Are you a property investor with multiple properties and loans?
– Hi guys. It’s Marissa and Richard
here from Rise High, and today we’re here to share with you another example of how we’ve helped one of our clients recently. So, Richard, you’ve had a
busy month, haven’t you? – I have had a busy month, yes, there’s plenty of inquiry coming through
– Yeah. – left right and center, really, for all intents and purposes.
– Yeah. Awesome. – Investors, owner occupiers,
a bit of rate finance as well – You mean with car loans as well. – Vehicle loans, yeah.
– Yeah. – which is really nice.
– Awesome. – They are commercials for us, which is great.
– Yeah. Excellent. So, can you give us one of the scenarios that you’ve done recently, that you could share with us, just to give us a bit more information about how you’ve been able to help someone one this month. – Absolutely. So, I had an inquiry last month, we just worked through, for an investor who effectively with their current bank had been, what we call,
cross-collateralized, which is where the bank has effectively drawn out the home loans and taken multiply securities
over both of the loans. So, it’s almost like a spider’s web for this investor’s property
which from our perspective where we’re looking for the
best outcome for the client, that structure doesn’t
support the client at all. – What do you think, I
mean, I completely agree, you know, cross-collateralization’s
never good for the client, you know, what are the potential, sort of, problems that
cross-collateralization can cause? Why do we have the belief that cross-collateralization’s
not the best approach in most situations? – Yeah. So, a lot of the time
cross-collateralization causes challenges that we typically see when you either need to have a quick sale, or you need to maybe release equity from a property, or, just to – Maybe even move a loan to
save money, take advantage of a cheaper interest rate.
– Exactly right, so. – It reduces flexibility. – It reduces your flexibility,
– Yeah. – but ultimately it’s never
quite clear to the consumer what any of these little
intricacies will be, what the outcome will be, until we actually make an
application or go to sell a home, or something like that, where the proceeds like
they may feel they have then have to go into paying this other loan down.
– Yeah. And so, it’s a bit tricky
because it’s all fine at the time that you take out a loan, but then long term it might come to bite you in the side, you know, if you do have to have that
cross-collateralized structure. – Yeah. It’s a lovely structure if you are not doing anything
ever again with your loan. – And it’s good for the bank, but not so good for the client. – It’s good for the bank
because then it means they’ve really got all of their assets tied up in a bundle, and they’ve made it hard
for you to walk away, which is great, because they’ll want you
there for as long as possible. In terms of the consumer,
as we have already said, it removes all of the freedom of choice. – Yeah, that’s right. So, okay, so this investor came to you, all of their facilities
were cross-collateralized, and it was a muddled web,
– Yip. – of complexity,
– Yip. – so what process did you go through – Yeah.
– to help them with that? – Well, first of all, we just established where the value sat on
all of the properties, and then we aligned
– How did you do that? – Yeah, just through, so, first of all just getting an understanding throughout the order where the value sat on each property, before we knew which bank
we were going to go to, and once we narrowed that down – So, you were able to
give the client, you know, detailed property report
about their properties, to give them an indication of value. – Definitely. So, we draw up these data data reports, which are pretty comprehensive, and I feel like we’re
getting a good range of value with these reports to know confidently where your equity sits. So, I did that, so that helps me prepare. Once they’ve chosen the
lender we want to move to, then it’s about finalizing
those valuations and move to the direct bank. – And you were able to order free upfront valuations
– Yip. Free upfront valuations. – for the client on all their properties?
– Absolutely. And it cost the client nothing? – It costs the client nothing. – So these valuations
that the bank can then use for application purposes if they want to? – Exactly right. So, if we need it, these valuations, and we’re doing it upfront
so that we can be prepared, and make sure ultimately we can remove this cross-collateralization by being prepared where the loan is going to sit.
– Yip. – So to round out that question, the valuations are done,
we know the equity, we then understand what purpose
do each of the loans serve. Is it for property number 1,
is it for property number 2, was there maybe a little equity loan that was to help fund property number 2? We need to align all of those debts to the appropriate property. – Yes. And that’s important because it’s not really important from a debt perspective
but that becomes important from a tax perspective and helping them to manage their affairs moving forward. – Yah. – You know, particularly if they want to grow their property portfolio, being able to understand,
– Definitely. – you know, what loan is for what purpose is really important consideration. – Exactly right. So, we’re really making the structure an accountant’s best friend.
– Yeah. – You could take our customer’s
summary to an accountant and they would know
exactly what’s going on. The purpose of each loan
is labeled for our client. They understand what it is, but also, by aligning the property with debt, we’ve removed that
cross-collateralization, and ultimately simplified
the one structure. – So what was the end
result for the clients? – Their result was removal
of cross-collateralization, which was one of our biggest goals. We were able to save them on
interest, which is, you know – Do you remember how much you saved them? – It would have to be in
the vicinity of A$ 5,000, give or take. – Wow!
– And that’s over a three year period. – It was substantial.
– That is substantial. – A nice family holiday. – It is a family holiday. But ultimately the interest
rate was very much secondary to making sure the structure
was in good health. So it was a nice to have, but ultimately once it was settled the client then knew,
knew their structure, they understood why we were
doing what we were doing and could now move forward. – A much simpler structure. – A simpler structure. – Saving money, and they
would have moved forward with their future plans and goals. – Yeah. With a lender who’s aligned to, you know, for us to be able to continue to negotiate with them, to make sure rates are sharp ongoing, and to ultimately now be prepared, if they ever buy again,
we’re not in a jumbled mess, so we don’t have to
remove collateralization sorry, in the next process if they decide they want to buy another property or you know, sell a property to maybe do something else,
– Yip. – it’s all set up now, to
succeed moving forward. – Awesome. And how was the experience,
sort of, working with the client and you know, how did the client feel at the end of the process,
and how did you feel at the end of the process? – Definitely I think ultimately our
process is about education through, throughout the journey. You know, we have quite
a good knowledge here in our office here of what good structure looks like, how everything should be put together. So, I think the client, and typically, it’s mum and dad investors
that we’re working with, so, you know, yes, they
know that buying property is a good thing for them, but they’re still not
spending nine to five understanding the intricacies of how it should be structured, and all of these little things. So I’m educating on the way, which I find is very rewarding to me,
– Yeah. – The clients are learning, and they’re happy throughout our process, and then once it settles,
they’re very happy. – So what’s next working with this client? What’s the next thing? – The next thing from where we are is they will go into our annual review around our review
– process. – process, and we’ll manage them on an ongoing basis to make sure – And what does that involve? How do you, sort of,
look after them ongoing? – Yeah, so, whether the
client likes it or not, we’re going to go and
negotiate with their bank at least on an annual
basis, if not sooner, depending on the type of
movement a lender might have, and then we’ll report back to the client what we’ve been able to achieve, and in that process, we’ll also touch base – So, you’re proactively trying
to get them extra discounts without them having to ask for it. – A Hundred percent. – Which client doesn’t
like saving money, really. – Everyone wants to
save money, if they can. and ultimately you know, we do rely on the banks
to provide us the money but they’re not going to call you and typically give you
the best rate they can if they don’t have to. – That’s our job, to make sure we’re constantly getting you the best rate that you can. – Hundred percent. You know in that process, I want to review the goals of the client, you know, in twelve
months a lot can change. They may have a child, or they may have been saving for another investment property, and I want to be on that
front foot with them, so that when they’re ready
to take that next step, whether it’s another property, or up-sized to a new owner
occupier home, we’re ready to go. – Yeah, awesome. Thanks for sharing, Richard.
– No worries. – We’ll see you later. Bye.