Episode 7: Exploring Property Finance Strategies with Imogen Alexy 🏡

Welcome to Episode 7 of the "Property Now Podcast," where we immerse ourselves in the world of property finance, guided by our expert guest, Imogen Alexy. With her extensive financial acumen and passion for real estate, Imogen takes us on a deep dive into the intricate art of financing property ventures.

🏢 **Market Insights:** Kicking off the episode, we analyze the current real estate landscape. Imogen sheds light on the latest market trends, helping you understand the pulse of the industry and making informed decisions based on the present scenario.

🔑 **Unleashing Leverage:** Imogen's insights extend to the power of leverage in property investment. Learn how to harness leverage to amplify your investments and make the most of your financial resources.

💰 **Decoding Deposits and LVR:** Navigating the financing journey, we delve into the nuances of deposits and Loan-to-Value Ratio (LVR). Imogen breaks down these crucial components, empowering you to strategize your finances effectively.

🏦 **SMSF Financing and Trusts:** Imogen takes us through the realm of Self-Managed Super Funds (SMSF) financing and trusts. Discover how to leverage these unique avenues to fuel your property aspirations and optimize your financial structure.

💼 **Meet Imogen Alexy:** An accomplished financial expert and seasoned real estate enthusiast, Imogen shares her experiences, successes, and challenges in the industry. With a keen eye for detail and a passion for guiding others, Imogen's insights are invaluable for anyone navigating the property finance landscape.

🎯 **Practical Takeaways:** This episode isn't just about theory – it's about actionable wisdom. Imogen equips you with real-world strategies and tactics, so you can make well-informed choices and secure your property dreams.

Tune in to Episode 7 of the "Property Now Podcast" to gain an in-depth understanding of property finance, from market dynamics to leveraging opportunities, deposits, LVR, SMSF financing, and trusts. Imogen Alexy's expertise will empower you to confidently stride forward in your property journey.

Find us on [Instagram](https://www.instagram.com/propertynowpodcast) for updates and exclusive behind-the-scenes content. Remember, your path to property success starts with a solid financial foundation – press play and let's embark on this enlightening episode together!

🔗 #PropertyNowPodcast #PropertyFinanceInsights #RealEstateFinancialWisdom

Transcript

Speaker 1 (00:01):

Welcome to the Property Now Podcast, where we talk all things property, investment, and new homes with your host Matt eol. Speaker 2 (00:09):

Yes, there's bad debt. Yes, there's good debt. The good debt is not bad. It will never send you broke. Ever rich people rely on debt to expand because without debt it's pretty hard to expand. It's almost impossible. Speaker 1 (00:20):

If you want to learn more about what's happening in the market and how to benefit from property investment, then go no further. We dig deep as to why our sector is a key to building financial security and safety for your family. Never before has it been more important to understand the playing field than now. Speaker 2 (00:39):

And I would say this, this is probably going to raise some eyebrows with some people, but your family home is not an asset. It is a liability. It's taking money out of your pocket from a cashflow position. Speaker 1 (00:49):

So let's get on with the show. Happy listening and we'll see you on the other side. Speaker 2 (00:54):

Hello, hello and welcome to the Property Now Podcast with your host as always, Matt Al. It's good to be back. And I have a very special guest today. Her name is Imogen Alexi from LO Lending. Hello, how are you? Speaker 3 (01:08):

Great. Thank you for having me on. Speaker 2 (01:10):

You're very welcome. Thank you for coming. Imogen has come down to our investor centre today to have a bit of a look before we go into an intro view. I'd love your feedback on what you think of the display centre that we've put together. Speaker 3 (01:21):

It's so cool. Definitely worth checking out. I think it looks wonderful. The rooms are so well set out and so well thought out. A lot of education, but it also looks beautiful as well. Speaker 2 (01:32):

Thank you very much. Maybe I was fishing for some compliments there. We've got some. So that was good. So Imogen, very experienced broker come from the banking game, has a role now with LO lending in a senior position. We'd love to learn a little bit more about you, what's your experience? Tell us a bit about your finance journey or professional journey and where you're at now and then we'll get into adding some value for the people that are listening. Absolutely. And education. Speaker 3 (01:57):

Awesome. Thanks Matt. So basically I started my journey in the world of finance in banking. So I held a few roles through my time in banking. I was about three years in total, so worked my way up from being in the contact centre through to the lending area and then in a sort of broker role at the bank as well, which was great. So lots of experience on that end. I learned how to assess loans and credit applications and things like that. And then jumped across into the world of broker starting off as a credit analyst and then as a self-employed broker. And now I have joined the wonderful team at LO lending in a senior role, which is Speaker 2 (02:37):

Great. Sounds good. It sounds like you've had quite a diverse access to lending as a whole, not just Yeah, Speaker 3 (02:43):

Absolutely. It's been so good to see both ends of it. So seeing the backend has been incredibly useful for learning the front end and the consumer side. I guess it's allowed me to really structure deals in the way that I know that banks want to see it and will approve Speaker 2 (02:58):

It. I would imagine that that's really important, especially with turnaround times, being longer at the moment, being able to put something forward that you're confident will Speaker 3 (03:07):

Get through, go through. Yeah, absolutely. Our goal is always to have one touch applications, which means they don't come back asking a plethora of other questions about the applications. So giving them everything they need upfront and knowing what to give them and how to structure it is really important to having a solid submission and a good result for our clients. Speaker 2 (03:26):

And so do you prefer broking or working for the bank or, well, I mean obviously you're in broking now, so Speaker 3 (03:32):

