799 --> 00:29:45,179 longer making any income doesn't make778 00:29:45,179 --> 00:29:46,980 any sense but they want to be trying to779 00:29:46,980 --> 00:29:49,260 and interest they could be trying to780 00:29:49,260 --> 00:29:52,080 invest to get the income for to you know781 00:29:52,080 --> 00:29:54,240 to give themselves more opportunity782 00:29:54,240 --> 00:29:55,860 later on in life and have the income783 00:29:55,860 --> 00:29:58,020 paying for themselves like I'm always784 00:29:58,020 --> 00:30:00,000 talking about you know I'm talking about785 00:30:00,000 --> 00:30:01,500 investing in commercial property and786 00:30:01,500 --> 00:30:03,659 having positive income coming in it's787 00:30:03,659 --> 00:30:05,399 not this is not a negative um you know788 00:30:05,399 --> 00:30:07,200 negative play789 00:30:07,200 --> 00:30:08,520 um yeah you know that's just really790 00:30:08,520 --> 00:30:10,799 interesting I just um it's just a good791 00:30:10,799 --> 00:30:12,720 example yeah well you just said792 00:30:12,720 --> 00:30:14,460 commercial property if you're saying a793 00:30:14,460 --> 00:30:15,720 million dollars buy a commercial794 00:30:15,720 --> 00:30:17,220 property you know there's no Financial795 00:30:17,220 --> 00:30:19,559 advice here but that would generate the796 00:30:19,559 --> 00:30:23,059 income yeah 65 yeah797 00:30:23,059 --> 00:30:25,799 right yeah and now all of a sudden798 00:30:25,799 --> 00:30:27,840 you've got income that you can use to799 00:30:27,840 --> 00:30:30,240 help the leverage and and borrow money800 00:30:30,240 --> 00:30:31,860 of course if that million was everything801 00:30:31,860 --> 00:30:34,740 now you've got no security yeah um and802 00:30:34,740 --> 00:30:36,600 that property has already been oh then803 00:30:36,600 --> 00:30:37,919 again you could use that property of804 00:30:37,919 --> 00:30:39,480 security as well yeah keep that in mind805 00:30:39,480 --> 00:30:41,460 right yeah you have an unencumbered806 00:30:41,460 --> 00:30:43,080 property earning you the income now you807 00:30:43,080 --> 00:30:44,880 can put that property as security and808 00:30:44,880 --> 00:30:46,980 use that to borrow more money to buy809 00:30:46,980 --> 00:30:49,260 something else so that's that's how you810 00:30:49,260 --> 00:30:51,779 do I like it so you can recycle you buy811 00:30:51,779 --> 00:30:53,940 that property with cash then you recycle812 00:30:53,940 --> 00:30:55,500 the debt out of that to buy more813 00:30:55,500 --> 00:30:57,000 property and you can use the income from814 00:30:57,000 --> 00:30:59,520 that property to service the debt on815 00:30:59,520 --> 00:31:01,380 Future Property yeah that's how it's816 00:31:01,380 --> 00:31:02,880 that's definitely how it should be done817 00:31:02,880 --> 00:31:05,039 yeah that's good I like that I was818 00:31:05,039 --> 00:31:06,539 literally having a conversation with819 00:31:06,539 --> 00:31:09,000 with someone yesterday about this who's820 00:31:09,000 --> 00:31:10,440 got the cash821 00:31:10,440 --> 00:31:12,840 um sitting in the account and they they822 00:31:12,840 --> 00:31:17,360 want to buy uh a ppor at home right823 00:31:17,360 --> 00:31:21,299 non-deductible debt right uh it's not824 00:31:21,299 --> 00:31:23,880 income generating but he wants to buy it825 00:31:23,880 --> 00:31:25,020 for their family826 00:31:25,020 --> 00:31:27,899 but he's got seven hundred thousand827 00:31:27,899 --> 00:31:30,360 dollars you know him and his and his828 00:31:30,360 --> 00:31:31,919 wife and they're going to use that as a829 00:31:31,919 --> 00:31:34,500 deposit and the lvr on the property830 00:31:34,500 --> 00:31:37,080 they're buying is going to be about831 00:31:37,080 --> 00:31:39,840 60 thereabouts832 00:31:39,840 --> 00:31:42,360 so he could technically they could buy833 00:31:42,360 --> 00:31:43,500 this home834 00:31:43,500 --> 00:31:48,179 borrow a 60 contribute 40 and then835 00:31:48,179 --> 00:31:50,940 go to the bank in the future836 00:31:50,940 --> 00:31:53,279 pretty soon if they want and re-borrow837 00:31:53,279 --> 00:31:55,860 the equity that they've just chipped in838 00:31:55,860 --> 00:31:57,120 with their cash839 00:31:57,120 --> 00:32:00,840 add the deposit and use that to buy an840 00:32:00,840 --> 00:32:02,340 investment property now the interest841 00:32:02,340 --> 00:32:04,020 that they're going to pay on that is tax842 00:32:04,020 --> 00:32:06,659 deductible so if they had done it the843 00:32:06,659 --> 00:32:07,620 other way844 00:32:07,620 --> 00:32:09,899 and just put the cash straight as a845 00:32:09,899 --> 00:32:12,840 deposit on an investment property yes846 00:32:12,840 --> 00:32:15,600 they would have stronger cash flow847 00:32:15,600 --> 00:32:17,700 but they wouldn't be able to claim any848 00:32:17,700 --> 00:32:19,200 interest because there's no interest to849 00:32:19,200 --> 00:32:20,940 claim and they wouldn't have a home850 00:32:20,940 --> 00:32:24,120 either so so this is a strategy because851 00:32:24,120 --> 00:32:25,500 if you think about if you trace the852 00:32:25,500 --> 00:32:27,360 money all they're using is their own853 00:32:27,360 --> 00:32:28,919 money right they're just putting it into854 00:32:28,919 --> 00:32:30,840 a property first and then they're855 00:32:30,840 --> 00:32:33,600 Recycling and taking it back out for an856 00:32:33,600 --> 00:32:36,539 investment purpose857 00:32:36,539 --> 00:32:39,419 so you know that that happens every day858 00:32:39,419 --> 00:32:42,419 of the week just knowing timing and you859 00:32:42,419 --> 00:32:43,440 know you've got to know your personal860 00:32:43,440 --> 00:32:46,500 objectives and you'll be 100 yeah that's861 00:32:46,500 --> 00:32:49,500 really interesting so with the bank862 00:32:49,500 --> 00:32:50,940 um this is an actual interest one I know863 00:32:50,940 --> 00:32:52,380 you and I have had a few864 00:32:52,380 --> 00:32:54,000 um you know offline conversations about865 00:32:54,000 --> 00:32:55,679 this because Victor's doing uh some866 00:32:55,679 --> 00:32:57,659 range refinancing for me867 00:32:57,659 --> 00:33:00,539 um in my own personal finances so I868 00:33:00,539 --> 00:33:01,620 wanted to869 00:33:01,620 --> 00:33:02,880 um talk about this because this is870 00:33:02,880 --> 00:33:04,200 really interesting I don't think that871 00:33:04,200 --> 00:33:04,919 people872 00:33:04,919 --> 00:33:06,840 um really understand or know about this873 00:33:06,840 --> 00:33:09,720 it's about um if uh you can demonstrate874 00:33:09,720 --> 00:33:11,399 a business plan875 00:33:11,399 --> 00:33:13,679 um and you can forecast the the cash876 00:33:13,679 --> 00:33:16,799 flow from that business will the bank877 00:33:16,799 --> 00:33:20,899 lend on that particular forecast878 00:33:21,539 --> 00:33:23,700 so879 00:33:23,700 --> 00:33:25,799 this is a yeah it's a good question880 00:33:25,799 --> 00:33:30,659 because it it's only it's very specific881 00:33:30,659 --> 00:33:33,299 when you're talking