One ‘sure thing’ you can count on in this bullish real estate market is the logic of using a experienced “property focused” mortgage broker when looking at property investment.
They will highlight some very basic rules such as ‘don’t put all your property (eggs ) in one basket (lender) and although this could be said to be an obvious rule there are many investors who have not even thought about it. Simply put, all lenders have different criteria and niche markets that they themselves are focused on. If for any reason you were to get over-exposed in one area with one lender it is important that this does not effect your overall situation. An example of this may be the purchase of too many apartments for one lenders liking. Most lenders also have a limit on the number of investment properties they will lend on to any one investor, or entity, and it is good to know this information well in advance as well as any other criteria specific to that particular lender before considering who to approach . Your long term goals, not short term should dictate the final choice of lender for each property purchase.
I’m sure we would all agree that when we are buying anything we must have choices in order to assess and compare true value and performance. (When buying a car we don’t just go to one car yard !) Shopping is all about having the choice of products, coupled with the ability to objectively analyze their respective features and benefits to suit the situation before making an informed decision. Because every individual’s situation is different and all situations are subject to change anyway, it is very important from the outset that your mortgage is designed to allow for future flexibility in any property investment portfolio. A good broker will have thorough knowledge of all the major lenders products and services, criteria, and I would hope first hand experience as a property investor to help you avoid the pitfalls and mistakes that some people make.
If it is something technical we are making a decision on then we ask the opinion of the technical experts, being ever mindful of the experts who only have access to a limited range of products to advise on. The logical choice should be to shop where the widest and best range of products are available, sure makes the decision making easier.
If you are intending to grow a property investment portfolio, getting the correct mortgage advice early in the process to suit your overall goals, can prove to be very valuable in the long term.
It is a sad but true reality that the days are gone when a phone call to your long-term friendly family lender manager could be all you needed to do for that next investment property. Many lenders do not have rental properties themselves and do not understand the client’s needs as a result of this inexperience.
Any property purchase should involve your team of experts to help make informed decisions. Many of my seasoned investors discuss the purchases with their accountant, solicitor, valuer and myself prior to making their offers. The advise received from these experts and including your chattel valuer can be invaluable and save not only money but time, and worry.
On many occasions I will also make calls to your accountant and solicitor to talk through the purchase because in my opinion your team of experts must work together with you to ensure that the “package” we put together is also working as tax efficiently and structurally sound as possible.
Another and probably most important role of your broker is to present the appropriate paperwork and technical details to the lender in order to get the client the best deal possible. Often a broker, doing the homework, can isolate and identify information, and set up a structure that a client would not have considered but which could make the difference between a loan application being accepted or not, or being accepted on more favorable terms for the client. I strongly encourage my clients to bring in as much information as possible to our initial meeting. The more we can present to the lender initially and quickly the quicker and better the lenders response will be.
And the down side? Well it’s a free service, we are paid a commission from the lender, so there isn’t a down side if you choose your mortgage broker well, so, now that the Xmas rush is over, let’s go get organised and lets go shopping.
Printed with the permission of Tarawera Publishing and NZ Property Magazine