THE RECENT APRA CHANGES to LVR (Loan-to-valuation) ratios and subsequent raising of interest rates may have already impacted your investors. We sat down with experienced property management business owner and now mortgage broker Kirsty Dunphey of Up Loans to talk about life after property management and what you can do to help your owners through these changing times.
FROM PROPERTY management to mortgage broker, event speaking to writing books – there is pretty much nothing Kirsty Dunphey can’t do.
With a career that kicked off at the tender age of 15, her own successful real estate business at 21, a self-made multi-millionaire at 25 and an astounding ability to retire at the ripe old age of 27, Kirsty has now changed entrepreneurial paths and has chosen to explore the incredibly interesting world of mortgage broking, which came about as a result of her business experience in property management.
During this time, she says, she would regularly be talking to her owners about various things, but would get quite frustrated when they would tell her that they were selling for reasons that were entirely preventable.
“I talked to investors to find out why they were planning on selling their property and found out that in the majority of cases it just wasn’t working out for them at tax time. I’m a curious person by nature; I probably delved a little bit deeper than I should have, talking to them about the way they had structured themselves. And I was astounded how many people were really poorly structured with the way they had their finance set up, in terms of properly maximising the tax benefits of owning investment property,” says Kirsty.
So she decided to take on her next challenge, to study and train and become a qualified mortgage broker, to stop these investors from leaving the property market.
“It felt like a really natural fit for me. I heard some people had brokers working within their companies, but not from a property management perspective.
So I trained up with another girl in the company and set about implementing changes for our clients.”
Through this implementation, she found she was able to tailor the service for investors in particular and, when her property management company sold last year, the mortgage-broking arm of the business was turned into a full-time business in its own right, operating under the name Up Loans. Kirsty now works full-time in Up Loans, providing investors with the best products and options, keeping clients in the loop throughout the entire loan application process, with the main aim of making things as simple as possible.
The recent Australian Prudential Regulation Authority (APRA) changes have changed rules for the banks, where the five majors must hold more capital against mortgages to provide a safeguard against defaults. As a result of this, Kirsty says now is a much more complicated time to be owning and buying investment properties.
“Lenders are under pressure to cut back their broker investment lending and how much of their portfolio is actually investment properties, as opposed to owner occupied dwellings. There have been massive changes around foreign investing and changes with pretty much every lender about loan to value (LVR) ratios. For example, some banks that would have previously let you borrow 95 per cent of the highest value of the investment property will now only let you do 10 per cent of the highest value.
“From my perspective, it’s a great thing because people wanting to buy investment properties need to use a broker now to be able to find lenders who can give them flexibility.”
She says smaller, non-bank lenders were originally getting a lot more business, but some of them are now under pressure to cut their investment lending as well. There are only a couple of small lenders transacting business because they aren’t under any restrictions from APRA.
Kirsty says investors need to factor in the negative tax benefits they can receive as far as serviceability goes. Investors have found their interest rates have also gone up, which is “interesting, given we’ve had two interest rate drops this year”. She says this is the ideal time for people to look at their owneroccupied mortgages.
“The banks are all clamouring for that [owner-occupier] business at the moment. If you strip out investment from their portfolios, they could increase owner-occupied lending. APRA cares about percentages, not the individual loans, and the banks are all trying to win your own mortgage.”
Finally, we asked Kirsty what advice she has for property managers who are managing investor landlords in the current financial and economical market.
“One, always look at small increments or rent increases – even with the best long-term tenants. You don’t need to stay in line with investor increases or interest rates.
“Two, make sure the owners are fully aware of things like depreciation to ensure they are claiming appropriate tax benefits. Rather than have the client come to you trying to cut back on your fees, show them how they can pay less tax by getting proper depreciation set up.
“Three, establish a good relationship with a broker who understands investment properties and who can add value for a client. You can have a good relationship with any sort of broker in property management; you just need to find a local one who is [preferably] an investor themselves and who understands the nuances that go along with helping someone finance investment properties. The broker can then do two things – look into a refinance option, or look into whether there is the option to get pricing cheaper on their existing home loan.”
For more information or to contact Kirsty visit uploans.com.au.