Definitely broking. I did really enjoy working in banking and I think it was the perfect place to start. However, as a mortgage broker, you do have the option of choosing from a very large amount of lenders. So you can workshop deals through multiple different solutions and find one that fits the clients the best. You're not just selling your own products, it isn't one size fits all when you work in banking. You don't have the same requirements to work in the client's best interest as you do when you're a broker. So as a banker, you can sell your own products to a client even if they may not be the best fit because you work for the bank and you're representing them. Whereas when you're a broker, we are bound by what's called best interest duty. We need to work in the client's best interest and pick products that will be best for their circumstances and lenders that are best based on what they've requested. So it's really important. And for me, I love helping people. So finding a range of solutions instead of having to say no is really nice. Speaker 2 (04:33):

Yeah, it's similar with what we do and I think it's important for people to understand how broking works because we're exactly the same. We're a building broker, so the advantage to that is that we have inside knowledge also as to who's offering what position they're in. One provider might be offering build prices at $10,000 cheaper than the other builder, but they might have a three months longer bill time. Speaker 3 (04:56):

Exactly right. Sometimes the things that look the best upfront are not the best long term, and being able to navigate and understand that and knowing where to find that information is really beneficial. So I always take a very educational approach with my clients. I think I'll provide a range of different options and let them make an informed decision from there isn't what I think is best, what's going to suit them best for their circumstances as well. Speaker 2 (05:22):

That's really cool, Imogen. I mean, we always encourage people to speak with brokers because of that exact reason. So I'm glad that you've backed that up for me. Speaker 3 (05:28):

I mean, I'm biassed, but obviously I think brokers are fantastic. And yeah, I think education is key with doing all of these things, which is why what you guys are doing is so cool because you're providing a range of options that people wouldn't have otherwise known about. So Speaker 2 (05:43):

Thank you. Yeah, well what you are doing is pretty cool too. And I mean, we've spoken in previous episodes, we've had lawyers, we've had financial planners, we've had conveyances, and the finance part is critical to what we were speaking about, and that is having an army absolutely almost representing you when you are going to make decisions that are very important. Yeah, Speaker 3 (06:04):

It's basically creating a team of trusted advisors in a sense, and putting all those pieces together and having advice from different people is very valuable because it allows you to then decide based on what works for you, because you might speak to two different brokers and they might have two different opinions. So it's always good to put the feelers out there. Options. Speaker 2 (06:25):

Yeah, no, that's good. And we digress slightly, but that's fine. It always happens. I always say, well, let's follow this process and then we go direction, but doesn't happen business wise, but in chatting it does. So tell us a bit about LO lending. Speaker 3 (06:38):

Yeah, Speaker 2 (06:39):

Absolutely. Where are you base, what do you specialise in, what do you do? Speaker 3 (06:42):

So LO lending, there's four brokers in Melbourne and one in Sydney now, which is amazing. So we've just started our team up there in Melbourne, I've got myself, and then we have three other brokers. Personally I do probably slightly more complex people who are looking to have an investor portfolio acquire multiple properties, and it might take a little bit more work and a little bit more of a journey. I like to build a close relationship with all my clients and wherever possible have them on as a long-term client, like one I recently sent to you as well. And then the rest of the team have a bit of a diverse background in a really positive way. So one of them came from credit impaired and sort of end the line clients tough, tough, who were really struggling. She's incredibly compassionate. She knows absolutely everything there is to know about that credit impaired space, and she's just an absolute asset to the team because it's something that a lot of people don't take on because they don't know how to approach it.
(07:43)
So it's brilliant to have her as part of the team. She can take on things that are more complex from outside of the box scenarios. We also have a guy who's been in the lending industry for over 25 years. He's been at every major bank and seen it all. So again, a wealth of knowledge and very, very useful surprises him. No, absolutely not. He's seen it all before. Yeah. And then lastly, we have a younger broker who is up and coming. She is absolutely incredible for her age as well. She's only 22, but her knowledge astounds me every single day and I expect to see big things out of her as well. So Speaker 2 (08:18):

Younger people absorb information faster. I Speaker 3 (08:20):

Can't wait to watch her journey and her growth through her career because I think she'll be going big places. Speaker 2 (08:25):

Very cool. Thank you for that. Imogen, I want to talk about the current climate. It's been an interesting space in the world of property and lending and mortgage rate cliffs and whatever they're calling it, Speaker 3 (08:35):

Mortgage prisoners. Speaker 2 (08:36):

Yeah, it's pretty full on. And I think from a property standpoint, people have been quite uncertain recently, unsure sentiment's been quite stale, which is not good. But it happens in these downward cycles. It Speaker 3 (08:48):

Does, and I think you've used a key term there. It's a cycle. So what must go up must come down and what goes down must come up. And I think I'm quietly confident, but I think we're sort of hitting the peak about interest rate rises, and I think that the confidence is really restoring in the market. I can feel it with my clients especially that they're eager to buy things, whether that's because they're sick of waiting, they've tried to write out these interest rate rises and they're just sick of waiting, or whether it's because there's a bit more confidence return to the market. I think it's a combination of both. The other really great thing that's come out of this and sometimes hard things, good things happen, the rock diamond analogy, whatever that is, pressure makes diamonds. Yeah, yeah, pressure makes diamonds. So exactly what's been happening in the banking industry as well. What we're seeing is we're seeing a lot of banks come out with new products to tackle the challenges that people are facing. Things like lower buffer rates when refinancing and some longer loan terms. For example, you can service over 35 or 40 years versus 30. Is that in now? Yeah, sure is. Wow, Speaker 2 (09:54):

I didn't hear about that, but I'll, okay, cool. Speaker 3 (09:56):

Yeah, knowledge is power. Speaker 2 (09:58):

And just quickly, for people that don't understand what a buffer rate is, how does that work? Speaker 3 (10:01):