about an investor it882 00:33:33,299 --> 00:33:35,760 doesn't work an investor883 00:33:35,760 --> 00:33:38,100 will get rental income884 00:33:38,100 --> 00:33:41,279 but if you're an owner occupier885 00:33:41,279 --> 00:33:43,140 so it means you're going to operate a886 00:33:43,140 --> 00:33:45,720 business out of that property887 00:33:45,720 --> 00:33:49,760 then yes you could potentially use888 00:33:49,760 --> 00:33:52,260 forecasted or projected income along889 00:33:52,260 --> 00:33:54,899 with a business plan so it's definitely890 00:33:54,899 --> 00:33:56,640 considered commercial lending not891 00:33:56,640 --> 00:33:59,700 residential it falls outside of the892 00:33:59,700 --> 00:34:02,159 consumer credit protection and apra893 00:34:02,159 --> 00:34:03,480 regulations894 00:34:03,480 --> 00:34:06,019 because they'll only look at historical895 00:34:06,019 --> 00:34:09,119 income and net profit but if you're896 00:34:09,119 --> 00:34:11,099 looking at commercial lending in your897 00:34:11,099 --> 00:34:12,418 your business898 00:34:12,418 --> 00:34:15,418 then yeah definitely a bank can look at899 00:34:15,418 --> 00:34:18,719 forecasted revenue and income and profit900 00:34:18,719 --> 00:34:21,780 to help you borrow to even acquire a901 00:34:21,780 --> 00:34:24,119 business in the first place but you902 00:34:24,119 --> 00:34:25,619 still need security that's something you903 00:34:25,619 --> 00:34:26,760 got to keep in mind because a lot of904 00:34:26,760 --> 00:34:28,619 people have that idea and they're like I905 00:34:28,619 --> 00:34:31,560 want to buy an established business and906 00:34:31,560 --> 00:34:34,080 um you know improve it and earn more907 00:34:34,080 --> 00:34:36,480 money from it and then borrow money to908 00:34:36,480 --> 00:34:37,800 buy their business from that future909 00:34:37,800 --> 00:34:39,659 income I'm going to create910 00:34:39,659 --> 00:34:42,300 but if you don't have a property911 00:34:42,300 --> 00:34:44,879 there's no skin in the game so it's very912 00:34:44,879 --> 00:34:46,320 risky for the bank it's considered913 00:34:46,320 --> 00:34:47,760 unsecured Lending914 00:34:47,760 --> 00:34:51,418 and you know I have done one before but915 00:34:51,418 --> 00:34:55,020 it was it was very Niche and it was the916 00:34:55,020 --> 00:34:58,320 bank required at least a 50 deposit so917 00:34:58,320 --> 00:35:00,599 they were willing to fund the other half918 00:35:00,599 --> 00:35:04,140 so it was a 600 Grand purchase price of919 00:35:04,140 --> 00:35:05,160 a business920 00:35:05,160 --> 00:35:08,520 uh they looked at the at the income and921 00:35:08,520 --> 00:35:10,500 then they also looked at the forecasted922 00:35:10,500 --> 00:35:11,839 income923 00:35:11,839 --> 00:35:15,660 uh you know profit and a business plan924 00:35:15,660 --> 00:35:18,839 that this new buyer was going to or new925 00:35:18,839 --> 00:35:21,359 owner was going to turn it into but then926 00:35:21,359 --> 00:35:22,980 because they didn't have any property to927 00:35:22,980 --> 00:35:24,359 put a security928 00:35:24,359 --> 00:35:28,920 they uh they wanted at least 50 down so929 00:35:28,920 --> 00:35:30,960 that's six hundred thousand they930 00:35:30,960 --> 00:35:34,560 borrowed 300 and they contributed 300.931 00:35:34,560 --> 00:35:36,780 so you can't do them that way but if932 00:35:36,780 --> 00:35:38,760 you've got property that's got a lot of933 00:35:38,760 --> 00:35:40,079 equity934 00:35:40,079 --> 00:35:42,180 that's really a good opportunity for you935 00:35:42,180 --> 00:35:43,560 to do something like936 00:35:43,560 --> 00:35:45,599 yeah you can use that property as the937 00:35:45,599 --> 00:35:49,320 security and and use the future income938 00:35:49,320 --> 00:35:53,339 and and to start business basically yeah939 00:35:53,339 --> 00:35:56,160 so yeah well with a with a startup so940 00:35:56,160 --> 00:35:58,920 say I have a business venture or I have941 00:35:58,920 --> 00:36:01,560 a business idea and you know obviously I942 00:36:01,560 --> 00:36:03,540 can demonstrate that you know either I943 00:36:03,540 --> 00:36:05,640 have knowledge in that industry or you944 00:36:05,640 --> 00:36:07,079 know I have some experience in the945 00:36:07,079 --> 00:36:08,280 industry946 00:36:08,280 --> 00:36:11,640 um is it is it usual or like a common947 00:36:11,640 --> 00:36:14,760 practice for a bank certain Banks to948 00:36:14,760 --> 00:36:17,700 lend on that forecasted business plan949 00:36:17,700 --> 00:36:19,380 for you and maybe they can you don't950 00:36:19,380 --> 00:36:21,180 have any property maybe they can951 00:36:21,180 --> 00:36:22,380 securitize952 00:36:22,380 --> 00:36:23,940 um you know the lease like if you have a953 00:36:23,940 --> 00:36:25,200 10-year lease or something on it like954 00:36:25,200 --> 00:36:26,040 that955 00:36:26,040 --> 00:36:29,820 um is that common practice to happen956 00:36:29,820 --> 00:36:33,660 no they're gonna they're gonna want to957 00:36:33,660 --> 00:36:34,560 um958 00:36:34,560 --> 00:36:35,820 they're going to want to take some959 00:36:35,820 --> 00:36:39,000 security over it so it depends on the960 00:36:39,000 --> 00:36:41,880 amount you're after as well so banks are961 00:36:41,880 --> 00:36:43,800 willing to do some unsecured lending962 00:36:43,800 --> 00:36:46,079 there's no no problem with that they're963 00:36:46,079 --> 00:36:48,240 willing to but if you need if you're964 00:36:48,240 --> 00:36:51,000 buying a business or you need to borrow965 00:36:51,000 --> 00:36:54,780 enough to cover all the costs to set966 00:36:54,780 --> 00:36:56,880 that business up and you've got no967 00:36:56,880 --> 00:37:00,119 property just the forecast and alone in968 00:37:00,119 --> 00:37:01,380 a business plan is not going to get you969 00:37:01,380 --> 00:37:03,060 the whole amount there's not enough in970 00:37:03,060 --> 00:37:04,680 that there's not there's still too much971 00:37:04,680 --> 00:37:07,700 risk you know experience in Industry972 00:37:07,700 --> 00:37:10,380 definitely adds to that973 00:37:10,380 --> 00:37:12,780 but they want they want some collection974 00:37:12,780 --> 00:37:15,300 and if you're975 00:37:15,300 --> 00:37:17,400 um you know if you've got976 00:37:17,400 --> 00:37:20,940 chattels or some sort of assets like977 00:37:20,940 --> 00:37:23,040 um vehicles or Machinery something like978 00:37:23,040 --> 00:37:25,020 that they'll look at that as security979 00:37:25,020 --> 00:37:26,940 that helps them too even though it's not980 00:37:26,940 --> 00:37:28,980 it's a depreciate depreciated asset that981 00:37:28,980 --> 00:37:31,260 helps them but if it's if it's literally982 00:37:31,260 --> 00:37:34,079 nothing else digital assets there's no983 00:37:34,079 --> 00:37:37,680 the only security they get is a is um a984 00:37:37,680 --> 00:37:39,720 security a GSA985 00:37:39,720 --> 00:37:41,520 um which is a general security agreement986 00:37:41,520 --> 00:37:43,440 over the actual trading business itself987 