Investing without cash flow

Our Experts Answer:

This is not an easy one! From experience, what happens in these situations is that clients still struggle to be able to finance property number two. The reason for this is that the first property can prop up the second from both an equity and servicing point of view. But, in most cases, lenders are also loading living costs on the borrowers when assessing servicing and that means that servicing struggles to work.

In the last property cycle (pre-GFC), there were a number of low doc /no doc products which were priced relatively close to bank interest rate pricing. This meant that it was possible to make this work. However, these days while these products still exist, changes in regulation much more is required to be able to obtain them. Alternatively, the pricing is considerably more expensive. This means that most people don't use it for buy and hold investment purposes.