Absolutely. So when you're looking at borrowing money or refinancing, what the bank does is they take the actual interest rate and they add on 3%. So it becomes pretty expensive. If you're looking at rates of 6%, 7% and then they're adding 3%, you're actually being assessed at like nine 10%. So it's quite hard to show servicing. So the ability to repay your loan when it's at that level. So what a lot of banks have done, particularly for people looking to refinance who have the existing debt is they've said, well, if you can show us that you are going to be in a better position as a result of this refinance, so we're moving you from a higher rate to a lower rate and you'll have your repayments reduced as a result, we're putting you in a better position. So even if it's quite tight on paper, you're going to be better off. And so what they've done to help that is they've reduced their buffer rates. So instead of adding 3%, they're now adding one or 2%. So it makes it a lot easier to show servicing. Speaker 2 (11:00):

That's good. Yeah. Does APR get involved in that? Is that Speaker 3 (11:03):

They sure do. Yeah. So anything that banks pass on is very much dictated by a R and ASIC as well. So they sort of oversee all of those decisions. Typically speaking, they do like to have control in what those buffer rates are, but as the market changes, we do need to be a bit flexible. And so the banks have then gone back to a PR and told them this isn't working. We've got people stuck on obscenely high rates after they've come off these incredibly low fixed rates from the last couple of years, and we need to do something because the same people who were borrowing hundreds of thousands more a couple of years ago and now stuck with what they have and they can't move. Speaker 2 (11:43):

And so in regards to that, obviously interest rates have spiked dramatically. I think it was 12 increases or something like that in 15 months or whatever it was. We've had a couple of months of no movement, steady, thank god, Speaker 3 (11:56):

Fingers and toes crossed. I Speaker 2 (11:58):

Thought Philip Lowe, who's the, well, he's the outer governor now. See you later, mate. Goodbye you. Good luck on your next journey. But I was hoping that he wouldn't try and go out with a bang, so I'm glad that they held firm on that. What are you hearing? What are you seeing? What are your feelings about what may happen moving forward? Speaker 3 (12:15):

Yeah, absolutely. Look, I wish I had a crystal ball and could see the future, but looking at what a lot of people are saying, I personally don't expect there to be too many more increases. If anything, it might be one more, but I feel like we're probably stable now or close to stable. I was looking at some statistics last night, actually, three of the four big banks think we're at our peak of where interest rate rises will stay. So no more increases in terms of the RBA. They might still put their rates up, but the RBA no more rate rises. One big bank NAB are still thinking they'll go up one more time. I think the next meeting, September 3rd, off the top of my head, and hopefully three of the four are right. Speaker 2 (12:59):

I think inflation stats that came through for the last quarter were the lowest that they've been, which was encouraging. That's obviously what they're trying to bring down. You've seen the graph inside. You guys can't see this, but with the inflation in the past and the connection to mortgage rates and house prices, it's interesting how it all works Speaker 3 (13:17):

Together. Exactly. And that's that cycle we're talking about and things do need to balance out because if you look at high peaks and troughs, people are winning at different ends of the spectrum. It's a great time to accumulate property at the moment if you can afford to do so because when the rates are higher, there's less people in the market. Speaker 2 (13:35):

Couple of my favourite sayings, best time to buy properties yesterday. Speaker 3 (13:38):

Absolutely Speaker 2 (13:38):

Always the case. You don't just make money through capital appreciation. There's other ways that you can make money with property and the best investment on earth is earth. They're not making any more of it. So Speaker 3 (13:48):

I've never heard anybody say they regret a purchase. Speaker 2 (13:50):

Yeah, that's actually interesting. I spoke to a client that we were speaking about recently and she raised some concerns to me, which is normal with every interaction that we have. And I said, look, here's the thing, and this is very true. In 15 years of selling property, I've never had someone come back to me and say, I really wish that I didn't buy that. I've had lots of people come back to me and say, I Speaker 3 (14:10):

Wish I bought that. I really wish I bought that. Me too. Speaker 2 (14:13):

Because stuck in this mentality of, well, it can't continue to double. It can't continue to increase, but when you understand how it works, it's like, well, yeah, it can Speaker 3 (14:21):

Absolutely supply and demand. I mean, look at the rental crisis for starters. There's nowhere near enough rental properties available. So if you're in a position to acquire an investment property, it's such a good idea. It's a passive income stream forever. Speaker 2 (14:34):

I think your friend Ella, Cass did a TikTok recently that showed a tent for rent in South Melbourne, $350 a week for a tent in a living room with a family and two kids. Speaker 3 (14:45):

Yeah, it's wild. Speaker 2 (14:46):

Yeah, worked that out. Cool, cool. So anything else that you're seeing in the industry at the moment? Speaker 3 (14:50):

I think just some really great new policies coming through. Some strategies for people acquiring properties, whether that be in trust, self-managed super funds, whatever it might be. People are looking for alternative options that traditionally they didn't need to because they could just borrow as per usual in their own names. But when under pressure we seek new options and the market adjusts accordingly. Sometimes it takes some time, but we're seeing some really good products come through now. Speaker 2 (15:17):

I think we should talk to trusts at some point maybe a bit later. I love trusts. It's not for everyone, but people have been using trusts for 1500 years. I used to use them in England when the kings would invade people's land to protect their land. So it's interesting. I like the history behind it. Cool. No, that's really good. Thank you so much. Let's talk about investor loans. A lot of our audience are investors. We do have first home buyers that listen in on our recordings, but it's mostly investors. What are you seeing in the investment lending space at the moment? And let's talk about buffers servicing these kind of policies, lvs, which we can explain for people if they don't understand what that means. Speaker 3 (15:54):

