Investment Loans


An investment property should be all about the numbers.  You borrow money to buy property and build long term wealth.  Consequently, it is critical you have an accurate understanding of the value of your proposed investment property and the projected returns and expenses before committing to purchasing the property.

Like other asset classes, investing in property carries some risks. During an economic downturn these risks can be significantly magnified, therefore it is important to put a strategy in place that deals with risks when they occur.  Important things like interest rate increases, increases in government charges, tax credits and deductions and changes in market rent can have a very significant impact on the financial performance of your investment property.

Don’t let ‘rose coloured glasses’ or fear and panic drive your decisions on property investing.  A good risk management plan allows you to manage fear and identify great investment opportunities where other investors shy away.  As the world’s most successful investor over the past 30 years Warren Buffet once famously stated ‘Be fearful when others are greedy and be greedy when others are fearful’.

Australia is currently experiencing the lowest interest rate environment in decades.  This low interest rate environment is likely to be a structural ‘given’ across all major economies for a number of years to come, with official rates in many countries at or near 0%.  In such an environment, arming yourself now with the tools and strategies to overcome setbacks you might encounter whilst owning an investment property over the next 15 – 20 years is critical.

 

At Affinity Property, we work closely with our investor clients and finance partners to help investors understand the key things you need to manage when investing in property:

  1. Do your research – the old saying ‘You make money when you buy – not when you sell’ has never been more relevant when you consider today’s economic uncertainties.  There will always be good demand for well-located properties that appeal to a large cross section of prospective tenants.  Some of the key questions investors frequently ask when researching property are answered in our Investors FAQs
  1. Set a price range and budget you can manage comfortably – you must be able to manage the cash flow in owning an investment property. You need to work out how much you need to save and identify what costs and outgoings you’ll need to cover during your ownership of the property.
  1. Determine how much you can borrowcontact one of our expert brokers or lenders and determine how much you can borrow. Getting pre-approval of the loan and understanding what your monthly repayments will be is a great way to prepare yourself so you can jump on top of good investment opportunities when they present themselves.
  1. Consider the tax implications and discuss with your accountant - you will need to consider the most appropriate ownership structure, negative gearing benefits, land tax issues, depreciation benefits, stamp duty and what structure gives you the best asset protection.  A good accountant will provide the right advice about how to manage your loans, offset accounts, redraw and repayment facilities and how you can maximise the tax outcome of your investment property loan.
  1. Engage a good conveyancing lawyer – seek advice from a good property lawyer and ensure the ownership structure advice from your accountant is reflected in the contract of sale. An experienced property lawyer will conduct all the necessary searches and manage correspondence with the vendor’s solicitor to ensure the conveyance and settlement is managed as quickly as possible.
  1. Engage a good property manager – a good property manager will do a lot more for you than simply place a tenant and collect the rent. They can increase your after tax returns by thousands each year.  They will: regularly review the market rent and suggest how and when you should increase the rent; manage all income, disbursements and outgoings so you can prepare an end of year financial statement for your property that you can simply take to your accountant and process your tax return, saving you hundreds of dollars in accounting fees; deal with all legislative compliance issues and manage tenancy matters at arms-length, ensuring you don’t need to get embroiled in tenancy disputes, insurance claims or arrears matters.  For a free appraisal of your investment property, please see our services page for more information.