For many Australians, investment in property may be the key to securing their financial future. If you’re thinking about investing in property, you’re not alone.
The idea of owning your own investment property may seem a far off dream, however many people buy an investment property before they buy their first home or don’t realise that they can use the equity in an existing property. To work out how much equity you have in your property, speak to a home loan lender.
Your home loan lender can determine the market value of your property, and compare this to your home loan balance to calculate the amount of equity you have. They can also inform you of the requirements to borrow for an investment home loan and may be able to provide pre-approval for an investment loan.
A pre-approved loan will provide you with knowledge of what you can afford to buy and may speed up the loan application process when you are ready to make an offer on a property. However, note that a formal approval is subject to any approval conditions being met, including a satisfactory property valuation.
Here are a few tips to keep in mind as you embark on your investment journey:
1 – Keep up with trends in property values and the latest financial information. There are plenty of market reports, magazines and websites that can help you, and many are free.
2 – Consider planning to hold your investment property for the long term (7 – 10 years) to benefit from the regular cycles that usually occur in property.
3 – Buy a structurally sound house or unit. Professional building inspection reports are usually around $350.
4 – Consider employing the services of a property manager to look after your asset and screen for reliable tenants. They will check tenant databases and use other tools to help choose suitable tenants who do not have a previous history of damaging properties or not paying the rent.
5 – Discuss your financial position and your investment goals with an independent expert in taxation accounting. The benefits of property investment may vary according to your income level and age.
6 – Keep up the maintenance on your investment property. A neglected property will not appreciate in value as fast as others. It may also be more difficult to lease, which could lead to a loss of rental income.
7 – It is importantly to remember that this is an investment so think about maximum rent and minimum vacancy rates relative to the cost of the property – not whether you would be prepared to live there or not.
8 – Make your property a rental in demand. Keep in mind what tenants look for in a property. Is it well kept? Is it close to transport and amenities? Is it safe for children? Does it have air-conditioning or other appreciated features?
Any advice contained in this material has been prepared without taking into account your objectives, financial situation or needs. Because of that, before acting on any advice, you should consider the appropriateness of the advice having regard to your circumstances.
Michael Leach is the Head of Marketing at Newcastle Permanent Building Society Limited (http://www.newcastlepermanent.com.au) ABN 96 087 651 992.
Newcastle Permanent Building Society is a provider of home loans and mortgages
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