00:37:43,440 --> 00:37:45,780 for future income that it can generate988 00:37:45,780 --> 00:37:47,520 but that that doesn't really mean989 00:37:47,520 --> 00:37:48,599 anything because if it doesn't make any990 00:37:48,599 --> 00:37:49,859 money they get nothing991 00:37:49,859 --> 00:37:51,300 so there's nothing that they can992 00:37:51,300 --> 00:37:53,520 immediately sell no stock there's993 00:37:53,520 --> 00:37:55,260 nothing they have control over to sell994 00:37:55,260 --> 00:37:57,540 to pay back the bad debt if you don't995 00:37:57,540 --> 00:37:59,339 make your repayments that's what they996 00:37:59,339 --> 00:38:01,980 look for so you know good example was997 00:38:01,980 --> 00:38:03,900 myself a few years ago I set up a998 00:38:03,900 --> 00:38:06,420 business a mortgage broker business it999 00:38:06,420 --> 00:38:08,400 didn't go well failed actually the first1000 00:38:08,400 --> 00:38:10,320 one my first attempt but I had a1001 00:38:10,320 --> 00:38:13,260 property and one of the banks was able1002 00:38:13,260 --> 00:38:16,380 to refinance my existing residential low1003 00:38:16,380 --> 00:38:19,500 and work off forecasted income1004 00:38:19,500 --> 00:38:22,140 to serviced alone and they gave me a1005 00:38:22,140 --> 00:38:25,619 startup overdraft of like 60 Grand and a1006 00:38:25,619 --> 00:38:27,380 business credit card1007 00:38:27,380 --> 00:38:31,140 well I had industry experience but I1008 00:38:31,140 --> 00:38:33,180 didn't have business experience so I1009 00:38:33,180 --> 00:38:36,660 made some mistakes and I ended up using1010 00:38:36,660 --> 00:38:38,040 all that money and not getting a return1011 00:38:38,040 --> 00:38:40,920 on it uh immediately so I ended up1012 00:38:40,920 --> 00:38:42,960 making my own decision to sell that1013 00:38:42,960 --> 00:38:44,820 property to clear the debt they didn't1014 00:38:44,820 --> 00:38:47,880 enforce that but they could have if I1015 00:38:47,880 --> 00:38:49,020 let the loan1016 00:38:49,020 --> 00:38:52,079 you know go into arrears and get you1017 00:38:52,079 --> 00:38:53,880 know into bad debt they could have sold1018 00:38:53,880 --> 00:38:55,740 my property and cleared it and then I1019 00:38:55,740 --> 00:38:57,180 would have got whatever was left after1020 00:38:57,180 --> 00:38:59,339 legal legal cost and I would have had1021 00:38:59,339 --> 00:39:00,540 bad credit1022 00:39:00,540 --> 00:39:04,020 so you know it can be a risky game that1023 00:39:04,020 --> 00:39:06,300 was a perfect example they took their1024 00:39:06,300 --> 00:39:07,740 risk but they had the property so1025 00:39:07,740 --> 00:39:09,420 they'll happily give me the money1026 00:39:09,420 --> 00:39:11,099 I took the risk didn't have the1027 00:39:11,099 --> 00:39:13,260 experience but I made that decision and1028 00:39:13,260 --> 00:39:15,180 it's time to get out and clear the debt1029 00:39:15,180 --> 00:39:17,760 so you know people out there they want1030 00:39:17,760 --> 00:39:21,060 to do some risky stuff too but1031 00:39:21,060 --> 00:39:23,220 if they've got no property or no big1032 00:39:23,220 --> 00:39:25,320 cash to chip in don't expect that A1033 00:39:25,320 --> 00:39:26,460 bank's going to lend you all the money1034 00:39:26,460 --> 00:39:28,200 it just doesn't happen this day yeah1035 00:39:28,200 --> 00:39:31,020 yeah that's right now I bet um just from1036 00:39:31,020 --> 00:39:33,240 that that failed Adventure or that first1037 00:39:33,240 --> 00:39:34,320 try1038 00:39:34,320 --> 00:39:36,660 um You probably learned so many lessons1039 00:39:36,660 --> 00:39:39,000 so you basically paid for you know your1040 00:39:39,000 --> 00:39:41,400 education into how to how things are run1041 00:39:41,400 --> 00:39:44,280 and how you know things should and the1042 00:39:44,280 --> 00:39:46,020 processes and things like that and1043 00:39:46,020 --> 00:39:47,700 that's why you've got a flourishing you1044 00:39:47,700 --> 00:39:49,980 know mortgage broking business now from1045 00:39:49,980 --> 00:39:51,420 that first mistake because you learn so1046 00:39:51,420 --> 00:39:53,520 much from your mistakes like if you1047 00:39:53,520 --> 00:39:55,740 hadn't had success straight away1048 00:39:55,740 --> 00:39:58,560 um success isn't a great teacher failure1049 00:39:58,560 --> 00:40:01,619 is the true like the great teacher1050 00:40:01,619 --> 00:40:04,079 yeah yeah and and you know the word1051 00:40:04,079 --> 00:40:07,020 failure you know the truth is you don't1052 00:40:07,020 --> 00:40:10,500 really truly fail unless you give up1053 00:40:10,500 --> 00:40:13,079 unless you quit yeah yeah unless you1054 00:40:13,079 --> 00:40:14,700 quit unless you're fully out of the game1055 00:40:14,700 --> 00:40:17,099 but if you're around in the lesson I1056 00:40:17,099 --> 00:40:18,839 give you you know if you're going1057 00:40:18,839 --> 00:40:20,940 through the experience and you learn1058 00:40:20,940 --> 00:40:23,099 through those experiences you keep going1059 00:40:23,099 --> 00:40:25,020 and that's what happened with me so1060 00:40:25,020 --> 00:40:26,579 you're right I'm in a much different1061 00:40:26,579 --> 00:40:28,560 position now and and there's just an1062 00:40:28,560 --> 00:40:31,079 expensive lesson yeah yeah that's it I1063 00:40:31,079 --> 00:40:34,020 had a few expensive lessons myself1064 00:40:34,020 --> 00:40:34,880 foreign1065 00:40:34,880 --> 00:40:37,260 another one I wanted to actually talk1066 00:40:37,260 --> 00:40:39,000 about which is something that you and I1067 00:40:39,000 --> 00:40:41,880 have also spoken about is how you have1068 00:40:41,880 --> 00:40:44,700 to have your accountant on board with1069 00:40:44,700 --> 00:40:46,859 your property plan and this has bit me1070 00:40:46,859 --> 00:40:49,800 in the ass just recently and I wanted to1071 00:40:49,800 --> 00:40:52,980 basically let you talk about how the1072 00:40:52,980 --> 00:40:54,900 accountant really needs to be working1073 00:40:54,900 --> 00:40:57,119 with you on your team and potentially1074 00:40:57,119 --> 00:40:58,920 even be connected you know with the1075 00:40:58,920 --> 00:41:00,839 mortgage broker you know on your team to1076 00:41:00,839 --> 00:41:05,060 make sure the goals are aligned1077 00:41:05,099 --> 00:41:07,859 yeah it's super important because an1078 00:41:07,859 --> 00:41:10,320 accountant you know they some of them1079 00:41:10,320 --> 00:41:12,180 are not really1080 00:41:12,180 --> 00:41:13,740 um1081 00:41:13,740 --> 00:41:16,619 properly focused some of them don't own1082 00:41:16,619 --> 00:41:18,359 property they don't understand property1083 00:41:18,359 --> 00:41:19,920 and they don't try to help customers1084 00:41:19,920 --> 00:41:22,140 build the property portfolio some of1085 00:41:22,140 --> 00:41:24,359 them do some of them understand the1086 00:41:24,359 --> 00:41:26,280 limitations of borrowing capacity they1087 00:41:26,280 --> 00:41:27,540 understand that you're going to need to1088 00:41:27,540 --> 00:41:31,680 be sometimes