Roel Capital

Are you considering purchasing an existing business? 🤔 Over the past few weeks, I’ve had a number of conversations with customers who are exploring the option of acquiring an existing trading business. When seeking to obtain finance, here are some of the key considerations we discussed: ➡️ What is the purchaser’s relevant industry or management experience? Otherwise, how will this acquisition compliment their existing income and/or business? ➡️ What is the vendor’s motivation behind the sale? ➡️ What is the proposed purchasing structure and have the appropriate advisors been engaged? ➡️ Is there a business plan in place (including a financial forecast)? ➡️ What is the proposed collateral and/or equity? ➡️ If there is a bricks & mortar location, what are the lease terms? Often, these points are ill-considered - or not considered at all. As such, we are generally engaged as the client’s trusted finance representative at a very early stage. Our job is then to procure the optimal mix of term debt, working capital & equipment funding with the appropriate funding partner. Roel Capital Jonathan Roël #businessfinance #workingcapital #financialforecasts #mortgagebroking

Rent or own? We’ve seen clients build an investment property portfolio. We’ve seen clients buy an owner-occupied residence and experiencing capital growth. When deciding on which strategy to pursue, these clients almost always consider, among other things: (i)     Where will they live, and what are the costs and benefits of each strategy [financially and for their lifestyle]? (ii)    What are the tax implications of each strategy? Particularly relating to a potential future asset sale plus the treatment of interest and holding costs. Seeking the appropriate accounting and tax advice here is critical. (iii)  Which scenario generates the greatest long term borrowing capacity? Or; (iv)  Which scenario is expected to provide the fastest pathway to living ‘mortgage free’? Either strategy has its potential costs and benefits. We specialize in providing tailored lending solutions for clients looking to access to loan funding. #mortgagebroking #propertyinvestment #structuredlending #propertyfinance Anthony Nocon Roel Capital Note: This is general information only and has been prepared without considering your objectives, financial situation or needs. It does not constitute legal, tax, investment or financial advice and you should always seek professional advice in relation to your individual circumstances.

I’ve alluded in previous posts that as the cost of capital increases, the necessity to optimize the deployment of capital into a business also increases. For those corporate finance aficionados out there, let me rehash the difference between ‘accounting profit’ and ‘economic profit’. (1)   Accounting profit is where revenue exceeds expenses. (2)   Economic profit is where the return on invested capital exceeds the cost of capital. Q: What's the difference? A: The second is a benchmarked metric, whereas the first is not. Let’s say you make $10 profit, that’s good business, right? What if the business where that $10 profit is derived has an unlevered balance sheet with $100 equity capital invested. If the opportunity cost of equity is 15% p.a. is that still good business? Recently we’ve settled several transactions for our commercial clientele who have been experiencing cash lock up from working capital. Usually this is where: (i) Inventory is paid for in cash, held for sale, then converted to cash from sales; or (ii) Sales are on payment terms, and they require additional liquidity between making a sale and receiving payment. In these recent transactions, lenders have not required first mortgage property as collateral. We specialize in partnering with our clients on their business and personal growth journey, through providing tailored lending solutions. #workingcapital #corporatefinace #businesslending #commercialbroker Anthony Nocon Roel Capital Note: This is general information only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

Let's say you bought a unit for $1m in Sydney, five years ago. The house you wanted at the time was $1.7m and out of reach. For argument's sake, let's say units have appreciated 20%, and houses 40% over your five-year holding period. In this scenario, the same properties today are now worth $1.2m and $2.4m respectively. Breaking down the math of stamp duty and selling costs, equity gains can be quickly eroded through trading. Many younger clients we're talking to (unsurprisingly) are looking at regional or non-major housing markets and evaluating high(er) yielding investment properties, in growth pockets with capacity for capital improvements (renovations / granny flats etc.). We pride ourselves on partnering with our clients on their property ownership journey and providing tailored loan solutions. Roel Capital Anthony Nocon #propertyinvestment #debtrecycling #capitalgrowth #investmentproperty Note: This is general information only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

We specialise in assisting our clients grow their property portfolios by providing certainty of funding. 🤝🏻

A sophisticated investor with an appetite to grow approached us looking to unlock equity and add to their investment portfolio. 📈   After completing a review and structuring scenario, they were ready to bid at auction once they found the ideal property. 🏡   Excitingly, they managed to secure a property over the weekend. From there, it was up to us to seal the (finance) deal. Here’s a summary of how it all happened:   🕙 Saturday 31/08: Customers are successful at an auction at 10am. Email sent on the same day requesting information required for assessment. 🕘 Sunday 01/09: Customer documents received at 9pm. 🕓 Monday 02/09: Valuations ordered and received in the afternoon. Additional items requested from our customers, with application forms issued for signing. 🕒 Tuesday 03/09: Forms received; application prepared for submission & lodged at 3pm. Conditional approval obtained 10 minutes later. 🕖 Tuesday 03/09: Unconditional approval granted at 7pm, with formal loan documents expected to be issued within 24 hours.   Our clients are thrilled to be on their way to a smooth settlement. 🤝   We pride ourselves on providing our customers with confidence to transact, whilst executing with accuracy.   Roel Capital Jonathan Roël   #mortgagebroking #propertyfinance #fastturnaround #propertyinvestment #dealstructuring #loans

