Unlocking Property Investment: 7 Strategies to Keep Growing Your Portfolio After Hitting Your Borrowing Limit

Over extended!!

We recently had a client come to us enquiring about what other options he has once his borrowing capacity was maximised. Reaching your borrowing capacity limit can feel like a dead end in your property investment journey. However, it's merely a sign to get creative and strategic. Many successful investors have navigated this hurdle by exploring alternative financing methods and restructuring their approach. Here are seven effective strategies to continue expanding your investment portfolio in Melbourne:

1. Leverage Equity in Existing Properties

If your current properties have appreciated in value, you can access the equity to fund new investments. This involves refinancing your existing loans to release equity, which can then be used for deposits on new properties. It's essential to ensure that the new investment will generate sufficient rental income to cover the increased loan repayments.

2. Utilize a Self-Managed Super Fund (SMSF)

An SMSF allows you to use your superannuation savings to invest in property. This strategy can be particularly beneficial if you're looking to invest in property for retirement purposes. However, setting up and managing an SMSF involves complex regulations and administrative responsibilities, so it's crucial to seek professional advice before proceeding.

3. Consider Joint Ventures or Partnerships

Partnering with other investors can increase your purchasing power. By pooling resources, you can share the financial burden and risks associated with property investment. Ensure that all terms are clearly defined in a legal agreement to protect all parties involved.

4. Explore Vendor Financing or Rent-to-Own Options

In some cases, property sellers may offer vendor financing, allowing you to purchase a property without traditional bank financing. Alternatively, rent-to-own schemes can provide a pathway to property ownership over time. These options can be particularly useful if you're unable to secure a loan through conventional means.

5. Optimize Your Financial Position

Improving your credit score, reducing existing debts, and increasing your income can enhance your borrowing capacity.Lenders assess your ability to repay loans based on your financial situation, so presenting a strong financial profile can improve your chances of securing additional financing.

6. Seek Alternative Lenders

Traditional banks aren't the only option for financing. Non-bank lenders and private financiers may offer more flexible lending criteria. However, these loans can come with higher interest rates and fees, so it's important to carefully consider the terms before proceeding.

7. Invest in Property Syndicates or Real Estate Investment Trusts (REITs)

If direct property ownership isn't feasible, investing in property syndicates or REITs allows you to participate in property investments with a lower financial commitment. These options provide exposure to the property market without the need for large capital outlays.

Final Thoughts

The above are by no means the complete list, but they are the more established and known ones. There are also versions of the above especially around private funding and other types of trusts.

By exploring alternative strategies and seeking professional advice, you can continue to grow your investment portfolio. Remember, each strategy comes with its own set of risks and benefits, so it's essential to conduct thorough research and consider your long-term financial goals.

If you're interested in exploring specific strategies or need assistance in evaluating your options, feel free to reach out!

Andrew Nott