creative uh to you know1089 00:41:31,680 --> 00:41:34,560 have a balance of tax reduction as well1090 00:41:34,560 --> 00:41:37,500 as you know borrowing capacity you know1091 00:41:37,500 --> 00:41:39,720 Improvement so working with the right1092 00:41:39,720 --> 00:41:42,420 encounter who gets that is going to help1093 00:41:42,420 --> 00:41:44,579 you along the way along the journey and1094 00:41:44,579 --> 00:41:45,839 it's going to be times where you need1095 00:41:45,839 --> 00:41:47,460 them to write up letters and1096 00:41:47,460 --> 00:41:50,040 declarations for you when you hit your1097 00:41:50,040 --> 00:41:51,660 ceilings of borrowing capacity and then1098 00:41:51,660 --> 00:41:54,240 you end up going to a non-bank do like1099 00:41:54,240 --> 00:41:56,339 an ALT doc or a low document so having1100 00:41:56,339 --> 00:41:58,380 the right account is super important to1101 00:41:58,380 --> 00:42:00,660 have an attempt and you know sometimes1102 00:42:00,660 --> 00:42:01,920 you have to let go of the old account1103 00:42:01,920 --> 00:42:04,859 the whole family account all the old h r1104 00:42:04,859 --> 00:42:07,260 block around the corner to uh to upgrade1105 00:42:07,260 --> 00:42:09,000 the team1106 00:42:09,000 --> 00:42:12,359 so just explain to me how an accountant1107 00:42:12,359 --> 00:42:16,760 can screw up your borrowing capacity1108 00:42:18,119 --> 00:42:19,920 um well I guess they can1109 00:42:19,920 --> 00:42:23,040 you know bring down your taxable income1110 00:42:23,040 --> 00:42:25,680 so low that there's nothing left to help1111 00:42:25,680 --> 00:42:27,359 you borrow so in their in their mind1112 00:42:27,359 --> 00:42:29,280 they're like I want to get you to pay1113 00:42:29,280 --> 00:42:31,859 less tax that's great but then when you1114 00:42:31,859 --> 00:42:33,180 want to go borrowed to buy a property1115 00:42:33,180 --> 00:42:34,980 there's no income left to borrow so1116 00:42:34,980 --> 00:42:37,020 that's how they can screw you they think1117 00:42:37,020 --> 00:42:38,820 they're helping you but they're actually1118 00:42:38,820 --> 00:42:42,359 hindering your your financial Journey1119 00:42:42,359 --> 00:42:45,000 yeah 100 and I've actually seen this a1120 00:42:45,000 --> 00:42:46,740 couple of times with um profit and1121 00:42:46,740 --> 00:42:49,500 losses on self-story facilities where1122 00:42:49,500 --> 00:42:52,260 the the operator obviously the Canton is1123 00:42:52,260 --> 00:42:54,480 working to minimize their tax like it's1124 00:42:54,480 --> 00:42:56,040 it's clearly obvious because you can see1125 00:42:56,040 --> 00:42:58,500 that the facility itself1126 00:42:58,500 --> 00:43:00,900 um has definitely a higher you know1127 00:43:00,900 --> 00:43:02,940 income but there are all like all these1128 00:43:02,940 --> 00:43:05,040 you know crazy things that he's been in1129 00:43:05,040 --> 00:43:07,020 charge he's taxing and deducting and1130 00:43:07,020 --> 00:43:08,640 things like that so it makes it look1131 00:43:08,640 --> 00:43:10,680 like at the end of the day he's earning1132 00:43:10,680 --> 00:43:13,560 such a small amount that you know it1133 00:43:13,560 --> 00:43:15,000 doesn't stack up when you're trying to1134 00:43:15,000 --> 00:43:17,040 to sell this property so like if you're1135 00:43:17,040 --> 00:43:19,140 owning a property or an asset like a1136 00:43:19,140 --> 00:43:21,000 self-story facility that you want to1137 00:43:21,000 --> 00:43:23,160 sell you have to prepare that like a1138 00:43:23,160 --> 00:43:24,780 year before1139 00:43:24,780 --> 00:43:26,099 um you know before you want to sell it1140 00:43:26,099 --> 00:43:27,420 because you've got profit and losses1141 00:43:27,420 --> 00:43:28,619 that are getting generated by your1142 00:43:28,619 --> 00:43:30,480 accountant it's a different Focus1143 00:43:30,480 --> 00:43:33,300 between them you know trying to save you1144 00:43:33,300 --> 00:43:37,140 money in in taxes to showing like1145 00:43:37,140 --> 00:43:38,760 um income from that property to get you1146 00:43:38,760 --> 00:43:41,280 the highest price for you know that sale1147 00:43:41,280 --> 00:43:43,020 so it's really important important to1148 00:43:43,020 --> 00:43:44,339 talk to these accountants and make sure1149 00:43:44,339 --> 00:43:46,079 they're doing that the objectives are1150 00:43:46,079 --> 00:43:47,760 the same or they're in line with your1151 00:43:47,760 --> 00:43:49,440 goals1152 00:43:49,440 --> 00:43:52,020 yeah exactly right and everyone knows1153 00:43:52,020 --> 00:43:54,180 someone in business it's always good to1154 00:43:54,180 --> 00:43:56,880 ask them who they use and why they work1155 00:43:56,880 --> 00:43:58,020 with their accountant that's how you1156 00:43:58,020 --> 00:44:00,180 just get the introduction and upgrade1157 00:44:00,180 --> 00:44:02,339 have the right conversations because1158 00:44:02,339 --> 00:44:04,020 that's what's going to help you get to1159 00:44:04,020 --> 00:44:05,819 the next stage whether it is for1160 00:44:05,819 --> 00:44:07,380 business or whether it's for property1161 00:44:07,380 --> 00:44:10,680 yeah 100 so mate can you just share a1162 00:44:10,680 --> 00:44:12,359 few actionable tips that maybe the1163 00:44:12,359 --> 00:44:15,119 listeners can can take away and you know1164 00:44:15,119 --> 00:44:17,819 use to potentially like increase their1165 00:44:17,819 --> 00:44:21,680 borrowing capacity somewhat quickly1166 00:44:22,020 --> 00:44:24,599 yeah so some of the immediate things1167 00:44:24,599 --> 00:44:27,060 they can do is actually to reduce their1168 00:44:27,060 --> 00:44:30,420 personal debts so if they can close1169 00:44:30,420 --> 00:44:32,280 their credit cards1170 00:44:32,280 --> 00:44:34,859 um if they can you know consolidate1171 00:44:34,859 --> 00:44:38,460 loans such as car loans or hex debt1172 00:44:38,460 --> 00:44:40,200 that's going to actually improve that1173 00:44:40,200 --> 00:44:43,020 straight away if they own property if1174 00:44:43,020 --> 00:44:44,880 they can increase the rent if they're1175 00:44:44,880 --> 00:44:46,380 outside of the lease they can increase1176 00:44:46,380 --> 00:44:48,660 the rent go ahead and do that it's going1177 00:44:48,660 --> 00:44:50,760 to improve your income if you've got1178 00:44:50,760 --> 00:44:53,040 existing loans that have got short terms1179 00:44:53,040 --> 00:44:55,640 10 years 15 years 20 years1180 00:44:55,640 --> 00:44:59,460 refinance them and reset the terms to 301181 00:44:59,460 --> 00:45:02,520 years having a longer term means yes1182 00:45:02,520 --> 00:45:03,960 you're going to pay more interest but1183 00:45:03,960 --> 00:45:05,160 you're increasing your borrowing1184 00:45:05,160 --> 00:45:07,500 capacity by doing that and then the1185 00:45:07,500 --> 00:45:08,460 other thing you can do is with your1186 00:45:08,460 --> 00:45:11,280 expenses is review them and talk to your1187 00:45:11,280 --> 00:45:13,380 mortgage broker who can tell you what1188 00:45:13,380 --> 00:45:16,740 