- Capital growth
- Rental income
- Tax benefits
- High demand for rental housing
- You can add value to your asset
- Hedge against inflation
- Property is considered a ‘safe’ investment
- High degree of control
The process of investing in property
The three elements required for successful property investing are planning, research and strategy. An investment property is one of the biggest financial commitments you will ever make and to achieve the best results, you need to take the time to get good advice and have a solid strategy before you act.
- Having clear investment goals
There are two types of income generated from investment properties, the first is rental income (yield) and the second is the increase in property value over a period of time (capital gains). You need to decide if your investment is a long term strategy that will give you a high capital gain over a number of years or if you are looking to earn income now from a high rental yield.
- Understanding positive & negative gearing
Negative gearing is where the cost of owning a rental property is greater than the income earned from the property each year. This creates a taxable loss, which can be offset against other income like your wage or salary. Positive gearing is where an investment earns more in rental income each year than it costs to own the property. As this profit is taxable, you will need to set funds aside to cover the tax you will be required to pay on your investment each year.
- Establishing your budget
Developing a clear budget prior to purchasing an investment property is essential. The costs associated with an investment property are different to the costs of purchasing your own home. Click here to see a list of the costs of purchasing a property. You need to consider there will most likely be some periods of time when the property is not tenanted so you will need to ensure you can cover the full cost of your repayments, repairs and maintenance without receiving a rental income during these periods.
A lender will look at the following factors when assessing an investment loan application;
Your income is the most important factor that a lender will consider when determining how much you can borrow on an investment home loan. You’ll need to be able to cover the repayments on your loan for periods when the property is unoccupied. If you are negative gearing (this means the costs of the investment are higher than the amount of rent you receive) you must be able to afford the balance of those costs.
Any equity you have in an existing property can be taken into consideration when calculating how much you can borrow on an investment loan.
Your repayment history on home loans, personal loans and other debts will be taken into consideration when you apply for an investment home loan.
Rental Income Potential
With investment loans, your capacity to borrow can vary dramatically from lender to lender. Some lenders will use 100% of the proposed or existing rental income in assessing your borrowing power, where others will use 60% to 80% of the rental income.
- Understanding taxation on investment properties
Investing in property offers many potential tax benefits, such as expenses associated with any investment property that is tenanted or available for rent as well as interest paid on your investment property loan.
It’s essential to get professional tax advice specific to your circumstances prior to making an investment. The cost of your tax advice and having your tax returns professionally prepared for an investment property is tax deductible.
The following expenses can normally be claimed on tax for your investment property:
Real Estate advertising for tenants
Property management fees
Borrowing costs ie: loan establishment & registrations fees as well as valuation fees
Interest payments and ongoing loan fees
Stationery, phone costs, book keeping fees
Travel relating to the property
Council rates, body corporate fees, land tax and strata fees
Property maintenance & repairs
Pest control, cleaning and gardening
Utilities that are paid by you ie: electricity, gas and water
Depreciation of both the property and contents such as fridges, stoves & furniture
- Think like an investor not a home owner
Choosing an investment property needs to be a financial decision, not an emotional one. It’s imperative to think like an investor and select a property that will suit your financial strategy. Rental yield, capital growth and a property that appeal to your target tenant need to be at the forefront of your mind.
If you are not confident in making the right choice on an investment property, you can use the services of a buyers agent who is a property investment specialist. The team at Assured Lending can put you in touch with local buyers agents.
- Location, location, location
Location is the key to investment property success. You need to research potential suburbs looking at things like, population growth, local housing prices, rental yields, rental demand, planned developments for the area, transport links, proximity to lifestyle features and business districts, schools, employment and suburb growth potential. We have some free reports to help you in researching locations. Click on the links below to get your report now.
- Features of an investment property
The type of property you purchase for an investment will obviously depend on your budget and investment strategy. You could consider a house, unit, duplex, holiday rental or defence force housing. You’ll also need to look at advantages and disadvantages of buying an existing property or buying off the plan. The type of property you buy will determine the level of rent you receive and may involve different upfront and ongoing costs.
