Whenever the banks starts to make changes to credit score and loan calculator algorithms it’s time to really consider the solidity of your financial position, from a lender’s perspective.
Of course, lender’s perspectives are all slightly skewed by fear right now, as they endure multiple attacks on internal policymaking, not to mention profit margins, from government and regulators.
As a result, they’re hurriedly seeking defensive positions and starting to pull back on so-called ‘high risk’ loan types, including Interest Only mortgage products, and investor loans with higher Loan to Value Ratios.
From within, we’re seeing a lot of transitions in what banks will accept as evidence of your cashflow position and what they won’t. There’s even talk that some lenders are going to reduce the portion of rental income they’ll consider in your loan application to 60%.
So with multiple changes suddenly making credit much harder to come by, now is the time that investors must start to really be strategic, and recognise that cashflow is just as critical as capital growth if you hope to grow a sustainable portfolio.
Here are five ways you can boost your cashflow quickly…
1. Get rid of anything dragging you down.
This includes superfluous properties and superfluous finance structures, packages or product add on’s that you really don’t need.
2. Make sure you’re claiming every possible tax deduction.
The raft of legitimate tax deductions you can claim as a property investor is going to become slightly smaller as federal budget measures are rolled out to curb certain depreciation and travel expense claims.
But that means you should really look extra hard at what you ARE entitled to claim and make sure you’re doing so! Better yet, hire experts to do this on your behalf! Knowledgeable, experienced experts who are property investors in their own right preferably.
3. Raise the rent whenever you reasonably can.
This really isn’t the time to feel a sense of generosity toward your tenants. Wherever reasonably warranted, consider ways you can ask for more rent from your tenants. Remember, this is particularly important given talk of banks reducing the percentage of rental income considered in your credit application.
4. Upgrade with a granny flat or some other fast track to increased cashflow.
A great way to boost cashflow through increased rent is to expand your potential to ask for more rent. Consider renovating or updating a tired investment property to give it broader market appeal.
Even better, where space and planning parameters permit, why not have a simple granny flat constructed in the backyard of an existing property? Many investors have had immense success with this approach, consolidating a massive cashflow win within just weeks of the build starting.
5. Consider your credit score & make changes.
What might be negatively impacting on your credit score and dragging it down in any way, that you have the potential to change? This might include things like credit card limits and other personal loans that you could consider getting rid of.
When all is said and done, it’s a very good time to seek the guidance of someone who has lived through this type of experience before. A good mortgage broker is your best ally in this increasingly confusing and chaotic banking battleground. It will literally pay to have them on your side!
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).