Absolutely. So I mean we touched on it briefly, but with these new products that are coming through, it is restoring some confidence in the market and people are feeling a lot more comfortable to start purchasing again. I think you reflected on it as well, saying you're getting a lot more clients who are keen to pull the trigger now, who might've held off a bit six months ago, they weren't sure what was going to happen in the market. So I definitely think we've got increased bias sentiment and they're feeling a lot more confident in purchasing at the moment. So that's one of the really great things. Buffer rates obviously being reduced, it's a bit more specifically towards refinancing and helping people refinance. That being said though, if you can get your principal place of resident costs down, that allows you to borrow more for an investment property. So the cheaper the rate is on your own or occupied property, the more you can afford to borrow in your investment property because they do look at what you're currently repaying. Speaker 2 (16:49):

Well, I talk about paying down your home loan quicker and paying more frequently, those kinds of things. Trying to make a difference in that. Is that something that you advise as well or? Speaker 3 (16:58):

Absolutely. And look, something people have probably heard the phrase good debt and bad debt and how to make debt work for you. So having home loan debt in general is not bad debt because it's debt to an asset that will be appreciating not depreciating. So first of all, that's amazing and what you can hope for. And secondly, investment debt specifically has a lot of taxation benefits as well. And I'm not an accountant so I won't talk to that, but if you know a bit about depreciation, capital gains for some buzz words to throw out, they're all taxation benefits that you can claim through your investment property. And if you are building up a bit of a portfolio of property or just higher wealth in general, using that to your advantage is essential to keep your tax costs to a minimum. Speaker 2 (17:55):

Yeah, it's not always about earning more, sometimes it's about getting more out of what you already earn. And I think a lot of people that we speak to at first don't understand that. Absolutely. Depreciation's my favourite component of it, the only free one, you don't pay for it apart from getting a depreciation schedule, it's just given to you as an incentive to build because we need more new homes. Absolutely. So that's cool. What kind of rates are you seeing investment loans and what kind of lvs, what are we talking? Yeah, Speaker 3 (18:25):

So I mean in terms of the LVR, so LVR stands for loan to value ratio. Basically what that means is the amount of debt you're taking out against the property, so the value of the property versus the loan value. So what we're seeing with LVR is anyone who starts to build some equity in their owner occupied property, if they have one, tends to start looking at options to access that equity. And equity that's usable. Is anything up to 80% of your property's value without going into LMI territory, which we will touch on I'm sure. So they tap into that equity, so it might be taking some cash out, it might be using that property as security and then they decide, Hey, I'm going to purchase another property. Depending on how much equity you've got, they'll take that money out and put it into the investment purchase. Speaker 2 (19:15):

Yeah. So when you say up to 80%, so let's just say hypothetically a house is worth a million bucks and someone owes $800,000 on that property, that's 80% LVR. So is there any money out of that that can be used, or do they have to then have less owing on their mortgage to be able to access more funds? There Speaker 3 (19:34):

Are options. There are options. So some lenders will, in certain circumstances take it up to a hundred percent. A hundred percent is very uncommon. We see 95 most of the time as a cap. So taking it up to 95 means that you will have to pay some lender's mortgage insurance, LMI. So lender's mortgage insurance is an insurance you pay that protects the lender if there's more risk. So the higher your LVR, the more risk the bank views the transaction as. And that's purely because if anything were to happen and property prices decrease, they want to be able to sell it and make their money back, Speaker 2 (20:10):

Which is fair Speaker 3 (20:11):

Enough, which is totally fair enough. And look, if I'm Speaker 2 (20:13):

Giving you a million dollars of my money, I want to know it's protected. Speaker 3 (20:16):

Absolutely. And look, when I worked in the bank, I had one of the major MI insurers come out to visit us and basically what they said is in their entire time working with that bank in particular, they had only ever repossessed one property, which is pretty incredible when you think about it. And the bank had been around for a long time. It wasn't one that just popped up in the last few years. That's a great statistic I think to call out because it's worth paying. If that's the case, you're not going to lose your home hopefully in a lot circumstances. And sometimes paying that gets you into a property faster. And in the scheme of things, what's 10, $15,000 when your property in a period of six to 12 months can go up three times that? Speaker 2 (21:02):

Yeah, it's absorbed. I actually talk about LMI being a good thing. I mean if you can avoid it, great. But if you need it to access more leverage into more property, it's a tool then do it. I've spoken about a poor friend of mine, I've never mentioned her name, so it's all good. She knows I talk about it. She's the old school approach of 20% deposit for her first home. And so I do Speaker 3 (21:21):

Love those Speaker 2 (21:22):

People. Oh, I love her too, because she's a good friend, but it's like, Hey Soandso, Speaker 3 (21:27):

You didn't need to wait. Speaker 2 (21:29):

Well, she's still waiting. She still hasn't Speaker 3 (21:30):

Done anything. And I think that's one of the things I understand, having savings and the importance of having savings to put towards property, primarily your first one, once you've got your first property, it's not nearly as important, but realistically, you only need to show 5%, 5% genuine savings, which means you are putting that money aside each time you get paid and you're not pulling it back out again. So the bank likes to see that for a couple of reasons. They like to see good character that you show that you've got good money management skills that you can afford to put money aside every time you get paid and you're not tempted to dip into it, it shows them that, Hey, if we give you this mortgage, are you going to repay it? Yeah, most likely we Speaker 2 (22:08):

Will go head off to MNO Speaker 3 (22:10):

And enjoy the Speaker 2 (22:11):

Right boat, which sounds nice, Speaker 3 (22:12):

But it does sound lovely. But in the scheme of things, MNOs is a short-term gain and we want the long-term. Speaker 2 (22:19):

