1. Lending Strategy

Lending is one of the key foundations of property investment. Almost every client of ours will be using a loan to purchase, so it only makes sense that as the saying goes, “property is a game of finance, with houses thrown in between.”

Understanding how lending works, and how to build strategy around it, is what separates an average investor that gets stuck, from one who manages to build a portfolio and achieve their goals.

This module is designed to equip you, the Portfolio Strategist, with a deep understanding of lending mechanics, constraints, structures, and sequencing. Your job is to think about how finance enables (or might limit) a client’s journey and help them make strategic decisions that will protect and extend their borrowing power as much as possible.

While cashflow and equity are important components to consider, borrowing capacity is almost always the number one constraint as a portfolio matures. Cashflow and equity are typically more manageable as time goes on, especially when good investment decisions lead to rent and capital growth. But if an investor doesn’t have access to funds, this will grind the journey to a halt or require an investor to take a step backwards, to move forwards once again.

As a result, we must always be thinking about how we maximise borrowing capacity and use it as a scarce resource for a client’s portfolio.

A client’s borrowing capacity is essentially the maximum amount a lender (or lenders) is willing to lend a client, based on their ability to repay the loan. It’s one of the most important concepts to understand when building a property portfolio because it determines how far a client can take their portfolio — and where they may hit a ceiling.

As a strategist, while you’re not a broker, your role is to understand the mechanics well enough to guide conversations, spot limitations early, and collaborate effectively with brokers to structure a client’s portfolio journey.

As a general rule of thumb, clients can typically borrow 4–7x times their gross annual income, depending on their financial circumstances, liabilities, and the lender used.

A conservative working estimate is 6× gross income. This is also referred to as DTI (Debt to income). However, it’s important to note that this can vary a lot from lender to lender.

Example:

This multiplier can shift significantly based on:

Understanding what to avoid or manage early on is essential when helping a client prepare for their next purchase.

These factors often quietly erode capacity without the client realising it. Your job is to be one step ahead and help the client be “bank-ready” for their next step if they can reduce any of these limitations to maximising their borrowing capacity.

While you may not always have full insight into a clients finances, you may be able to spot hints that allow you to mention these points to the client to optimise their borrowing capacity.

Choosing the right lending partner is one of the most critical strategic decisions in an investor’s journey. While property selection gets a lot of attention, lending is what determines whether a client can scale their portfolio or get stuck after their first or second purchase. That’s why an investment-savvy mortgage broker is non-negotiable in any successful portfolio strategy.

Let’s explore the differences between using a strategic broker, a bank lender, or a generalist/bad broker, and why it can be the difference between getting stuck at 2 properties, or being able to scale to the 10 property portfolio.

A strong investment broker isn’t just someone who submits your loan application. They are a strategic partner in your portfolio journey who proactively manages lending outcomes and provides ongoing planning support. Here’s why that matters:

Brokers aren’t tied to a single institution. Instead, they have access to a wide panel of lenders — often over 30 — ranging from major banks to niche lenders. This allows them to match a client’s financial situation with the most favourable lending policy at the time.

For example, a client with bonus income or a newly self-employed status may struggle with a big bank, but a smaller lender may have a more accommodating policy. A good broker will know who to approach for every client situation — something a banker can’t do.

One of the most important aspects of portfolio lending strategy is sequencing — that is, the order in which you approach lenders.

Savvy brokers know to start with the most conservative lender who offers favourable rates and policy, so you use them while you still fit within their criteria. Then, as your portfolio grows and your serviceability drops, they move you to lenders with looser criteria, even if their rates are slightly higher.

This allows you to stretch your borrowing capacity as much as possible and get the most value out of each lender before moving to the next. A banker or unsophisticated broker won’t think this way — they’ll just go for whatever works now, without considering the next step after this one.

A quality broker will understand the nuances of equity release and how to structure loan splits correctly.

When clients release equity to use as a deposit for their next purchase, it’s crucial that these splits are clean, traceable, and purpose-specific. If done poorly — for example, mixing funds or cross-collateralising — it can lead to contaminated loans, tax complications, and restricted flexibility.

An investment-savvy broker will set up standalone splits, ensure clarity for your accountant, and preserve the client’s ability to reuse equity efficiently.

Lending policies are changing constantly — sometimes weekly. Lenders may shift their appetite for certain borrowers, adjust serviceability buffers, or tighten rules around specific income types.

Great brokers stay on top of these changes in real time, using industry networks, direct lender updates, and experience. This ensures your strategy doesn’t become outdated or derailed by a surprise policy change.

