An investment loan could be the first step in getting you into the property market, allowing you to realise your long-term financial goals. If you’re already in the market, it is a great way to build your net worth.
Property investment is the key way Australians have chosen to build their net worth. Australia's a land-rich country, and property is an investment you can 'set and forget'.
Once you've purchased a home that can be rented out, found a good property manager or reliable tenant, you will generally be able to realise long-term growth without micro-management of your investment.
Investing in property is a long-term commitment. With an investment property, you’ll earn rental income, as well as realise capital gains into the future. However, before you start hunting for an investment property, it's important you consider whether you'll be making the best long-term decision.
An investment Property loan is just like a regular home loan. The main difference is that you’ll need a different insurance than if you occupied the property. There are two types of loans that are particularly attractive to investors:
This loan is particularly handy if you wish to renovate the property you purchase, or if the investment property is not your first property purchase. Paying interest only on the loan for a set term frees up the cash you’ll need to do the renovations. Or if you own your primary residence, it allows you to increase the equity you have on this property.
If you own property then you might be able to use the equity you’ve built up as a deposit for your investment property. You can draw from a set amount for additional expenses. This type of loan is for the conservative people, though - having access to cash can go against you in the long term if you aren’t very careful.
Property Investment comes with tax benefits that can help you to meet your financial goals, so if you’re renting your property out, you can claim deductions for a range of expenses related to the rental property, including:
If the rent you receive doesn’t cover your mortgage, you’ll enter a period of ‘negative gearing’. The difference between the costs of the property ownership and the rent coming in can be offset by the tax deduction.
This allows you to go into a negative cash flow for a period of time. The cyclical nature of the property market generally means that if you wait it out, property prices will rise and leave you with a long term profit in capital gains.
A good investment property is one with good potential for capital growth.
If you have an idea of where you’d like to invest, you can get free important information and statistics from Residex to help you make the important decision and ensure your property purchase will enhance your investment portfolio.
If you're ready for more comprehensive advice, check out our property investment guide which can help you to understand the different types of investment strategies that you can choose from, and how to buy an investment property that will fit neatly into your financial goals.
Investing in a property should be an exciting and straightforward process. We’ve put together some of the steps you’ll need to take so you have a clear idea of how to move forward.
Purchasing property is a pretty big commitment, so you want to make sure that you set yourself achievable financial goals. Speaking to a mortgage broker will help you understand what you can afford to invest, and give you an idea of what to expect.
Owning an investment property is a long-term decision, and during the time you own it, you’ll experience some ups and downs such as slowing of capital growth, problems with tenants or vacancy periods.
With a loan pre-approval, you have a set budget for the property before you begin to search. When you find the right place and make an offer, you’ll be showing the vendor you mean business and you’re ready to move on the purchase right away, giving you an edge over other offers.
You may decide to engage a Buyer’s Agent to help you find the right place, or you might collect some data yourself. Your broker should be able to assist you with finding a suburb that has predicted capital gain and with property reports on the places you are considering.
Something you’ll want to find out is the vacancy rates for rentals in the area. A few must-have features for an investment are:
Remember to use your head on this one. You’re not looking for a home to live in yourself, you’re looking for a property that’ll suit a broad spectrum of desirable tenants.
Getting the right legal assistance will make a huge difference to the ease of the transaction once you find your investment. Our business partners offer a range of services essential at this point in the buying process.
Once you’ve found a place you want to buy, get a building inspection done before you make an offer.
Once you've successfully purchased your first investment, you can celebrate without the hassle of having to move house.