Professional Documents
Culture Documents
Also when growing a property portfolio investors will find that as they progress and
take on more debt, lenders will invariably get more difficult to deal with. This issue
can be postponed by spreading debt around several lenders thus putting off
reaching certain lending limits which often trigger more rigorous financial
assessment.
We recommend quarantining your own home with one lender referred to here as
Bank A who you do not look at securing further properties with (with the exception
of a holiday home which if advised should also go inside the same trust as the family
home makes sense to also be secured at this lender). We normally look to set up a
revolving credit facility with Bank A from which deposit funds for investment
purchases can be drawn on (and renovation funds if you are looking to target do-up
type properties). A preapproval is then organized from a second bank referred to
here as Bank B, which will hold security over the investment purchase and who
provides the majority of the funds to complete the purchase. Over time,
appreciation in the property means that equity will build up in the rental and then it
is generally advised that the mortgage should be topped up with bank B and the
funds utilized to reduce the debt on the owner occupied property with Bank A.
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Note that with the preapproval we are looking to get a preapproval based on the
highest possible Loan to Value Ratio without incurring low equity costs which since
the introduction by the Reserve Bank of the LVR rules on the 1st of October 2013 is
generally 80%. It is important to note here that the type of properties you are
looking at targeting may determine which lender is best to act as Lender A in this
case and also Lender B. As an example one particular lender is useful and often
used as Lender A as they are more willing to enable clients to set up large revolving
credit facilities which is ideal so investors can move quickly when suitable purchases
arise knowing that they have funds in place to act. If an investor planned to target
the apartment market however we would prefer to leave this lender available to act
as Lender B as they have much easier requirements around minimum apartment
size than most other lenders and utilising this lender as Lender A would invariably
put the investor into a situation of having to cross secure their home against their
investments which is what we are aiming to avoid.
Other banks (and potentially second tier lenders) will be approached over time
as a portfolio grows to spread the risk and minimize the chances of hitting a
“lending wall” should one funder tighten their credit criteria substantially. Lenders
do tend to relax and tighten criteria at different times and so it is important not to
have all deposit funds locked up otherwise it can be difficult to continue investing.
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STANDARD DEBT STRUCTURING
Not recommended
Investment
Purchase
100% Financed
Personal Investment
Home Purchase
Holds Equity 100% Financed
CAPTIAL
Investment
Purchase
100% Financed
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RECOMMENDED DEBT STRUCTURING
STAGE 1 - Securing Revolving Credit
PREAPPROVAL RECOMMENDATIONS
Investment
Property Different lender to BANK A for preapproval.
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RECOMMENDED DEBT STRUCTURING
Recommended
Personal Investment
Home Purchase
Revolving Credit 20% Deposit
80% Financed
BANK A BANK B
20
%
20% Deposit
De
po
sit
Investment
Purchase
80% Financed
Investment
Purchase
BANK D
Note
If no renovations are undertaken there is generally a 6 month wait before a bank
will be willing to disregard the purchase price and consider a top up against a
higher valuation.
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RECOMMENDED DEBT STRUCTURING
Recommended
Personal Investment
Home Purchase
Revolving Credit 20% Deposit
100% Financed
BANK A BANK B
20
%
De
20% Deposit
po
sit
Investment
Purchase
100% Financed
Investment
Purchase
BANK B
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ASSET PROTECTION
It is strongly recommended that qualified asset protection experts who understand
both how to protect the assets and how to structure for optimum tax efficiency are
approached. They will then be able to assist in ensuring that the structures will hold
up to a creditor’s challenge and also assist in ensuring that gifting is completed
correctly. We work very closely with New Zealand’s most prominent structuring
experts who we can introduce to you, to ensure the process is correctly put in place
and manage.
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ABOUT THE COMPANY
KRIS PEDERSEN - DIRECTOR & ADVISOR
By drawing on his personal property investment knowledge and armed with experi-
ence working at a market leading non-bank lender, Kris developed outside the box
lending structures that allowed more applicants to get deals across the line.
In 2009 Kris and his wife Tennille made the decision to establish Pedersens
Property Management company to best service his clients property management
needs after purchase.
Kris maintains an active role in the New Zealand property market and frequently
speaks at property events around country while regularly being asked to contribute
to the NZ Property Investor Magazine and other publications each month.
Kris stongly believes his clients need to be dealing with specialists, that's why Kris
Pedersen Mortgages offer specialist brokers for First Home Buyers, Commercial
Property & Business Finance and Risk Insurance Cover.
Kris' specialist property team are available to help you whether you're just starting
on the property ladder, are a sophisticated investor, or a large scale property devel-
oper.
Click here to hear from just a few of the happy customers we've been able to help
along the way.
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