Yeah, we talk about the jungle not being as dangerous as it used to be. And I'm referencing what you just mentioned about banks, repossessing homes, it's like we do live in a first world economy where we do have protection mechanisms in place. They're not all good. Superannuation being one of them, but I won't get into that. But LMI is one of those things that do support protecting the whole Speaker 3 (22:40):

Position. Absolutely. The institution, right. Speaker 2 (22:42):

Well, exactly. And it's a big one. $10 trillion is the value of Australian residential property, so it's a Speaker 3 (22:48):

Lot for a good reason. Speaker 2 (22:49):

Exactly. And it over triples the next biggest asset, which is superannuation. Speaker 3 (22:53):

Crazy. Speaker 2 (22:54):

So people like it. Obviously just quickly, if you don't have a home, so let's say you don't have a family home, you're renting, you want to buy your first property as an investment rent vesting or whatever you want to call it. What kind of deposits are we talking as far as that's concerned? Speaker 3 (23:07):

You can still get your foot in the door at 5%. It is a little bit more difficult. You would probably aim closer to 10% because you do need to keep a margin for LMI in there. So if you only put 5% in, for example, you can't capitalise your LMI on the loan because that will take you up to 98%, 99%. Speaker 2 (23:26):

So you need to have that savings. Speaker 3 (23:28):

So you need to have some savings to put into it. And you can either have a 5% deposit and pay your LMI out of your own pocket or what most people do because there's not a lot of point in doing that is just put the whole deposit towards the loan and hope it's going to be more like a 10% deposit. Speaker 2 (23:43):

Yeah, cool. That's great advice. It Speaker 3 (23:44):

Is good to point out though as well that there are particular industries and particular lenders who will let you go higher. So I know teachers, medical sector, some other sectors, they will go up to 98%. It's most common on owner occupied properties, but it's good to, Speaker 2 (24:03):

Yeah, cool. And I think the good thing for people to understand with investment loans is naturally you're getting those deductions depreciations, but most importantly rent. Speaker 3 (24:12):

Absolutely. Speaker 2 (24:13):

So that does go towards people servicing. Speaker 3 (24:15):

It helps dramatically. For a good example, last night I was looking at a lady's circumstances. She was very fortunate because she had the option to move back home and she currently lived in this property and she was deciding whether she'd continue to live in it or to move back home. The difference the rent made in her circumstances was astronomical. It was about $200,000 difference in borrowing capacity just from adding that rental income. And when you look at adding rental income and someone moves back home, for example, most lenders will make you add a cost, which is called notional rent. It's basically, yes, I'm living with mom and dad or family or whoever it might be, and I'm not paying anything, but they make you put down this amount. It's around 500 per week depending on the lender just to show that if you are renting at any point, you can afford to do both. It's still made a difference of about $200,000 per year. So same goes for if you're renting. Speaker 2 (25:12):

Yeah. The reason why you see some people, and some of it's probably got a bit of mail on it, but 25 year olds with 10 properties and these kind of things, the reason why that occurs is because what Imogen was saying with saving for your first home, you only need to save for the first one and you can start leveraging the value and equity in that to be able to get more. And when you get an income coming in from an investment property, that obviously increases your borrowing capacity. Yeah, it does. So if doing that intelligently to build a portfolio and you have someone who knows what they're doing with that, obviously that's going to get you on a much better track than just guessing. Speaker 3 (25:47):

Absolutely. And look, we did touch on it very briefly before and our love for trusts, but trusts are a great tool to be doing that as well. If you can have property in trusts in its self-sufficient, there's certain circumstances where you can then exclude that from your personal borrow capacity servicing, which can allow you to accumulate multiple properties. Speaker 2 (26:07):

Very clever. Well, let's talk about trust. I mean, I was going to jump to something else, but we're here. We're on the topic. Sorry. No, don't be sorry. It's fine. We're malleable here. Tell me about trusts. What is it? I would imagine, well, most people I speak to dunno how they work. Speaker 3 (26:20):

Absolutely. And look, part of the reason most people don't know how they work is there's so many ways they can work. So trusts essentially are a vehicle, so they can be an asset holding vehicle. They can also hold companies within trusts. You can have trusts that are income producing or you can have trusts that are purely just to protect your assets. Most people would've heard of family trusts. It's a really basic example. People with businesses tend to use family trusts to distribute income for various taxation benefits and those kinds of things. But likewise, if you're accumulating property, a lot of people will use holding trusts for their property. So they don't necessarily have an income, they just protect your property because it's a separate asset from in your personal name. Speaker 2 (27:08):

And when you are borrowing through a trust, how does that work? Speaker 3 (27:11):

So you have to be selective in which lenders you choose. Some lenders don't like trust lending because it's technically a business in a way. So it's not borrowing in your individual name, it's borrowing in the name of the trust, but it can be incredibly advantageous because if you borrow within a trust, your circumstances are quite separate. So yes, obviously you still need to show servicing, but once you've got one property in a trust, you can go to a particular lender or multiple lenders that offer something where you can exclude that trust in that property from the servicing for your next property. Because all you need to do is say that that trust is profitable keeping itself afloat and then they won't ask more into it. That's great. Yeah, Speaker 2 (27:56):

That's strategy is so important. Speaker 3 (27:58):

It's strategy. It's all about strategy and having a good team of professionals around you, a great accountant to set them up. A financial advisor who's knowledgeable in this stuff, someone like yourself who can advise on the property side of things. And obviously a broker is useful too. So Speaker 2 (28:15):