Bankers often find out after a change has already affected a customer, and generalist brokers may not even be aware that a policy shift has occurred.

Valuations are a critical part of unlocking equity. Some lenders are conservative in their desktop valuations, while others are more aggressive. The right broker will order multiple valuations across different lenders, compare them, and choose the best one to support a client’s next move.

For instance, a $100,000 difference in valuation (which we have seen before) could be the difference between accessing a deposit for the next purchase and getting a year of growth, or missing out. Bankers can’t give you that advantage, and bad brokers won’t know to do this for you.

Strategic brokers work hand-in-hand with strategists. They understand your client’s goals, and they build a lending roadmap to support future purchases — not just the one in front of them.

This includes:

This forward-thinking approach ensures that the lending strategy grows with the portfolio, and doesn’t become the reason it stalls.

Understanding the structure and type of loan is critical to a client’s ability to grow a portfolio.

While many investors focus purely on rates, smart lending strategy looks at how loan types affect borrowing capacity, equity access, cash flow, flexibility, and long-term scale. These are all much more important than saving a few dollars on a sharper rate.

In this section, we’ll break down the core loan types and how they impact strategic decision-making.

Loan Type Comparison Table

Lenders Mortgage Insurance (LMI) refunds are typically partial and available if you repay (refinance without LMI) your home loan in full within the first 1-2 years (often 12-24 months), with no arrears or defaults. Policies vary by lender and their LMI provider (e.g., Helia or QBE), and refunds are not guaranteed, always contact the lender directly to confirm eligibility and apply. Based on current information, here’s a list of major lenders known to offer partial LMI refunds under specific conditions:

As property values rise, the equity position of a client improves — and with that comes an opportunity to scale their portfolio quicker. Saving the deposit for the first property is the hardest part, and it’s not expected for most investors to continually save for their deposits for the following properties.

But this is why we love property! We have the ability to leverage on the returns of the initial property to fund the deposits of the following properties.

This section is about understanding how we help clients unlock that equity, maximise their opportunities through smart lending, and structure it in a way that supports long-term portfolio growth without adding unnecessary complexity or risk.

Revaluations are typically conducted when:

Usually without manufacturing equity we would wait around a year to see the market growth and reflect on valuations.

Lenders will usually rely on bank-ordered valuations to determine how much usable equity the client has. The higher the valuation, the greater the potential equity that can be extracted — subject to LVR limits.

Example:

This can then be used as the deposit and costs for a new property.

A key differentiator of an investment-savvy broker is their ability to work across a panel of lenders and:

This is crucial because bank valuations can vary significantly, even for the same property — one lender might come back at $600k while another comes in at $650k. This means an extra $40k of usable equity for a deposit or as a buffer.

Strategic takeaway: The difference in valuation can be the difference between securing your next property or losing 6–12 more months of opportunity cost. A great broker knows to complete multiple valuations to get the best outcome for a client. This is often much more important than the interest rate, but clients can often focus on saving a few dollars, not realising how much they lose in opportunity cost.

When releasing equity, it’s vital that the loan structure is kept clean.

There are two common options:

Always split loans when accessing equity. It keeps the debt traceable, separates the new investment loan from existing ones, and supports cleaner planning and accounting.

Equity releases aren’t just about just funding the next deposit — it can also serve as a safety measure.

We often advise clients to pull slightly more equity than needed if they can, with the excess funds parked in an offset account attached to the new split loan. This creates a buffer that can be used for:

Example:

Important mindset shift for clients: We’re not over-leveraging — we’re planning ahead. Having cash in an offset is far safer than riding with no savings, or trying to scramble to extract equity when higher expenses arrive. This is especially a great strategy to use for clients who have cashflows that are riding quite negative after accumulating a few residential properties.

One of the most common and damaging mistakes made in property lending is cross-collateralisation — where two or more properties are tied to the same loan facility or guarantee one another.

Each loan should only be secured against an individual property.

Separate loans and separate offsets means clean ownership structures.

Cross-collateralisation reduces your flexibility, increases exposure, and can cripple your borrowing capacity as the portfolio grows.

As clients scale their portfolios, one of the most powerful (and misunderstood) tools available is the use of trust structures.

Trusts aren’t just about tax or asset protection — in the portfolio building world, they are a key strategy to retain borrowing capacity when used at the right time, with the right lender and broker guidance.

In this section, we explore the mechanics, benefits, constraints, and timing around trust lending — and how it influences long-term portfolio growth.