the hemis hem for your household and1189 00:45:16,740 --> 00:45:18,960 bring your expenses in line with him so1190 00:45:18,960 --> 00:45:20,880 that way you're below that or in line1191 00:45:20,880 --> 00:45:22,380 with it so that way you're not above it1192 00:45:22,380 --> 00:45:24,180 that will increase your buying capacity1193 00:45:24,180 --> 00:45:25,859 and there's other things you can do1194 00:45:25,859 --> 00:45:29,099 which look I don't suggest to anyone to1195 00:45:29,099 --> 00:45:31,500 to underinsure yourself it's important1196 00:45:31,500 --> 00:45:33,839 to have the right insurances but just so1197 00:45:33,839 --> 00:45:34,980 you're aware1198 00:45:34,980 --> 00:45:38,160 uh life insurance and health insurance1199 00:45:38,160 --> 00:45:40,859 income protection all of that falls1200 00:45:40,859 --> 00:45:43,740 outside of him so if you're paying for1201 00:45:43,740 --> 00:45:45,540 all these insurances it's actually1202 00:45:45,540 --> 00:45:49,880 impacting your buying capacity and also1203 00:45:49,880 --> 00:45:52,980 private school fees so if you're paying1204 00:45:52,980 --> 00:45:54,660 for private school well I don't want to1205 00:45:54,660 --> 00:45:56,220 tell you what to do take your kids out1206 00:45:56,220 --> 00:45:58,380 of private put them into public but that1207 00:45:58,380 --> 00:46:00,420 can actually impact your buying quite a1208 00:46:00,420 --> 00:46:01,920 bit so those are things that you can do1209 00:46:01,920 --> 00:46:03,359 immediately that will that will boost1210 00:46:03,359 --> 00:46:05,579 your buying capacity and then obviously1211 00:46:05,579 --> 00:46:07,680 the most important one is you know get a1212 00:46:07,680 --> 00:46:10,200 payer answer so you can either ask your1213 00:46:10,200 --> 00:46:12,480 boss for a pay increase or a bonus1214 00:46:12,480 --> 00:46:14,220 that's going to help you and then if1215 00:46:14,220 --> 00:46:15,839 you're self-employed work with your1216 00:46:15,839 --> 00:46:18,000 accountant that can that can actually uh1217 00:46:18,000 --> 00:46:19,920 help you to you know show a bit more1218 00:46:19,920 --> 00:46:21,240 profit1219 00:46:21,240 --> 00:46:22,680 um you know that you can use for help1220 00:46:22,680 --> 00:46:25,319 you helping you borrow more yeah yeah1221 00:46:25,319 --> 00:46:28,500 that's interesting because on the um uh1222 00:46:28,500 --> 00:46:31,079 the term sheets or the um you know the1223 00:46:31,079 --> 00:46:33,599 in your portal that I filled out and you1224 00:46:33,599 --> 00:46:36,359 gave me the the output back and I'm1225 00:46:36,359 --> 00:46:38,040 doing some borrowing obviously with my1226 00:46:38,040 --> 00:46:40,619 fiance's involved as well and um she's1227 00:46:40,619 --> 00:46:43,500 got a 25 000 hex debt and like hex dad1228 00:46:43,500 --> 00:46:46,700 what the hell is this this isn't mine1229 00:46:46,700 --> 00:46:49,800 now I've got a 25 000 hex debt that's1230 00:46:49,800 --> 00:46:52,619 apparently like lumped with my you know1231 00:46:52,619 --> 00:46:54,420 my borrowing so I've got it we've got to1232 00:46:54,420 --> 00:46:55,740 take care of that1233 00:46:55,740 --> 00:46:57,599 um to get together in the same household1234 00:46:57,599 --> 00:47:00,000 right yeah this is um I didn't sign up1235 00:47:00,000 --> 00:47:03,020 for that you know1236 00:47:08,000 --> 00:47:11,280 yeah so when you're finding a partner1237 00:47:11,280 --> 00:47:12,839 make sure you've got to ask them about1238 00:47:12,839 --> 00:47:15,000 their hex debt what what hex debt do1239 00:47:15,000 --> 00:47:16,680 they have you know is it uh you know1240 00:47:16,680 --> 00:47:19,800 good or bad or ugly so um1241 00:47:19,800 --> 00:47:23,760 mate when what about like mistakes I1242 00:47:23,760 --> 00:47:25,319 want to know I'm sure you see a lot of1243 00:47:25,319 --> 00:47:27,540 mistakes that people make with you know1244 00:47:27,540 --> 00:47:30,060 putting in their their um applications1245 00:47:30,060 --> 00:47:32,940 or like mistakes with their Finance what1246 00:47:32,940 --> 00:47:34,920 are the really big you know ones that1247 00:47:34,920 --> 00:47:37,140 you've seen that maybe the listeners can1248 00:47:37,140 --> 00:47:39,180 avoid to help them you know not make1249 00:47:39,180 --> 00:47:40,319 that mistake and increase their1250 00:47:40,319 --> 00:47:42,839 borrowing capacity1251 00:47:42,839 --> 00:47:46,020 yeah it's um there's definitely a lot of1252 00:47:46,020 --> 00:47:48,060 mistakes that people can make I think1253 00:47:48,060 --> 00:47:50,579 talking to a broker is the number one1254 00:47:50,579 --> 00:47:52,319 thing that you can do rather than going1255 00:47:52,319 --> 00:47:54,599 to the bank and I think that's a mistake1256 00:47:54,599 --> 00:47:57,000 going to the bank well it's a mistake to1257 00:47:57,000 --> 00:47:59,160 go to the bank directly1258 00:47:59,160 --> 00:48:01,619 at times because1259 00:48:01,619 --> 00:48:05,060 what you say can't be unset right1260 00:48:05,060 --> 00:48:07,680 whereas talking to a broker will1261 00:48:07,680 --> 00:48:09,960 understand your situation and help you1262 00:48:09,960 --> 00:48:12,119 navigate it in a way that's going to1263 00:48:12,119 --> 00:48:13,980 allow you to achieve you achieve your1264 00:48:13,980 --> 00:48:17,160 objectives so it's typically somewhat1265 00:48:17,160 --> 00:48:19,319 confidential what you talk about1266 00:48:19,319 --> 00:48:20,760 um because at the end of the day you're1267 00:48:20,760 --> 00:48:22,560 trying to figure out a solution for each1268 00:48:22,560 --> 00:48:24,720 other so that would be I think a common1269 00:48:24,720 --> 00:48:27,480 mistake is you know providing way too1270 00:48:27,480 --> 00:48:29,640 much information up front directly to1271 00:48:29,640 --> 00:48:32,160 the bank yeah uh talk to your broker1272 00:48:32,160 --> 00:48:35,460 first to get a you know a more broader1273 00:48:35,460 --> 00:48:37,079 picture as to what's possible for your1274 00:48:37,079 --> 00:48:39,660 circumstances1275 00:48:39,660 --> 00:48:43,560 um another mistake would be uh debts so1276 00:48:43,560 --> 00:48:46,319 a lot of people don't talk about the1277 00:48:46,319 --> 00:48:47,579 fact that they had you know you talk1278 00:48:47,579 --> 00:48:49,859 about hex but you might have had some1279 00:48:49,859 --> 00:48:51,960 missed payments in the past or old1280 00:48:51,960 --> 00:48:53,460 default that you had on your credit file1281 00:48:53,460 --> 00:48:55,200 and you and you you know in the back of1282 00:48:55,200 --> 00:48:57,240 your mind it could still be there but1283 00:48:57,240 --> 00:49:01,020 you try to hide it or ignore it thinking1284 00:49:01,020 --> 00:49:02,579 that no one's going to find out about it1285 00:49:02,579 --> 00:49:05,099 and then you apply for the loan and you1286 00:49:05,099 --> 00:49:06,839 know everyone spends time getting it all1287 00:49:06,839 --> 00:49:09,060 together and then you find out later1288 00:49:09,060 --> 00:49:11,160 