“Keep it simple” When you get into lending, you’re exposed to many different corporate and investment structures. When working for a lender, your primary role is to locate and analyse the sources of cash flow within these structures, particularly those residual cash flows available to service debt commitments. Then you consider, is this a ‘good’ transaction, or not? Should the bank lend, or not? Let me start by describing a ‘simple lending structure’. (i) Business owners have an operating company ‘OpCo’. (ii) OpCo is unlevered and owned by a spousal couple, beneficially through a discretionary trust. (iii) OpCo pays Director salaries to the owners and retains its profits. (iv) The couple have a strategy to grow an investment property portfolio. They approach lenders with the available sources of cash flow below: (a) Director wages; (b) Business profitability; and (c) Prospective rental cash flows. Now let’s describe a ‘complex’ lending structure: (i) OpCo is instead owned by a Holding Company ‘HoldCo’. (ii) OpCo distributes every dollar of profit to HoldCo. (iii) HoldCo then provides capital to a series of special purpose vehicles ‘SPVs’ which are entities established for the sole purpose of acquiring a single investment property each. (iv) The owners approach lenders and request borrowings via each of the SPVs. I’ll say nothing on tax and legal implications of each structure (and will leave that to the experts) but will ask this… - Have the available sources of cash flow changed in the transaction? - Has the proposed tangible collateral changed? A: No, they haven’t. I’m not against complexity, provided clients are well advised by relevant tax and legal experts. But complexity when simplicity will do, may be the wrong strategy… #complexlending #simplification #mortgagebroking #finance Anthony Nocon Roel Capital Note: This is general information only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

Is a cash-rate cut around the corner? 🤔 With two of the country’s Big 4 Banks slashing fixed rate pricing by up to 80 basis points over the past week, there is a growing expectation that the RBA’s next move will be to reduce the cash rate. Similarly, per the AFR’s opinion piece below, there are several other indicators which tend to support the notion of an imminent cash rate cut: 1️⃣ “The market ends up determining the cash rate more than the central bank”. Ultimately, this is a key dictator in the RBA’s decision-making process over the medium term. Per Jonathan Roël's post last week, the ASX implied yield curve is forecasting a futures yield of 3.86% in March 2025, which is circa 50 basis points lower than today’s cash rate of 4.35%. 2️⃣ NZ, Canada, the UK and Europe have started cutting rates, with the US expected to follow suit next month. It is unlikely the RBA will be able to avoid cutting rates for much longer, with mounting potential recession risks the longer they hold off. 3️⃣ Expectations of lower inflation & higher unemployment figures than forecast in the September print, supported by CBA’s head of Australian economics, Gareth Aird. This should in turn force the RBA’s hand in line with the Bank’s forecast of a November rate cut.   Roel Capital #interestrates #loans #propertyfinance #mortgagebroking #yieldcurve #fixedrates The opinion expressed above is subjective in nature and does not constitute financial advice.

“The power of leverage” Three concepts we regularly see sophisticated property owners discuss. 1. An extra $1 of income can, depending on your marginal tax rate and personal financial position, translate to an extra $4 to $5 of borrowing power. 2. At 80% LVR, a doubling in asset value can result in a 5x return on equity. 3. Both owner occupied and investment property owners usually have distinct strategies for value creation through capital growth, future additional leverage and / or structural improvements. Many property owners and investors understand that purchasing power and return on equity are two of the most important factors in growing their portfolio. At Roel Capital, we specialise in partnering in your property ownership journey through arranging structured loan solutions, particularly for those with a complex financial position. Anthony Nocon #mortgagebroking #propertyownership #propertyinvestment Note: This is general information only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

A concept from business school - ‘Gap’. ‘Gap’ is the difference between a bank’s rate sensitive assets (loans) and its rate sensitive liabilities (deposits). The concept differs from ‘net interest margin’ in that it’s not a static measure, it’s contingent on where market interest rates move. Think about if a bank’s loan book is funded by long dated term deposits locked in when rates are low and their mortgage book is predominantly variable. In a rising interest rate environment, its assets (loans) adjust quickly to rising interest rates, whereas its liabilities (deposits) do not adjust as quickly. Now think of the same concept in reverse, where variable rate mortgages fall and term deposit interest paid is less adjustable. Interesting take from the AFR on banks cutting deposit rates. There is a line in the article which notes this may be a hedge against falling rates, or the start of more intense price competition for mortgages…or both 🤔 Anthony Nocon Roel Capital #mortgagebroking #interestrates #financebroking