Very useful. I mean this advice is really great. It's helping me too. I mean I love finance. I'm not a finance broker, but it's really cool. The Art of war is one of my favourite books. Talking about having an army and stuff, strategy is key. I've just started watching Peaky Blinders again for the third time or something, and Thomas Shelby's strategy that he applies with his gangster result. Very cool. Smart man. Yeah, very smart man. That's really cool. Imogen trusts people learn more about it. We're actually releasing a new book soon and it's got a bit of information about trust. So amazing. Yeah, hopefully it's on point and makes sense. I just want to go back one step. I actually raised a question to you before we started recording about line of credits. Line of credit is essentially, well why don't you explain it. Yeah, Speaker 3 (29:00):

I mean look, I used this term before, but it's essentially a very large credit card. So line of credits, there's not that many around anymore. There's still a few floating around, but they're harder to find than they once were. They were very big back in the day. Don't quote me on the eras, but in the early two thousands and the nineties, I think you would've come across a lot of people with a capital a trust Speaker 2 (29:25):

With a line of credit. That's the one that's all Speaker 3 (29:28):

Good and line of credits can be a really good asset. So basically what it is, is it's a revolving credit that you can tap into and you can take the money out and then pay it back as you please usually only have interest only repayments. So you're not paying the principal down at any point in time. You're just paying the interest costs and the money you can take in and out as you please. Speaker 2 (29:50):

So what is the purpose of line of credits for people that are listening? Speaker 3 (29:53):

Absolutely. So look, I'm probably not an expert on them because they don't exist too much anymore, but from my probably limited understanding of line of credits, they can be an incredibly useful tool for investors because it's equity you can tap into at any point in time without having to engage in new lending application. It's already sitting there, it's ready to use, you can use it as you please. And so you can take the money out, purchase a property, put it back in at some point, and then do it all over again without having to apply for a new loan every time. Speaker 2 (30:28):

And the alternative option to this is an equity loan, is that correct term? Yeah, Speaker 3 (30:31):

So there's a few different ways that you can access your equity. The most common that I see is taking out a separate loan split. So you might have your existing property, whether that's owner occupied or investment, it doesn't matter. You can take a second loan split out for the equity, that loan split. Most of the time it's a good idea to have it interest only, so you're not making any repayments on the money till you use it provided those funds are sitting in an offset account or in the loan itself. So if you don't have an offset account, you just keep the funds in the loan because you're only paying interest until you draw on it. There is no interest being charged. So no repayments. Speaker 2 (31:08):

Yeah, repayment strategy is important too. A lot of people pay off the wrong debt. They pay off the investment debt, which you don't want to do because you're just reducing what you can claim. Exactly. Which should be paying off their family homes first. Speaker 3 (31:20):

Definitely Speaker 2 (31:21):

They cost us more to Speaker 3 (31:22):

Hold. And structuring your debt against your investments is always a good strategy where you can Speaker 2 (31:28):

Cross collateralizing with equity loans. For people that don't understand what that is, having the same bank providing the lending for your whole setup, your family home, your investment property, what's your take on that? It can Speaker 3 (31:39):

Be a really good idea if you don't want to take cash out. So if you have an existing property and you want to leverage it, but you don't necessarily want to increase the debt against that property, you can cross collateralize. So basically what that is is like you explained, you have your lending at the one lender 90% of the time. There are ways you can do it separately. 90% of the time the lending's at the one lender and they will secure a portion of the new lending against the original title. The end of the day you end up with the same amount of debt. It's just whether or not it's secured against the original property or against the new property and how that's structured. Speaker 2 (32:17):

Yeah. Okay, cool. We won't get too much more into that. I think they're good things to be talking about when you actually want to apply for a property loan image and happily help you. I want to touch on the first home buyers listening to this podcast, first home buyer, lending's a little bit different. It is. There's obviously some government assistance and whatnot to try and encourage people first. Home buyer ownership has gone down considerably since the year 2000 in particular. I think the percentage is about 35% down. So we're seeing it being harder for people to get. Yeah, Speaker 3 (32:49):

It's Speaker 2 (32:49):

Tough into the market. Speaker 3 (32:50):

It's really tough. I think most Australians would be feeling that the cost of living's increased pretty significantly over the last six months, 12 months, Speaker 2 (32:59):

$7 lettuces is it? It was a special the other day last night, two capskin and it was like $7 80. Speaker 3 (33:05):

Capsicum is the only vegetable I don't eat. Funnily enough, I love my veggies, Speaker 2 (33:09):

But it'll save you money. Speaker 3 (33:11):

Yeah, no capsicum for me so I can't talk to that one. Yeah, so it's really tough and anyone who's managing to get their foot in the door is doing a great job at the moment in my opinion because it is quite hard to save in this economy. But if you can put a little bit aside each time you get paid to show that genuine savings piece, it is worth also noting that if you are renting, a lot of banks will look at your rent as genuine savings as well. So they call it rental ledger. So what that is is the rent you're paying. If you don't miss any repayments, then basically they'll count that as if you're putting money aside because you essentially are, you're still showing that you can afford to repay your home loan. You're just repaying the rent instead. Speaker 2 (33:52):

That's common sense in my opinion. Speaker 3 (33:54):

You'd think so, but some banks still don't take that approach either. Some banks still want to see genuine savings, but if you get a gift from family and you're concerned because you can't show genuine savings, there's options out there. Speaker 2 (34:07):

Yeah. Helps to have someone who knows what's going on there. So government incentives at the moment, what sort of available for people? Speaker 3 (34:13):

Yeah, look, there's been some really great government incentives over the last couple of years. There's two in particular that I think are worth highlighting. So one of them is the first home guarantee scheme. It was called the first Home Loan deposit scheme, but they rebranded because the name was a bit long I think. So first home guarantee, basically what it is, is you can put your 5% deposit towards the property and the government will pay your LMI for you. So personally, this is my favourite scheme. I am biassed. I used it to buy my first property as well. So it's tried and tested, you're not Speaker 2 (34:47):

Biassed, your experience, Speaker 3 (34:48):