the bank finds out because they do their1289 00:49:11,160 --> 00:49:13,200 checks the the mortgage broker finds out1290 00:49:13,200 --> 00:49:14,700 but you knew deep down so that's a1291 00:49:14,700 --> 00:49:16,220 mistake I think you need to be1292 00:49:16,220 --> 00:49:19,560 transparent with your credit history uh1293 00:49:19,560 --> 00:49:21,359 and look for remedies around there are1294 00:49:21,359 --> 00:49:23,160 ways to to clear everyone makes mistakes1295 00:49:23,160 --> 00:49:25,500 like no one's got perfect squeaky clean1296 00:49:25,500 --> 00:49:27,480 credit history well some people do but1297 00:49:27,480 --> 00:49:29,460 you know for the most part there's1298 00:49:29,460 --> 00:49:30,599 people out there that have made some1299 00:49:30,599 --> 00:49:32,400 mistakes and there's there's ways to1300 00:49:32,400 --> 00:49:34,200 remedy it to still help you borrow1301 00:49:34,200 --> 00:49:36,060 I'd say those are probably the biggest1302 00:49:36,060 --> 00:49:37,079 ones1303 00:49:37,079 --> 00:49:40,200 um borrowing capacity wise look at the1304 00:49:40,200 --> 00:49:41,819 end of the day what you oh actually no1305 00:49:41,819 --> 00:49:43,800 there is another big one that just1306 00:49:43,800 --> 00:49:44,880 occurred to me1307 00:49:44,880 --> 00:49:47,220 when you go and start your own business1308 00:49:47,220 --> 00:49:49,800 or you become a contractor1309 00:49:49,800 --> 00:49:51,960 a lot of people want to go out and you1310 00:49:51,960 --> 00:49:52,980 know invoice because they're going to1311 00:49:52,980 --> 00:49:55,260 get paid more but they go do that and1312 00:49:55,260 --> 00:49:57,000 then they go apply for a loan they need1313 00:49:57,000 --> 00:49:58,680 two years of trading history1314 00:49:58,680 --> 00:50:00,180 so you want to get the loan while you're1315 00:50:00,180 --> 00:50:03,780 still payg once you've got the loan you1316 00:50:03,780 --> 00:50:05,160 can make decisions for your life you1317 00:50:05,160 --> 00:50:07,140 know for your household so that would be1318 00:50:07,140 --> 00:50:09,839 a common mistake a lot of people do1319 00:50:09,839 --> 00:50:12,300 so the mistake is quitting your job1320 00:50:12,300 --> 00:50:14,460 first and go taking you're doing your1321 00:50:14,460 --> 00:50:17,040 your new Venture and then trying to get1322 00:50:17,040 --> 00:50:18,900 the loan after you've quit your your1323 00:50:18,900 --> 00:50:20,839 payg job1324 00:50:20,839 --> 00:50:24,440 exactly first yeah1325 00:50:24,920 --> 00:50:27,000 yeah while you've still got the1326 00:50:27,000 --> 00:50:29,160 recurring income if you plan on setting1327 00:50:29,160 --> 00:50:32,280 up a starting a business well obviously1328 00:50:32,280 --> 00:50:34,140 you want to make sure that it's it's the1329 00:50:34,140 --> 00:50:35,700 right move for you but even if it is1330 00:50:35,700 --> 00:50:36,839 secure1331 00:50:36,839 --> 00:50:38,280 well the bank I can lend you money1332 00:50:38,280 --> 00:50:39,420 unless you've got two years of History1333 00:50:39,420 --> 00:50:42,000 to prove that so keep that in mind1334 00:50:42,000 --> 00:50:44,460 before you quit your job yeah if you1335 00:50:44,460 --> 00:50:46,020 need Finance anytime yeah that's a good1336 00:50:46,020 --> 00:50:48,119 one yeah because when when we when you1337 00:50:48,119 --> 00:50:49,440 first started answering that question I1338 00:50:49,440 --> 00:50:51,839 said what are the mistakes and you said1339 00:50:51,839 --> 00:50:53,819 um talking to a mortgage broker and I'm1340 00:50:53,819 --> 00:50:55,020 like I thought you were leading into1341 00:50:55,020 --> 00:50:56,220 that's a mistake I'm like that's not a1342 00:50:56,220 --> 00:50:58,579 mistake1343 00:51:03,800 --> 00:51:08,040 so mate in terms of like trusts1344 00:51:08,040 --> 00:51:11,040 um I've heard a lot about like how you1345 00:51:11,040 --> 00:51:14,339 can use trusts and other entities to1346 00:51:14,339 --> 00:51:16,740 increase your borrowing capacity and I1347 00:51:16,740 --> 00:51:18,000 think this is a really interesting one1348 00:51:18,000 --> 00:51:20,339 because if this is actually like1349 00:51:20,339 --> 00:51:22,559 um really workable1350 00:51:22,559 --> 00:51:24,599 um it could definitely change the game1351 00:51:24,599 --> 00:51:26,819 um for a lot of people so how how can1352 00:51:26,819 --> 00:51:29,819 you use trusts or entities to to1353 00:51:29,819 --> 00:51:32,220 dramatically change uh your borrowing1354 00:51:32,220 --> 00:51:34,640 capacity1355 00:51:35,059 --> 00:51:37,380 yeah a lot of people think that by1356 00:51:37,380 --> 00:51:39,720 having a trust that you can increase1357 00:51:39,720 --> 00:51:42,420 your borrowing it's it's not necessary1358 00:51:42,420 --> 00:51:45,300 that increases it it can help you to not1359 00:51:45,300 --> 00:51:48,059 limit it limit your borrowing and what I1360 00:51:48,059 --> 00:51:49,380 mean by that is1361 00:51:49,380 --> 00:51:51,420 by setting up a new entity you're the1362 00:51:51,420 --> 00:51:54,480 guarantor so you and your partner for1363 00:51:54,480 --> 00:51:57,119 example so serviceability is based on1364 00:51:57,119 --> 00:51:59,880 your income and your expenses and the1365 00:51:59,880 --> 00:52:02,760 rental income that that entity is that1366 00:52:02,760 --> 00:52:04,319 property that the entity is buying is1367 00:52:04,319 --> 00:52:06,900 going to generate but1368 00:52:06,900 --> 00:52:08,760 it's it's called a special purpose1369 00:52:08,760 --> 00:52:10,680 vehicle so it's it's not a trading1370 00:52:10,680 --> 00:52:12,900 business it is set up specifically to1371 00:52:12,900 --> 00:52:15,300 own the property so the income is still1372 00:52:15,300 --> 00:52:17,579 going to be based on you guys you as a1373 00:52:17,579 --> 00:52:20,819 guarantors working uh not hinder you in1374 00:52:20,819 --> 00:52:22,920 the future is that because it's a1375 00:52:22,920 --> 00:52:25,200 commercial debt and not residential and1376 00:52:25,200 --> 00:52:27,300 it's under a commercial entity1377 00:52:27,300 --> 00:52:29,460 then it can be excluded from your1378 00:52:29,460 --> 00:52:31,800 personal borrowing capacity as long as1379 00:52:31,800 --> 00:52:33,599 your accountant is willing to write a1380 00:52:33,599 --> 00:52:35,640 letter to say that it's profitable and1381 00:52:35,640 --> 00:52:37,500 able to meet its Financial commitments1382 00:52:37,500 --> 00:52:39,839 if they write that you know they're not1383 00:52:39,839 --> 00:52:41,099 going to stress test that commercial1384 00:52:41,099 --> 00:52:42,960 mortgage so you could have a million1385 00:52:42,960 --> 00:52:44,160 dollar mortgage and we talked about1386 00:52:44,160 --> 00:52:45,839 earlier about they're going to stress1387 00:52:45,839 --> 00:52:47,339 test it at three percent of other1388 00:52:47,339 --> 00:52:49,920 interest rate right if it's seven1389 00:52:49,920 --> 00:52:51,900 percent commercial rate and a stress1390 00:52:51,900 --> 00:52:53,400 test at a 10 