Borrowing Strategy
Lender sequencing: the order you place loans is the lever nobody sees
Investors hit walls. They buy property one, then property two, then they go for property three and the answer is no. Or the answer is yes but with such tight terms that the loan eats their cashflow. They thought they were ready. The bank says they’re not.
Almost every time, the wall isn’t income. It’s lender sequencing. The order they placed their first two loans across lenders has used up their borrowing capacity in a way that wouldn’t have happened if a different lender had funded property one, or if the second loan had been placed somewhere else. Once the file is at the wrong lender, fixing it costs time, money, and sometimes the deal.
I tell clients this at the start: the order you place loans across lenders is the single biggest lever in investor finance. It’s also the one most brokers don’t think about, because it doesn’t show up in the conversation at property one. It only matters at property four.
What lender sequencing actually means
Every lender has a different appetite for property investors. Different limits on how many loans they’ll write for one borrower, different ways of calculating how much you can service, different policies on rental income, different attitudes to interest-only periods, different stress-test buffers.
Lender sequencing is the deliberate decision about which lender you place each loan with, and in what order, as you build a portfolio. It’s not about the cheapest rate today. It’s about preserving your capacity to borrow tomorrow.
Most investors approach this by going to whoever offers the best rate at the time of each purchase, or whichever broker their friend used. That’s not sequencing. That’s drift. And drift compounds against you.
The four variables every investor should know
1. Investor caps per lender
Some lenders will write you one investment loan. Some will write you two. A few will go to four or more before tapping out. The cap isn’t published. It’s lived knowledge a broker accumulates from running deals across the panel. Once you’re at a lender’s investor cap, every additional property either gets declined or gets repriced. Knowing each lender’s ceiling before you place loan one is what separates a strategic broker from a transactional one.
2. Serviceability calculation methods
Lenders are required to use a stressed assessment rate (typically 3% above your actual rate). But how each lender treats your existing debts varies. Some assess your existing investor loans at the actual repayment, some at a stressed payment, some at an even higher floor. Some treat interest-only repayments as if they were principal-and-interest. Some give credit for actual rental income at 80% of the lease, some at 70%.
What this means in practice: the same investor will get materially different borrowing capacity numbers from different lenders. The right move is to leave the lender that calculates you most generously for last, when you need the most capacity. Burning that lender on property one with a small loan is a structural waste.
3. Postcode and property-type policies
Some lenders are tight on regional postcodes. Some won’t lend on units below 50sqm. Some have caps on apartment exposure in specific buildings. Some are conservative on dual-occupancy. The policy you need at property four might be one your property-one lender doesn’t have. If you’ve already used the lender with the loose postcode policy on a metro property, you may not be able to bring that lender back for the regional one later.
4. Debt-to-income limits
APRA caps how much exposure a lender can have to high debt-to-income loans. As your portfolio grows, your DTI rises, and your access to lenders with tight DTI policies narrows. Some lenders cap at 6x. Some go to 8x. The lenders with higher DTI tolerance become irreplaceable as you scale, which is why you don’t want to use them on property one.
The ’easy first’ trap
Most investors fall into this naturally. The first investment property is exciting and a bit nerve-wracking. They want the easiest yes. So they go to the lender with the best rate, the loosest serviceability calc, and the most familiar brand. The loan settles cleanly. They feel good.
Two years later, property two comes up. The first lender is still the friendliest, so they go back. Loan settles. Now they’ve placed their two loans with the lender that would have been their lifeline at property four. Going back for property three with the same lender hits the investor cap. Going elsewhere means a tighter calculation and a smaller approval. They’ve sequenced themselves into a corner.
I’ve unwound this for clients more times than I can count. It’s usually fixable, but the fix involves refinancing one of the existing loans to a different lender, which costs time, valuations, discharge fees and credit reassessment. None of that is necessary if the sequencing is right from the start.
What good sequencing looks like in practice
Here’s a simplified example. An investor with two existing properties, planning to scale to four over five years. The numbers are illustrative.
- Property one (existing): placed with Lender A, a tier-two bank with conservative serviceability but excellent rates and clean policy. Their investor cap is two loans. Used now: 1 of 2.
- Property two (existing): placed with Lender B, a non-bank with moderate serviceability and a high investor cap (5+ loans). Slightly higher rate than Lender A. Used now: 1 of 5+.
- Property three (next): placed with Lender A, using their second slot. Rate stays sharp on what is likely the lowest-yielding property in the portfolio.
- Property four (after that): placed with Lender C, a non-bank known for generous serviceability on rental income at 80% of lease. The lender we’ve been saving for the moment when capacity is the binding constraint.
- Property five: if we get there, Lender B has plenty of room left, and the relationship is established. Or we open Lender D for further diversification.
This isn’t the only good sequence, and the right sequence depends on the investor’s actual income, structure, postcodes and goals. The point is that there is a sequence, and the broker should be thinking about it from property one.
How I do it on my own portfolio
My partner and I hold seven properties across multiple lenders. Some lenders hold two of our loans, some hold one, some hold none yet because they’re still being saved for whatever’s next. Every loan placement was a decision, not a default. The investor cap and serviceability calculation of each lender was on the table before the loan went out.
It’s not glamorous work. Sequencing is invisible to the client at the time. You don’t feel the benefit until two years later when the next purchase clears easily because the right lender still has room. That’s the work I bring to clients.
What this means if you’re building a portfolio
Three things to ask any broker before you place loan one:
- What’s this lender’s investor cap for someone with my profile? If they don’t know, they’re not sequencing.
- Of the lenders I’ll likely need over the next three to five years, which one calculates my serviceability most generously? That’s the lender to save for last.
- If I place this loan here, what does property three look like with this lender? If the answer is "we’ll work it out then," you’re drifting.
