Mr IQ again, via AFR:
Cracks are appearing in the residential investment market, with well-known Sydney investor Nathan Birch sued by his lender after his company defaulted on a $535,000 high-interest mortgage for a Gold Coast investment property.
Mr Birch, who claims to have a net worth of $30 million and earn $500,000 a year after expenses from his portfolio of more than 200 properties, said he had “briefly” fallen behind on “one or two mortgages” because of increased lending restrictions imposed by the Australian Prudential Regulation Authority.
…A claim filed in the Brisbane District Court by solicitors Dunstan Hardcastle, acting on behalf of Permanent Mortgages (a subsidiary of non-bank lender La Trobe Financial) shows that problems began surfacing for Mr Birch just two months after APRA took action on interest-only lending.
Court documents obtained by the Financial Review show that by June 23 Mr Birch’s company HLG One Holdings Pty Ltd had failed to pay amounts owing on a $535,000, 30-year interest-only mortgage for 9 Victor Avenue, Paradise Point, which has three two-bedroom rental units on one title.
HLG One Holdings, of which Mr Birch is the sole shareholder and guarantor over the loan, was given 31 days to remedy the situation or be in default.
When HLG One Holdings had not done so, Permanent Mortgages, who were charging a variable interest rate of 6.94 per cent plus late payment fees at an additional rate of interest of 5 per cent a year, sued HLG One Holdings and Mr Birch claiming repossession of the property together with $548,367 and interest accrued on the amount at a rate of 11.94 per cent a year from August.
Extraordinarily, Mr Birch did not file a notice to dispute the claim within the stipulated 28 days – an action which meant a judgement could be made against him for the amounts owing plus costs.
You might like to compare the above with the history as claimed by Mr IQ. As the world soured:
Then mid last year a few cracks appeared:
For a long time now, I’ve been collecting properties like kids collect action figurines in a happy meal. I never like to see one go.
But recently, the finance environment has changed…
It’s a bitter pill to swallow for a buy and hold investor – but I need to optimize to suite the times we are in by letting go.
Just to be perfectly clear this doesn’t mean that I’ve stopped buying! Far from it, last year alone I did $10 M in new property purchases. This year I am looking at spending $6 – 7 M on new properties.
However, I see this stage in my investment journey as graduating from my ‘foundation’ portfolio into a development phase.
Personally, I am interested in buying anything that I can develop into a bigger property in the future.
Now, I’m not selling up because my grand plan has failed, vindicating the ‘negative Norman’s’ out there.
Not at all! I can sit on this portfolio and ride these finance changes out without breaking a sweat, but that doesn’t sit well with me. I want more!
I want to keep moving in a market where almost every investor is stuck in quick sand – even if that means selling.
For years now I have been channeling equity into deposits for new properties, but it’s no secret that equity is very hard to release these days – even if you have millions of dollars of it!
The reason behind this is serviceability restrictions. Anytime you withdraw equity, you need to show income to service that new loan. Sadly, the banks don’t value rental income as highly as they once did.
The fail-safe way to access equity today for anyone with a large portfolio is plain old-fashioned selling.
The cash can be used to buy up new properties better suited to the current market. For me that’s anything I can develop and flip for a chunky cash profit.
At the time H&H suggested that far from buying more property, Mr IQ might be running into a little liquidity problem. To wit, earlier this week:
Perhaps a brand change is in order to be-leveraged.