Investing in property FAQs
Smart property investment can offer a steady ongoing income and/or the potential for capital growth. Traditionally, property investment is considered a good long-term investment strategy.
Is property investment easier if I already own property?
If you have equity in any existing property, for example your family home or another investment property, you may be able to use this to increase how much you can borrow and more quickly build a substantial property portfolio. Ultimately it will depend on your personal financial situation and investment goals.
When buying investment property, there are other costs in addition to the purchase price of the property that you will need to consider. These may include:
- Building and pest inspections
- Survey report
- Strata inspection report
- Loan application fee
- Lenders Mortgage Insurance (LMI)
- Refinancing or switching fees
Your mortgage adviser can assist you to determine what additional costs will apply to your situation.
Do I need a lot of flexibility in my investment property loan?
Flexibility in your investment property loan can take many forms, including the ability to make extra repayments, to redraw on your loan, split your loan between a fixed and variable interest rate or even transfer the loan between properties. Some options may be standard and some may cost you money, so you need to be clear about your investment strategy before choosing a suitable investment property loan. Always compare loans with similar features when looking for the right investment loan for your situation, and beware of choosing a loan with costly features you are unlikely to use.
How will a mortgage adviser help?
A good mortgage adviser will assist you to find the investment property loan package that is most suitable to achieving your investment goals, working closely with your accountant and/or financial planner. With access to investment property loans from a large range of banks and lenders, your mortgage adviser may be able to save you time and money.
If your investment strategy calls for you to pay out your investment property loan quickly, there are a number of approaches you can take, including:
- Dividing your minimum monthly repayment into two and paying this amount fortnightly, or dividing by four and paying weekly; this effectively increases the amount you repay every month
- Making both consistent and ad-hoc additional repayments
- Maintaining a higher repayment amount if interest rates fall
Interest only repayment options on investment property loans
Interest only loans suit investors who are focused on achieving capital growth in the short to medium term, and often go hand-in-hand with negative gearing. Interest only loans will have lower repayments than a principal and interest loan and may be available as a fixed rate or a variable rate loan product. Interest only loans may work to reduce your total outgoings and improve your cashflow.
Paying interest in advance
Paying interest in advance on your investment property loan works by paying the interest you will accrue over the next 12 months in one lump sum before it is actually charged. This allows you to claim the costs against your tax a year earlier than you would normally be able to. Generally available on fixed rate investment loans, you may also benefit from a discount if you pay the interest in advance.
Line of credit home loans
Line of credit home loans are often used to purchase multiple investment properties. Standard variable or fixed rate loans may also be used.
An alternative to cross-collateralisation is to purchase multiple investment properties using completely separate, stand-alone loans for each property and even different lenders. Instead of using your PPR as security, you instead take out an equity loan against the balance and use this as part of your deposit, or even a second mortgage on the property. These methods are often employed by more experienced investors.
Our advisers are also knowledgeable in the property market so if you have any questions about the buying or selection process, we are here to help with that too.Finding the right investment property
In order to create wealth through property investment you need to make smart choices on your property purchase. Some rules of thumb for choosing an investment property include:
- It’s all about the location your property should be in an area where it is likely to be well-tenanted and/or experience price growth.
- Investigate infrastructure look for a property which has good roads and public transport in and out of the area, schools, shops cafes and restaurants, and sporting facilities.
- Pick the right style of property target properties that suit the sort of people who live in the area or one that can be renovated to meet the right needs with a minimum outlay. If you’re looking to invest in the inner-city market, search for modern, low-maintenance apartments. Similarly, houses with big yards are suitable when targeting families.
- Do your research good research is the best way to find a bargain.
- Look ahead for any planned developments, upgrades of main streets/shopping districts, recent resource discoveries and suburbs adjoining soon-to-be completed highways, freeways, major roads or improved public transport, all of which make the commute into work more feasible.