Residential Property Investment Loans

It sounds like an easy way to build up your personal wealth but, good investment properties can be hard to come by.

To find the right investment property you will have to spend a fair amount of time viewing several properties before making an offer on the one that ticks all the boxes.

There are a few factors to consider such as:

  • Residential Property
  • Commercial Property
  • The vacancy rate in the area is it high or low, lower the better
  • Is the property in an area of growth, near schools, shopping amenities, medical centre’s this all adds up to the capital gains and rent potential on the investment property.
  • The condition of the property, will you have to spend extra to make a good rental return

Yield is important

The yield is the amount of money you will receive from the rent charged in a year. Less the expenses you have on maintenance, rates, insurance, a property manager cost, this is divided by the value of the property. Giving you a percentage, you ideally would prefer a positive approx. 5-6% yield per year.

You can take steps to increase your yield – like those renovations – but be aware they will cost money at the outset.

Positive & Negatively Geared Property

We all want a positively geared property, one that has a positive yield – this means the rent will cover your mortgage repayments and make give you a little bit extra.

The reality, is that an investment property can be negatively geared, meaning the income from the rent does not cover the full mortgage repayments. You as the investor are topping up the mortgage payments.

This is not ideal if you are wanting to grow your investment portfolio as the lenders are less willing to lend against them.

In some instances, you may want to own a negatively geared property especially if you are expecting to make a capital gain when you sell the property. The gain will then be used to make up the shortfall on the property. For example, if you are buying a property for a family member to live in and you are subsidizing their rent by paying the short fall.

An investment property is a big step and as such you should be prepared to put in the hard yards.

Once you have your investment property consider how you will manage your property:

  • Do you want to manage the property yourself? Or
  • Engage a Property Manager – there is an additional cost

Allsure Financial Solutions has access to several lenders both bank and non-bank to find a solution to meet your investment property goals and can recommend mortgage loan structures to compliment your goal. Redraw, offset and interest only loans can be effectively used to manage your investment loan. It is recommended to have minimal to no personal debt and to keep your investment debt to a minimum.

We always recommend you seek legal advice including advice from your accountant when considering investment loan.

Get in touch discuss your personal investment loan requirements.