Purchasing an Investment Property
Investment Property Overview
An investment property is becoming a more popular choice for those seeking to create a revenue stream and also achieve capital growth through the investment property value increasing over time.
An investment property can be part of a strategic financial plan and should be considered by investors as part of a diversified portfolio.
Once there has been capital growth in the investment property over time there is the option of liberating this equity through the investment home loan to move into other investment options such as shares or managed funds to further increase your investment portfolio and mitigate risk by way of diversification.
What to look for when buying an investment property
Aside from the traditional belief that tax advantages are the key driver for taking out an investment home loan there are many other factors to consider when purchasing an investment property.
Below are some key points for your reference, by using these points as a guide in conjunction with a detailed discussion with your accountant or financial planner you will be in a better position to ensure your investment purchase and home loan is a financially robust decision for the long term.
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What is the infrastructure like in the area? Are there enough schools, hospitals, shopping centres, doctors and dentists, freeways or main roads? |
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What has the historical capital growth been in the area over the last two decades? |
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Is the local council planning to increase housing density or add a new road to increase traffic flow? |
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What has the population growth been over the last decade? Has it outstripped the average growth rates for the surrounding areas or other areas? |
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What length of time will the investment be held? And will this tie in with planned infrastructure development, in turn accelerating capital growth? |
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Do you purchase a new or previously occupied property based on tax advantages either way? |
Investment Home Loan Options
Nowadays it is possible to obtain an investment home loan up to 106% of the purchase price when purchasing and investment property, we have access to lenders nationally which provide from 80% through to 106% of the purchase price, when choosing a home loan for investment you need to consider the out of pocket expenses like stamp duty, mortgage insurance and legal fees.
The 106% investment home loan allows you to absorb the majority and in some cases all of these costs into the home loan itself thereby freeing up your cash flow for other purposes.
Other investment home loan options are to have the home loan facility as interest only for maximum tax effectiveness but this will depend on your financial goals and we recommend you seek professional advice on this aspect of an investment home loan.
Can I get a home loan for investment if I don’t already own a home?
Yes you can obtain an investment home loan even though you do not own an owner occupied property. As long as you are able to sustain your current liabilities and the investment home loan you can purchase an investment property.
The rental return will be factored into servicing the investment home loan as well and the 106% investment home loan is also available for this purpose.
What is my next step in obtaining an investment home loan?
Your next step in obtaining an investment home loan is to understand what amount of finance you require by way of an investment home loan.
Do you require a 106% home loan to absorb most if not all costs, do you require a 95% investment home loan, will I choose an interest only investment home loan, if you have a property will you use the equity to help fund the purchase of an investment and borrow less on the investment home loan?
Our investment home loan consultants will be able to help you in selecting the most appropriate investment home loan structure to suit your needs so contact us to find out more about what home loan option will best suit you.
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