Think about the tenant you are targeting and research the demographic of people currently living in the suburb so you can select a property that suits their needs. Have a clear checklist of features that you want the property to have, things like;
number and size of bedrooms
gardens and external space
proximity to local shops, entertainment, schools and transport
quality of neighbouring houses
If you find a property you believe may be a good investment, Assured Lending would be happy to provide a free online property report if it is a residential property located in NSW. Click here to order your free report today which will include an estimated valuation on the property, previous sales history, location highlights, comparative sales details for similar properties that have been sold in the same area, median property prices for the suburb, properties sold per year in the suburb, capital growth and more.
- Find a loan and a lender that best suits your needs
Having an investment property home loan with the lowest interest rates and fees and the flexibility to suit your needs is just as important as selecting the right investment property. It is essential to shop around and make sure you are getting the best deal possible on what is likely to be the biggest financial commitment you will ever make.
This is where the financial experts at Assured Lending Mortgage Brokers come in. We will compare the loan products of Australia’s leading lenders, including the big four banks, to find the investment loan that is right for you.
Property Investing Tools
Would you like a free report on an investment property you are considering purchasing? We will email you a free property valuation report which includes an estimated valuation on the property, previous sales history, location highlights, comparative sales details for similar properties that have been sold in the same area, median property prices for the suburb, properties sold per year in the suburb, capital growth and more.
Instantly download this free report which features the 50 cheapest suburbs to purchase property in Australia.
Instantly download and print this property viewing checklist to make sure you consider all aspects of a potential property during a viewing.
Access our obligation free mortgage affordability calculator to get an instant estimate on how much you can afford to borrow. This calculator will also tell you what the monthly repayments may be on the loan amount and how much interest you might pay over the life of the loan.
Order your free suburb profile report to see how any Australian suburb is performing in the property market. Make informed choices on future property purchases with a detailed knowledge of the local area. This report features a suburb profile, median monthly sale prices, total houses for sale, total rental properties, land for sale, median capital growth, housing structure, occupancy, resident statistics, average household income and more.
Download this free report which features the top performing suburbs in NSW for capital growth and rental yield for the period July 2014 to June 2015.
Get an estimate on how much your home loan repayments might be on an investment property so you can compare repayments to rental yield.
Calculate what the stamp duty will be for a property you are considering purchasing. Stamp duty is a tax you will be required to pay when purchasing land or property and is calculated on the value of your investment. Stamp duty varies between the different states in Australia.
“Quintin from Assured Lending Mortgage Brokers has helped me grow my property investment portfolio three times over the last six years. Most recently he got me a new investment loan at an interest rate that was lower than the lenders advertised rate. The loan was approved for well over 100% of the property value by using my existing properties as well as the new property as security. I was a bit worried, being close to retirement age, but it turned out to be not a problem. I would happily recommend Assured Lending to anybody wanting finance.” John Muller, Yagoona, NSW.
- We’ll show you how to use the equity in your home to purchase an investment property
- We’ll help you maximise your borrowing capacity
- We’ll show you negative & positive gearing based on your individual circumstances
- We’ll liaise with your accountant to give you the best tax effective strategy
- We’ll find the most suitable loan options for you from Australia’s leading lenders
- We’ll complete all the paperwork and liaise with the lender on your behalf
Whether you are seeking to unlock the equity in an existing property or have a deposit saved, we will show you how much you can borrow, examine the negative or positive gearing aspects of your future investment and liaise with your accountant to ensure that you have the structure in place to minimise your taxable income. Additionally we are able to provide you with free market data reports, suburb analysis reports and residential property valuation reports and can even hook you up with a buyers agent to ensure that the property that you are planning to buy is going to have the best chance meeting your wealth creation aspirations. With investment loans, your capacity to borrow can vary dramatically from lender to lender as some will use all of the proposed or existing rental income in assessing your borrowing power, where others will use 60% to 80% of the rental income. You will also find that some lenders will put a buffer on top of existing loan repayments and then there are some that don’t. We have assisted many customers who have walked into their bank only to be told that they can’t demonstrate affordability; Our knowledge and expertise of which lenders are the right fit for your specific circumstances gives you a much higher chance of get your loan approved.