percent1391 00:52:53,400 --> 00:52:56,579 that killed the deal but if the rent is1392 00:52:56,579 --> 00:52:58,140 covering the mortgage1393 00:52:58,140 --> 00:52:59,880 and the expenses1394 00:52:59,880 --> 00:53:01,800 well we can exclude it all together1395 00:53:01,800 --> 00:53:03,900 within the current letter but if it's1396 00:53:03,900 --> 00:53:05,700 your name and you're buying it in your1397 00:53:05,700 --> 00:53:07,200 name you can't get an account letter for1398 00:53:07,200 --> 00:53:08,819 that it will show up on your credit file1399 00:53:08,819 --> 00:53:10,740 and you must declare it and we need and1400 00:53:10,740 --> 00:53:12,960 the bank's going to stress test it for1401 00:53:12,960 --> 00:53:14,339 what it is1402 00:53:14,339 --> 00:53:17,760 so that's why having a trust or a1403 00:53:17,760 --> 00:53:19,920 commercial trust specifically so keep1404 00:53:19,920 --> 00:53:21,300 that in mind has to be a corporate1405 00:53:21,300 --> 00:53:23,460 Trustee of the trust not the individual1406 00:53:23,460 --> 00:53:24,599 trustee1407 00:53:24,599 --> 00:53:27,059 and then it can be excluded so that's1408 00:53:27,059 --> 00:53:28,500 that's where it can help you so similar1409 00:53:28,500 --> 00:53:30,480 to a self-managed super fund1410 00:53:30,480 --> 00:53:32,339 that doesn't impact your personal wiring1411 00:53:32,339 --> 00:53:34,260 capacity because it is a separate entity1412 00:53:34,260 --> 00:53:36,420 outside of your personal1413 00:53:36,420 --> 00:53:38,220 um and it's excluded when calculating1414 00:53:38,220 --> 00:53:40,740 borrowing capacity so that that's really1415 00:53:40,740 --> 00:53:42,839 powerful and then in the future where it1416 00:53:42,839 --> 00:53:45,240 can help you borrow is when it becomes1417 00:53:45,240 --> 00:53:47,640 super profitable so say you've got a new1418 00:53:47,640 --> 00:53:49,440 entity and say two three years later1419 00:53:49,440 --> 00:53:51,480 it's actually generating you know 501420 00:53:51,480 --> 00:53:53,339 Grand profit every year1421 00:53:53,339 --> 00:53:56,400 well that profit can now then be added1422 00:53:56,400 --> 00:53:58,079 to your income1423 00:53:58,079 --> 00:54:01,079 to help you borrow without stress1424 00:54:01,079 --> 00:54:02,339 testing the mortgage that you got on1425 00:54:02,339 --> 00:54:05,339 there so it can actually just be added1426 00:54:05,339 --> 00:54:08,040 to your net profit can be added to your1427 00:54:08,040 --> 00:54:10,380 to your income and it'll be borrowing so1428 00:54:10,380 --> 00:54:11,819 yeah it can be a really powerful tool1429 00:54:11,819 --> 00:54:13,859 you do it properly so that's that's1430 00:54:13,859 --> 00:54:15,780 that's really cool so you can it's1431 00:54:15,780 --> 00:54:17,460 basically like you're Sheltering that1432 00:54:17,460 --> 00:54:20,280 debt so you're basically Sheltering that1433 00:54:20,280 --> 00:54:22,680 debt from going on to your personal name1434 00:54:22,680 --> 00:54:24,300 or your personal1435 00:54:24,300 --> 00:54:26,579 um borrowing capacity because it's its1436 00:54:26,579 --> 00:54:28,319 own Standalone entity and I guess that1437 00:54:28,319 --> 00:54:30,540 is essentially why you have a trust or1438 00:54:30,540 --> 00:54:32,819 UI you have a business account so a1439 00:54:32,819 --> 00:54:34,680 business entity because you know you1440 00:54:34,680 --> 00:54:36,119 don't want to be using your personal1441 00:54:36,119 --> 00:54:38,339 name and your personal like assets it1442 00:54:38,339 --> 00:54:40,079 won't be liable1443 00:54:40,079 --> 00:54:42,720 um so you basically can set up trust1444 00:54:42,720 --> 00:54:45,300 after trust just after trust and shelter1445 00:54:45,300 --> 00:54:48,480 the debt and then potentially you could1446 00:54:48,480 --> 00:54:50,880 not when you're assessing1447 00:54:50,880 --> 00:54:52,859 um you know borrowing or capacity from1448 00:54:52,859 --> 00:54:54,720 the bank if you're doing that in your1449 00:54:54,720 --> 00:54:57,420 personal name or a new entity then that1450 00:54:57,420 --> 00:54:59,819 doesn't take into account those original1451 00:54:59,819 --> 00:55:02,760 loans is that right1452 00:55:02,760 --> 00:55:04,619 yeah as long as the accountant allows1453 00:55:04,619 --> 00:55:06,300 you to exclude it1454 00:55:06,300 --> 00:55:09,240 um so if if not the bank's going to ask1455 00:55:09,240 --> 00:55:11,040 for financials and they're gonna they're1456 00:55:11,040 --> 00:55:12,480 gonna include the debts so if it's1457 00:55:12,480 --> 00:55:16,859 running at a loss and they see that they1458 00:55:16,859 --> 00:55:18,660 will put the loss against your name it1459 00:55:18,660 --> 00:55:21,300 will impact your bar so it you do that's1460 00:55:21,300 --> 00:55:22,619 why I'm having a good account is super1461 00:55:22,619 --> 00:55:24,300 important they know that the journey1462 00:55:24,300 --> 00:55:25,319 that you're on and they're willing to1463 00:55:25,319 --> 00:55:27,300 write letters for you to help you1464 00:55:27,300 --> 00:55:29,520 but if you need that income to help you1465 00:55:29,520 --> 00:55:31,380 with service like if you you say oh I1466 00:55:31,380 --> 00:55:33,059 get all this commercial rental income I1467 00:55:33,059 --> 00:55:34,440 want to use that to help me borrow well1468 00:55:34,440 --> 00:55:35,520 then you're going to have to disclose1469 00:55:35,520 --> 00:55:36,839 the debt as well1470 00:55:36,839 --> 00:55:38,940 it's only later when it's showing a1471 00:55:38,940 --> 00:55:40,920 strong profit if it's a very little1472 00:55:40,920 --> 00:55:43,079 amount of profit in the beginning you're1473 00:55:43,079 --> 00:55:44,940 better off excluding it all together1474 00:55:44,940 --> 00:55:46,859 but if it's running at a significant1475 00:55:46,859 --> 00:55:49,260 loss well your accountant is most likely1476 00:55:49,260 --> 00:55:50,579 not going to write a letter for you to1477 00:55:50,579 --> 00:55:53,760 say it's profitable but say it was and1478 00:55:53,760 --> 00:55:56,099 and it they can't was able to write that1479 00:55:56,099 --> 00:55:58,260 it can be excluded and you can keep1480 00:55:58,260 --> 00:56:00,480 growing your personal uh borrowing and1481 00:56:00,480 --> 00:56:02,640 buy your your ppor without that1482 00:56:02,640 --> 00:56:04,079 affecting your borrowing1483 00:56:04,079 --> 00:56:06,300 yeah wow so is this is it just1484 00:56:06,300 --> 00:56:08,400 accountant to accountant you ask that1485 00:56:08,400 --> 00:56:10,380 letter and then they provide it to you1486 00:56:10,380 --> 00:56:12,480 or like your mortgage broker is that how1487 00:56:12,480 --> 00:56:13,980 it works yeah1488 00:56:13,980 --> 00:56:15,839 yeah wow yeah yeah that's right well the1489 00:56:15,839 --> 00:56:18,480 customer has to ask for it and then the1490 00:56:18,480 --> 00:56:20,520 accountant will write it and then it's1491 00:56:20,520 --> 00:56:22,680 sent to the bank the bank will just1492 00:56:22,680 --> 00:56:24,240 happily exclude