I can talk, you've practised what you're posting. I can talk about it with great confidence in what I'm talking about because I know there's no catches now that I've done it. So provided you live in the property that you're buying, that is one catch. Basically the government will pay your LMI for you. And then once you've hit the point where you no longer require LMI, so either you've paid your loan down or the property's increased in value, you just refinance it as simple as that. It's only a one-time payment. It's not ongoing. So they make that payment upfront and then you're no longer tied to the government. They don't own a portion of your property. It's completely separate, which is fabulous. Speaker 2 (35:26):

It's not a shared equity, Speaker 3 (35:27):

It's not a shared equity, which is the second scheme that I wanted to talk about. So it's a really good lead in. So shared equity is also a great option and the reason it's a great option is because it increases what you can afford to borrow, whereas the original first home guarantee scheme doesn't. What you can borrow is what you can borrow regardless of your deposit. So if you only have 5% and you borrowing capacity is 500,000, you can buy for 5 25 and some costs. But if you're looking at the shared equity scheme, basically what that is, and look, to be honest, it's not something that brokers can do. You have to go directly to a couple of lenders to do it for you. But I have looked into it for some clients before, so I do know a little bit about it, but worth jumping online. I'm sure you can link below or something like that. So basically what it is is you go in a scheme with government where they will give you a portion of the property value. So 10, 15%, I think it's anywhere up to 20%. Speaker 2 (36:30):

They take 20% ownership or Speaker 3 (36:31):

Yeah, so basically 80%, no. So you still hold the majority, they'll contribute towards that purchase. So they'll contribute anywhere from I believe 80% up to a hundred percent. So closing that gap between where you may or may not need LMI. And then in that contribution, they will take the equivalent amount of equity. The catch with this one, and it's not necessarily a bad thing because you can get into a property that you may not otherwise be able to is that the government is then paid back when you sell that property or potentially change its purpose. I'm not too sure they're paid back their portion of the property ownership plus a percentage of the equity growth. Speaker 2 (37:14):

So if you are, they're investing in their They Speaker 3 (37:16):

Are, yeah. So they're making money from this one as well. Cool. So basically if they're putting in 10%, your property goes up in value by $50,000, you've got to pay them back their 10% plus 5,000. Speaker 2 (37:28):

5,000. Yeah. Which is fair. It's Speaker 3 (37:30):

Fair. I mean it still is an asset when it comes to getting your foot in the door and purchasing a property sooner rather than later. And you are still coming out on top at the end of the day. But whether or not it's the right one for your circumstances, again, chats for broker do some research Speaker 2 (37:47):

And for those that are building or buying a home that hasn't been lived in as a $10,000 government grant, Speaker 3 (37:52):

There sure is. Yep. That's cool. It's great. Does that Speaker 2 (37:56):

Go towards deposits or not? Speaker 3 (37:58):

No, it doesn't. And I was looking at this recently for a client who was doing a land and build, it used to be paid on slap stage of the build, and so you could include it when you were calculating the build costs. You could say, okay, well they're going to get 10,000, so we don't need to borrow as much for the build because we can put this 10,000 towards it. Unfortunately, at some point in time they've changed it. So now you get paid it when the property is complete, which you still get $10,000. So Speaker 2 (38:28):

Does it go straight to the mortgage or do you get it in your bank account to go Speaker 3 (38:32):

Tono? Yeah, go straight in your bank account. Yep. You can furnish a house with 10 grand. Speaker 2 (38:35):

MNOs is going to happen. It's going to happen. Yeah. Speaker 3 (38:37):

I'm sensing a theme here. There's a lot of blue and white in the room actually as well. The theme Speaker 2 (38:42):

Is, I need a holiday. That's what that theme is. Yeah, Speaker 3 (38:44):

You and I both, but hey, inflation's real. So Speaker 2 (38:47):

Yeah, I know. Yeah, cool. I think that's great. And stamp duty exemptions, obviously something as well. Speaker 3 (38:52):

Amazing stamp duty exemptions are so useful if you're looking to buy your first home, unfortunately, I think they're capped a little bit too low, but honestly they'll change because not a lot of people can find a property under 600,000. So I imagine they will increases the demand increases to be purchasing for more. It's worth noting that is in Victoria. So these do change from state to state. Each scheme is slightly different depending on which state you live in. Speaker 2 (39:21):

And for Victorians listening to this, we are almost the most expensive with stamp duty. It's a because of the price of property here, but B, because we're just more expensive, the government take more. There are entities looking at trying to reform how stamp duties are happening. So that be Speaker 3 (39:38):

Interesting. Like the land tax in New South Wales for example. Speaker 2 (39:40):

Yeah, there's changes hopefully abroad, but time will tell, look, we're nearly out of time, so they always go longer than I think they will. And I could talk to you for a lot longer, very knowledgeable, which has been really good. One thing that we help people with is acquiring properties through their superannuation, through a self-managed super fund scheme. Gives people a lot of control as opposed to relying on the industry funds to control their money. Tell me a little bit about that can and what's your thoughts on it? Yeah, absolutely. And how does lending work? It is a bit different to lending through Speaker 3 (40:12):

Traditional. It's very different. It's more similar to trust lending. Actually. I love self-managed superfunds. I love self-managed Superfund loans. They've sort of come back with a vengeance in recent years. I think I'm seeing a lot more people looking to get their self-managed super fund up and running and acquire property in it. And I think there's quite a few reasons for that. A lot of changes happened in the financial advice industry and I think that's floated into advisors talking more about self-managed super funds and less about investments. So self-managed Superfund loans ideally are structured to be self-sufficient. So when I say that self-sufficient in the sense that the rental income for that property will pay the mortgage plus your contributions and you don't need to put an extra cent in there. So essentially it's paying down a property and having this added asset without changing anything in your day-to-day life. Speaker 2 (41:08):

