- 26 May, 2017
- property, Investor, Rental, Investment
Property is expensive: you generally must have the deposit to put towards the purchase price. For an owner occupied home this being in the vicinity of 20%. However, there are different lending rules for an investment property and a 40% deposit is required, therefore you will need to borrow money from the bank of up to 60%.
There are exemptions to the LVR restrictions, which are applicable to both investors and owner-occupiers.
The exemptions include new builds, bridging finance, re-financing existing high LVR loans, and funding for non-routine extensive repairs due to natural disaster or weather tightness issues.
Bottom line, work hard and save, save, save. Borrowers with owner occupied and investor collateral can use the combined collateral exemption to obtain finance up to 60% of the value of the investment properties and 80% on their owner occupied property.
This is the most important partnership in your quest to become a fit property investor. You could be asking your banker to lend you 60%. You need to convince your banker that you have a track record of steady employment and saving so they will feel confident in lending you the money, knowing you have a culture of saving and working and being able to make the monthly mortgage payments.
Establish a team
As a property investor, your team should be made up of a banker or mortgage broker (assist with finance), real estate agent and property manager (assist with buying and managing property), lawyer (assist with purchase contracts and settlement), and accountant (assist with tax and structures and cashflow with tax savings). Negotiate on the purchase price of a property but don’t skimp on the costs of the services of your team. If you don’t get the right advice it could cost you thousands.
Not all markets and properties perform the same. You need to understand how demand and supply works and look for areas that are in high demand with low supply. These are areas where the bulk of people want to reside, they are usually close to the centre of major cities with transport links, good schools and shops.
You will need to meet with your accountant before you exchange a contract so that he or she can explain how negative gearing will impact your cash flows.
Find the right manager
Once you have settled on the property, you need to secure ongoing cash flow by sourcing the right tenant and ongoing management of the property. The best property manager will manage your property on your behalf to ensure rents are collected on time, minor repairs and complaints are handled on your behalf giving you peace of mind.
This is general advice. Seek advice for your particular situation before acquiring an investment property to see if it will suit your current financial situation.