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Home Loan Blog

Want to Buy an Investment Property?
As more properties are coming on the market for sale, you may be in a position to consider the purchase of an investment property.  Rates are historically low for most real estate borrowing and, unfortunately, that means % rates on cash in the bank are also historically low so it might be time to think of an asset that may give you a decent return on your investment.  But remember, it is likely to be a lengthy process and one that usually involves a plan for the long term.
If you are a first-time property investor, to ensure you have considered what is required before making the big purchase, we’ve outlined steps you need to take in that process.
1. Make the commitment

A property investment must be a long-term commitment in order for it to be worthwhile, so the very first step is to ‘do the numbers’ in order to evaluate your budget, potential constraints, and future financial and personal obligations including the potential impact on family members.

Consider your future as far ahead as you can and assess your ability to maintain or improve personal income as well as your commitment and ongoing financial capability to continue to service the financial impact of the investment for a minimum of five to ten years, as that’s what generally brings premium results. You need to also make the commitment to ‘manage’ the investment – even if you outsource the day-to-day tasks involved including locating suitable tenants, collecting rents, paying relevant costs in rates and taxes as well as ensuring that the property’s repairs and maintenance are kept up to date.

2. Obtain Professional advice

An investment in real estate is likely to be significant in relation to your current financial position. We highly recommend speaking to an accountant who understands property investment and can evaluate if residential real estate is considered the most appropriate for your current circumstances, and who will consider aspects including rental return, maximum capital growth, and/or tax effectiveness.

If appropriate, we can help you find a suitable property and we can help you to secure finance to enable the purchase.

You will also need a solicitor/conveyancer and property manager on your team to assist you in coming to your decision.

3. Assistance from relatives & friends
Talking to friends, family, and acquaintances who have already made such an investment, or are currently considering one, can help your awareness of stumbling blocks and potential issues that you might otherwise miss. While any issues you face may seem new, it can help to bounce these off a trusted friend or relative who has been there before. But only those who have learned from being on the field and actually buying and learning from mistakes – not those who are too scared to try.
4. Collate your information
In order to apply for finance, you will need proof of your current income, employment, and your assets as well as all liabilities including debts, loans, rental payment, outstanding credit card obligations, and any other due payments, for example, buy now pay later commitments. Collate these and also any paperwork that helps support your personal position. For example, if you have been a long-term tenant, get a 12-month tenancy statement that proves your capacity to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible, reduce the limit on, or cancel any credit cards you have, as this is perceived by lenders as potential for debt.
It is strongly recommended that you have a fully assessed pre-approval before you start your search. This will allow you to know what your financial limits are so that you can make an offer when you’ve found a property you like.
5. Other things to consider
An investment property purchase should not be an emotional decision. It is a business decision. If the property isn’t as clean as you would like, don’t assume that it hasn’t been maintained unless there are other clues to demonstrate that. Cleaning and even simple maintenance tasks are things you can do yourself or have done for you that you can include in your budget.

Consider choosing a property based on whether you feel like you could live in it. While it’s still a business decision, you also have to adopt the mindset that you could be selling to an owner/occupier down the track, which could be an emotional purchase for the buyer.  If, however, you plan to rent the property, your decision should be based on what would appeal to the type of individual who wants to reside in the area.  If buying in an urban area, you need to consider proximity to schools, transport, shops, and jobs and also enquire about any proposed infrastructure spending and development that may enhance or detract from the area.

 

 

 

 

 

 

 

Please speak to us if you are considering buying an investment property and we can assess your situation in a one-on-one consultation.  Reach out and book a time here.   We’d love to help you.

With thanks,