Yeah. Explain to people the brick wall between their personal entity and super. Absolutely. I think that's probably the most, well, it's not the most important thing, but it's a Speaker 3 (41:16):

Very important part of it. So when we look at self-managed super fund servicing, when I talk about servicing, it means what the bank will lend you and what you can afford. There's a distinct divide between your personal circumstances and your self-managed super fund circumstances. So essentially, even if you've maxed out your borrowing capacity in your personal name, so they say, Hey Matt, sorry, we're not going to lend you any more money. We think you've got enough. You can't afford to borrow anything else. If you came to me and said, no, what about a self-managed super fund? I'd be like, yep, great. Because they'll look at it completely separate to everything else. Speaker 2 (41:50):

And if something happens where you need to pay more into that, that doesn't affect your personal position either. It doesn't Speaker 3 (41:55):

Affect your personal position, that might happen through some additional super contributions, increasing rental income if you can. Unfortunately. And that's sort of how that works. There's not too much more to it. So it's ideally a very simple transaction. You do have to purchase what is called a single acquirable asset that is a house, for example, or a commercial property. It can be residential or commercial, and it needs to be a single asset that's standing, Speaker 2 (42:26):

Meaning that you can't buy a piece of land or then build on it. You can build something, but it needs to be a one part agreement. It does. Speaker 3 (42:34):

So a single contract. So if you're going to do house and land, it can't be a separate contract for the house and the land. It just needs to be the one contract for both, which is possible, but it's a little bit trickier than buying something that's already established. Yeah, Speaker 2 (42:48):

Come speak with us, we can help with that. Absolutely. And balance, what sort of amount do you say generally needs to be in someone's super fund for it to be worthwhile? Speaker 3 (42:55):

So in terms of dollar figures, it's flexible. It's more towards the percentage of the property that you are looking to purchase. So I would aim to have a 20% deposit plus the stamp duty. Speaker 2 (43:08):

Yeah. If we talk 500,000, we're talking hundred 30,000 as a guide roughly in super. I generally say if you've got 150,000 in super come and speak with us. That's Speaker 3 (43:19):

Exactly where I would usually start as well. Speaker 2 (43:21):

Yeah, Speaker 3 (43:22):

Even a hundred. But you'd be looking at a much cheaper property. Yeah, Speaker 2 (43:26):

I mean we can't give financial advice, but we generally say if you've got a hundred thousand in super, let's maybe sit on it for a bit. You don't need to do anything rash. But tax advantages, I dunno if you can talk to tax advantages through super. I can. If you can't, it's massive. This is the biggest thing. Well, the biggest thing with buying super properties is you get leverage. So if you've got 200,000 in super and you buy a $600,000 asset, all of a sudden you're getting growth on a bigger asset, which is what leverage is. But what are the tax advantages, if you're aware? Speaker 3 (43:57):

Yeah, look, I mean it's definitely not my area of expertise. I do work with some fabulous accountants that would take the ropes on this one. Speaker 2 (44:05):

We'll have an accountant coming on next, so there you go. Speaker 3 (44:07):

So save these questions for them. I do know a small amount about taxing self-managed super funds, but essentially you do save yourself money when it comes to your tax because it's something you can depreciate against it, I believe. Speaker 2 (44:21):

Yeah, look, I think the main advantage don't take this as financial advice, but so the main advantage of my understanding is that if you hold a property to maturity, and that means when at retirement age and you choose to sell that property, or obviously you just choose to live off the income that's being brought in from the rent, that's a tax-free environment, which is massive because capital gains tax in your personal entity, if you make a million bucks on a property, you're going to be taxed on half of that. Speaker 3 (44:49):

It's very significant Speaker 2 (44:51):

And it's why when we talk about the rich getting richer, the poor getting poorer, it's because they know how to apply these strategies. They're smart. They have advisors that educate them on, Hey, no, no, no, let's not do it this way. Let's do it that way. Let's use a trust and let's go through super or whatever it is because you'll get this advantage. So yeah, it's big. Speaker 3 (45:11):

Yeah, and look, not everybody knows about it. Speaker 2 (45:14):

Lots of people dunno about it. Speaker 3 (45:15):

No, most people dunno about it. And that's one of the biggest advantages. Speaker 2 (45:19):

Yeah. On that note, Imogen, I think unless you've got anything to add, I would love for you to share to people how they get in touch with you, please. How do they contact you? Speaker 3 (45:29):

Absolutely. So email call, I'm sure Matt can link my details in the description, but my email is imogen, I-M-O-G-N at allo ELO lending dot c. Speaker 2 (45:43):

Beautiful. no.com au? Speaker 3 (45:44):

No.com au. We're just.co. We're too Speaker 2 (45:47):

Cool. Just trending. It's trending. That's in Melbourne City Speaker 3 (45:50):

Stuff. Well, the full name is Aloe Lending Co. So Okay. We have Aloe Lending Co. Speaker 2 (45:55):

Very good. Well thank you so much for coming on. I really enjoyed that chat, and of course it went longer than we expected, but yeah, you've got a wealth of knowledge and thank you for sharing it. Speaker 3 (46:05):

Likewise, yourself. You've been incredibly valuable to my clients so far, so I look forward to what's to come. Cool. Cool. Thank you. Thank you. Speaker 1 (46:13):

Thanks for listening to The Property Now podcast with Matt elo. We hope you learned something valuable and enjoyed the show. Should you wish to reach out to us, you can do so by calling 1 302 8 9 3 2 4. Or you welcome to email matt@hellobayfairproperty.com au and he'll be more than happy to help however he can. Have a great day.