When a property is purchased in a trust, the loan is still assessed against the individual(s) acting as guarantors — at least initially. So contrary to what some assume, trusts don’t remove the liability from the personal name right away.

However, the real value of trust structures comes from this concept:

Once a trust is cash flow neutral or positive, lenders can treat the trust like a siloed entity. With confirmation from an accountant that the trust is ‘self-sustaining’, certain lenders will exclude that trust’s debt from the individual’s borrowing capacity calculation — retaining borrowing capacity for further growth.

This is ‘traditional trust investing’ — and it’s essential for clients who want to truly scale portfolios.

Here’s the sequence:

Important note: It’s not just about the cash flow of the one new property in the trust — it’s about the overall trust position. You can have multiple assets in one trust, and it’s the combined income and expenses that determine whether it’s self-sufficient.

The general rule of thumb: Trusts are often introduced just before a client hits their personal borrowing ceiling — but this is not a hard-and-fast rule.

Typically, trusts were seen as more appropriate toward the end of a client’s personal capacity journey, because:

But if left too late — when the client has already maxed out — there’s no capacity left to fund the trust’s first property. The window of opportunity closes.

A general structure to follow is to use personal name lending first, and then introduce trusts on the final few properties before the ceiling is reached.

However, this strategy can be limiting for clients with strong incomes, solid buffers, and long-term goals. If a client is financially capable, starting trust structures earlier allows them to:

The key is to assess the client’s broader financial position, savings ability, and intention to build a larger portfolio. If they’re committed and capable, trusts can be a strategic move earlier in the journey, rather than a last resort.

Important note: It can be argued that using trusts is always better if cashflow can be sustained. The faster you move to trusts, the longer time period you have for the trust to become neutral and therefore, the asset would be self-sustaining faster compared to subsequent asset purchased after. However this relies on an investor truly committing to the goal to use trust structures and build a large portfolio, otherwise the extra costs are not worth it.

Let’s say a client is one purchase away from hitting their borrowing ceiling with their existing personal portfolio. Their portfolio cashflow and equity is strong, but DTI limitations restrict the client from growing further.

Let’s say an investor is nearing the limit of their personal borrowing capacity. They’ve already purchased 3 properties in their personal name and want to continue growing.

Here’s a rotation approach using multiple trusts:

This strategy builds a rotation where the investor:

This approach requires careful planning. Each trust must be structured and financed correctly, and the investor’s broker and accountant need to be aligned on the end goal.

Some advanced investors use what’s known as a “balancing strategy” within trusts.

This involves purchasing a mix of:

By balancing these within the same trust, the net income position can be kept neutral or slightly positive, which:

But… there’s a trade-off:

This strategy requires starting the trust earlier — well before capacity is capped — because multiple assets are needed within the trust to make the numbers work.

A consideration is that it may mean slower siloing of debt as opposed to having two separate trusts, and siloing the one that is positive.

So if you’re pursuing this strategy with a client, planning becomes critical.

Key Lending Considerations When Using Trusts

While the traditional route to exclude trust-held debt from a client’s personal borrowing capacity requires an accountant’s letter confirming the trust is cash flow neutral or positive, some lenders have recently introduced a more flexible — though less common — alternative: self-declaration.

This policy allows the borrower or broker to declare that the trust is servicing its own debt, without the formal need for external confirmation from an accountant.

Considerations:

⚠️ Important: All policies relating to trusts and debt exclusion are subject to change. Whenever we talk to clients, we want to highlight that this can change in the future.

Investing through a Self-Managed Super Fund (SMSF) opens a another pathway to property ownership, but it also comes with different lending considerations, constraints, and strict compliance obligations. This section will focus on the key differences and considerations for clients who are looking to purchase within SMSF.

When a property is purchased through an SMSF, it must be done under a Limited Recourse Borrowing Arrangement (LRBA). This means:

This setup is essential to protect the other assets in the fund, but it also makes SMSF lending more restrictive in the eyes of lenders.

Asset selection implication: The real key to note here is that it’s a bit more complicated in structure and ‘improvements’ on the property are not permitted, only repairs. Refer to the Lending Guide at the bottom for more detail.

SMSFs have a completely separate borrowing capacity from an individual or a trust. Instead of looking at the borrower’s income or personal liabilities, lenders assess:

This means a client who is tapped out personally may still be able to borrow through their SMSF — provided the fund has a strong balance and contributions are strong.

TIP: While income requirements to service the loan will vary, a back-of-hand calculation you can use is multiplying your rental income and contributions by the number nine.

Lenders view SMSF loans as higher risk, and structure the products accordingly.

For more details on general lending information, check out the link