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Building a property portfolio? Smart funding will save you thousands....
Although real estate swings in and out of favour, it continues to be amongst the most resilient and most secure form of investment. However even before you make your first step towards an investment property, you should make sure your finances are in order. You should also ensure you understand all of the terms and conditions, and costs associated with your mortgage. Pre-approval of your investment loan can assist you when it comes to negotiations but be careful, a lot of pre-approvals aren't worth the paper they are written on. Many lenders will often have restrictions on the type, size and location of the property they will accept as security. This can be doubly dangerous if your application is subject to lenders mortgage insurance.
Tip: Avoid making unconditional offers unless you are certain your pre-approval cannot be withdrawn by the lender or the lenders mortgage insurer.
What's your budget
Mates Rates can help you make sure you factor in all costs associated with purchasing your investment property. These include obvious expenses such as loan costs, conveyance, land transfer duty and building and pest inspections. You should also set aside money for council rates, renovations and a buffer for unexpected surprises.
Set your rules
Remember the old real estate adage ‘location, location, location’. What are the most important location factors you are looking for in your investment? Should it be close to transport, shops, and schools? Is there a park nearby? Is the area quiet and leafy or a part of the bustling cafe lifestyle?
Yield, capital gain, what are you after
To help you stay focused, realistic and improve your chances of success, you should determine your financial limits and objectives from the start. This helps evaluate whether a particular property of location meets your income and growth expectations.
If you want a high rental return look for areas where renters are common and owners are not. Units and apartments often yield well, but have a slower rate of capital growth. Houses and land on the other hand tend to offer stronger capital gain, higher development potential, but often lower yields if left unimproved.
Hidden potential
Try to keep an eye out for hidden potential. Another old real estate saying is pick the worst house in the best street. In other words, get your location right, find a property with potential and the rest will look after itself. If you are thinking of renovating your purchase, be careful not to overcapitalise and speak with you accountant to determine what is deductible as an expense and what will be deemed a capital expense, which is value locked away until you sell the property.
How Mates Rates helps
Mates Rates will structure a solution based on your own personal needs. Our experience allows us to help you understand your mortgage options and answer important questions like:
- Which lenders have the most effective credit policy for your situation?
- A single lender or mix them up?
- Should you cross securitise and how far?
- Are there cross jurisdictional security implications of your portfolio?
Once it's done
Mates Rates will continue to grow with you, know matter how much your needs change. Whether you need to switch lenders, or split between lenders, our ongoing support and familiar voice will always be there to help.
Click here for a confidential chat with an investment property mortgage specialist.