because the bank will1493 00:56:24,240 --> 00:56:25,800 always do a credit check and any1494 00:56:25,800 --> 00:56:27,720 directorships you have will show up on1495 00:56:27,720 --> 00:56:29,640 your profile so they're going to want a1496 00:56:29,640 --> 00:56:31,500 letter for any directorship1497 00:56:31,500 --> 00:56:33,180 they're not going to do credit checks1498 00:56:33,180 --> 00:56:34,800 against every single company that you1499 00:56:34,800 --> 00:56:35,880 have because they don't you're not1500 00:56:35,880 --> 00:56:37,380 borrowing in that company you're1501 00:56:37,380 --> 00:56:38,700 applying under your name for this1502 00:56:38,700 --> 00:56:40,920 particular Loan in the future so they1503 00:56:40,920 --> 00:56:42,119 don't have the right to just do credit1504 00:56:42,119 --> 00:56:44,040 checks on all these other companies1505 00:56:44,040 --> 00:56:45,599 so that's why they need an accountant1506 00:56:45,599 --> 00:56:48,900 letter or financials tax returns1507 00:56:48,900 --> 00:56:50,760 one or the other it's a tax return show1508 00:56:50,760 --> 00:56:51,900 profit you don't need the account to1509 00:56:51,900 --> 00:56:54,000 write anything but just be mindful that1510 00:56:54,000 --> 00:56:55,920 they the bank May then stress test the1511 00:56:55,920 --> 00:56:58,079 mortgages that exist so that might not1512 00:56:58,079 --> 00:56:59,940 help you so it's better to exclude it1513 00:56:59,940 --> 00:57:00,839 all together1514 00:57:00,839 --> 00:57:02,819 yeah cool and I like the fact that you1515 00:57:02,819 --> 00:57:05,099 can you know exclude it and then later1516 00:57:05,099 --> 00:57:06,780 on when you want to borrow you can use1517 00:57:06,780 --> 00:57:09,180 the income as uh you know to help you1518 00:57:09,180 --> 00:57:10,740 that's cool so like you get the best of1519 00:57:10,740 --> 00:57:12,359 both worlds there1520 00:57:12,359 --> 00:57:14,760 exactly yeah just timeline right in the1521 00:57:14,760 --> 00:57:16,020 beginning excluded when it earns more1522 00:57:16,020 --> 00:57:18,720 and more then you use it yeah nice all1523 00:57:18,720 --> 00:57:20,520 right mate last question1524 00:57:20,520 --> 00:57:24,059 um you have obviously uh a large1525 00:57:24,059 --> 00:57:25,619 um you know view on all these different1526 00:57:25,619 --> 00:57:28,500 banks which ones right now particularly1527 00:57:28,500 --> 00:57:30,720 are you liking that you're able to1528 00:57:30,720 --> 00:57:32,940 squeeze the most out of the most out of1529 00:57:32,940 --> 00:57:34,440 like borrowing capacity for People Are1530 00:57:34,440 --> 00:57:36,240 there specific ones that you you like1531 00:57:36,240 --> 00:57:38,700 that you favor or have better lending1532 00:57:38,700 --> 00:57:42,480 terms right now that you you like1533 00:57:42,480 --> 00:57:44,700 uh actually I touched on it earlier we1534 00:57:44,700 --> 00:57:46,800 talked about non-banks so the non-banks1535 00:57:46,800 --> 00:57:49,260 that are kind of more generous with1536 00:57:49,260 --> 00:57:51,420 their borrowing capacity uh pepper money1537 00:57:51,420 --> 00:57:54,119 our Liberty Financial our first Mac1538 00:57:54,119 --> 00:57:56,220 they're kind of the the well-known ones1539 00:57:56,220 --> 00:57:58,559 but there are a couple of others out1540 00:57:58,559 --> 00:58:01,079 there that I'm sort of starting to1541 00:58:01,079 --> 00:58:02,460 connect with and learning more about1542 00:58:02,460 --> 00:58:04,619 their policies so I'm not going to tell1543 00:58:04,619 --> 00:58:06,359 you who they are yet just because I1544 00:58:06,359 --> 00:58:08,880 don't know them well enough so of course1545 00:58:08,880 --> 00:58:10,859 that's what I'm here to do so if1546 00:58:10,859 --> 00:58:12,720 customers do want to reach out to me I1547 00:58:12,720 --> 00:58:14,460 can always um look at their1548 00:58:14,460 --> 00:58:16,020 circumstances and then connect with1549 00:58:16,020 --> 00:58:17,940 these new lenders and see if if they're1550 00:58:17,940 --> 00:58:19,740 willing to help because remember these1551 00:58:19,740 --> 00:58:20,880 lenders will give you more but they're1552 00:58:20,880 --> 00:58:22,260 going to charge you more so just be1553 00:58:22,260 --> 00:58:24,960 prepared for that higher fees and higher1554 00:58:24,960 --> 00:58:26,400 interest rates but they'll lend you more1555 00:58:26,400 --> 00:58:28,200 money too yeah but it's all about1556 00:58:28,200 --> 00:58:29,940 getting the deal done isn't it so if you1557 00:58:29,940 --> 00:58:31,680 can just get the deal done1558 00:58:31,680 --> 00:58:32,880 um you know even if you can pay it1559 00:58:32,880 --> 00:58:34,020 you're paying a little bit higher1560 00:58:34,020 --> 00:58:35,700 interest rate you know your wealth can1561 00:58:35,700 --> 00:58:37,980 grow a lot from getting that deal done1562 00:58:37,980 --> 00:58:40,859 rather than just like you know trying to1563 00:58:40,859 --> 00:58:42,359 find the best interest rate possible1564 00:58:42,359 --> 00:58:43,859 because at the end of the day that1565 00:58:43,859 --> 00:58:45,119 little gap between the interest rate1566 00:58:45,119 --> 00:58:47,220 doesn't make you make you um you know1567 00:58:47,220 --> 00:58:49,079 wealthy but buying the property and1568 00:58:49,079 --> 00:58:51,839 potentially having a cash flow and then1569 00:58:51,839 --> 00:58:53,579 the Capital Growth of that behind it1570 00:58:53,579 --> 00:58:56,040 does so definitely um worth worth1571 00:58:56,040 --> 00:58:57,900 shopping around1572 00:58:57,900 --> 00:58:59,760 yeah great1573 00:58:59,760 --> 00:59:02,280 all right well that pretty much wraps up1574 00:59:02,280 --> 00:59:06,359 uh episode three uh cracking the what is1575 00:59:06,359 --> 00:59:08,160 it hang on what have I got1576 00:59:08,160 --> 00:59:10,559 yep all right all right mate that pretty1577 00:59:10,559 --> 00:59:13,200 much wraps up uh the episode three1578 00:59:13,200 --> 00:59:16,619 cracking the lending code so where can1579 00:59:16,619 --> 00:59:18,960 listeners go to find out more about you1580 00:59:18,960 --> 00:59:21,480 and your services mate1581 00:59:21,480 --> 00:59:23,940 uh they can find me on my website which1582 00:59:23,940 --> 00:59:27,299 is lagosfinancial.com uh they can hit1583 00:59:27,299 --> 00:59:29,579 contact us and they can do an inquiry or1584 00:59:29,579 --> 00:59:31,619 they can book in a call directly in my1585 00:59:31,619 --> 00:59:34,079 calendar and we will I'll reach out1586 00:59:34,079 --> 00:59:36,240 we'll set up a time well that could be1587 00:59:36,240 --> 00:59:37,619 our time setting up and we'll go through1588 00:59:37,619 --> 00:59:39,900 circumstances and I'll see what we can1589 00:59:39,900 --> 00:59:40,619 do1590 00:59:40,619 --> 00:59:43,799 fantastic mate this has been Financial1591 00:59:43,799 --> 00:59:46,920 expert Victor Lagos and Andrew Bean on1592 00:59:46,920 --> 00:59:49,710 the Financial Freedom series thanks guys1593 00:59:49,710 --> 00:59:56,229 [Applause]