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How to build a property portfolio without an income

By Greg Carroll www.attitudefinance.com



It is not unusual to hit a few road blocks with lenders on your way to building an investment property portfolio, particularly in relation to serviceability. Depending on which lender you deal with they may write down rental income, and not factor in aspects like interest or depreciation deductions which can make your serviceability look a lot worse than what it really is. Even for those with cash flow positive properties.


In short, it is likely you will hit a point where your borrowing capacity will be restricted based on serviceability.


A solution to problem is "No Doc" lending. You may be familiar with "Low Doc" lending, but "No Doc" is actually quite different. I briefly touch on the differences


"Low Doc" lending

Low Doc lending is typically available to borrowers who are self-employed people. It is generally used where the borrower is not able to prove their income through the provision of two years tax returns. Instead of providing financial statements the borrower provides a declaration of their income. This figure is then used to assess serviceability. Therefore the income declared must still be sufficient to service the loan.


Under low doc loan a borrower is also required to fully disclose all assets and liabilities. And this statement may need to be supported by rates notices and current loan statements.


Therefore a low doc loan is not that different from a standard home loan other than the need to provide paperwork to prove income.


"No Doc" lending

No Doc lending is pretty much as the name suggests. Other than providing suitable ID it may not be necessary to provide any other paperwork. There is no requirement to declare income and no need to provide a statement of assets and liabilities. It is essentially an asset lend. The main requirement is to hold at least 20% equity in the property provided as security.


For example let's assume your existing home is worth $600,000 with a loan of $200,000 against it. Under a No Doc loan you would be able to release a further $280,000 in equity without the need to prove serviceability. Pricing for these products is very close to standard variable rates so they remain an affordable option.  


The key qualifying criteria is as follows:


  • To borrow 70% of a property's value there is no other criteria other than a clean credit history
  • To borrow 80% of a property's value you need to be a business owner or property investor for two years or more  


If you would like to know more about NO DOC lending and how you can build a property portfolio call Greg Carroll on 07 3666 0110 or contact us


This information is general only and does not constitute advice. The Home Loan Spot accepts no responsibility or liability for anyone relying on this information.