The One Bank Trap and The Several Bank Nightmare
Property investors often fall into one of two traps: they either commit all their borrowing to one bank or scatter it across so many that keeping track becomes a full-time job. Both approaches might seem sensible in theory, but in practice, they can leave you exposed…or exhausted. Finding the sweet spot is what separates the strategic investor from the stressed one.
Meet Joe Bloggs: The Classic Investor Dilemma
Take Joe Bloggs. He owns five investment properties worth a combined $1.5 million in mortgages and, for simplicity’s sake, has no personal debt. The question facing Joe is one many investors share: how should he spread those loans?
Falling Into the One Bank Trap
The One Bank Trap is simple to understand and easy to fall into. When all your debt sits with a single lender, that bank effectively owns the rulebook. If they decide to raise rates or tweak policies, you have no bargaining power. You can’t shop around, you can’t negotiate, and you can’t play them off against competitors.
Sure, having all your accounts in one place is convenient, but convenience doesn’t count for much when your financial flexibility vanishes overnight.
When Diversifying Becomes Dysfunctional
At the other extreme, there’s the scattergun approach. Imagine Joe spreads his mortgages evenly across five different banks: $300,000 each, assuming equal property values. That might sound like smart diversification, but it’s actually overkill.
Each bank now holds such a small slice of Joe’s debt that he’s not valuable to any of them. He’ll miss out on preferential treatment, better rates, and dedicated support. Meanwhile, he’s juggling five sets of online banking credentials and a wallet stuffed with EFTPOS cards, turning his investment portfolio into a paperwork circus.
The Smart Investor’s Middle Ground
The trick is balance. A general rule of thumb is to give one bank around $1 million in lending before you start shopping around. For Joe, that might mean assigning three properties and $900,000 to one lender. That’s enough to make him a “preferred” client—someone worth offering sharp rates and flexible service to.
Once he’s reached that level, he can take the remaining $600,000 to another bank. This creates a competitive dynamic: the first bank’s rates can be used to negotiate with the second, and vice versa. Joe gets the benefits of loyalty without the drawbacks of dependency.
Playing the Long Game
Lenders reward valuable customers, but they also respect those who know when to walk across the street. Building strong relationships with two major banks gives you options, influence, and breathing room.
Spreading your debt isn’t about paranoia or overcomplication, it’s about smart risk management. Stick with one bank long enough to become valuable, then diversify just enough to keep everyone honest. That balance between loyalty and leverage is what keeps investors like Joe sleeping soundly at night, no matter which way interest rates turn.