Making the decision to invest involves careful planning and thought, especially when it comes to property. You have to decide where you want to buy, how much you want to spend and make sure that you can cover all expenses.

If you buy a residential property and rent it out, the rental income may cover this, however, there are many other costs which may put a significant dint in your budget. What do you need to know before investing and how can you make sure that your investment decision results in a financial gain? Read on to find out.

Getting finance

The first hurdle is getting finance. Whilst most banks allow investors to borrow 90% of the purchase price, this is subject to a serviceability assessment which takes into account your credit history, employment status and income. Investors that wish to borrow 95% can do so, however the banks assess this on a case by case basis. Lenders Mortgage Insurance (LMI) is also applicable; however some banks will include it in the loan amount.

Once you get finance and purchase a property, it may be easier to get additional loans for other investments. The banks will see that you have a strong record of prompt repayments and you can use the equity in your existing properties to get a loan with no deposit! If you choose to buy a residential property and rent it out, the income you receive can help cover your mortgage repayments. Read on to find out what rental income is and how it can benefit your wealth.

Rental income

This is the income that you earn through renting your investment property out to tenants under an agreement. Some properties such as display homes and properties rented by the government, offer a rental guarantee which guarantees rent to the owner, for the life of the rental agreement.

Where you are buying and renting privately, the rental income you earn can help cover both the principal and interest repayment on the loan and may also help to pay other costs. Where the income does cover the mortgage repayments, this is known as positive gearing, and this serves as an indication that you are not losing money on your investment, and going out of pocket.

However, where the rental income does not cover your loan repayments and you have to pay for costs, these are tax deductible. This is called negative gearing, and there are also benefits associated with this.

Where you do have sufficient personal income to pay the mortgage of your investment property, the added rental income can reduce financial pressure and allow you to spend more enhancing your quality of life, holidaying or further investing.

How to calculate your annual yield

When figuring out how much rental income you will receive from your property it is first important to determine the earning potential of the property. The best way to do this is to speak to an agent who can give you a more accurate estimate of the amount that your property is likely to be rented out for. However, generally you can get an idea by looking at similar properties in the area, with the same size block, rooms and condition as yours.

Whilst this gives you an idea of the rental income, it is important to bear in mind that your property may not be occupied all year round. There may be times where there are gaps between tenants and the property is vacant. During this time you will not be receiving any rental income and will have to cover the mortgage repayments and other costs.

If the area that you are buying in is in high demand, your property may be occupied all year round. However, it is also best to compare your property to others in the area to see how frequently they are vacated.

There are also other things to keep in mind including the on-going costs associated with property ownership. These include paying for repairs, maintenance and upkeep of the property, insurance, council rates and other expenses.

You then need to consider your mortgage and interest repayments, which may amount to quite a significant sum. With all this information, you can determine whether your rental income will cover monthly expenses, which include a combination of mortgage repayments and other costs.

This way you can determine whether it is feasible for you to purchase the property and whether you will be able to afford it.

Costs
Although you may be receiving rental income from the property you have bought, it is necessary to consider the costs associated with purchasing the property, as well as the on-going costs involved in ownership.

Even before purchasing the property it is important to conduct research on the area you are wishing to buy in, find out the market value of the property and enlist the services of financial planners or estate agents.
When you decide on what to buy, you will need a conveyancer and perhaps legal assistance.

This is on top of the mortgage repayments you will make every month, as well as the stamp duty payable on the purchase price. All this can be quite a significant amount!

Once you own the property there are other costs included insurance, rates and other expenses for maintenance and repairs on the property, especially if you are renting the property out.
The costs can add up, so it is important to keep these in mind when deciding whether to buy.

Invest today!

If you think that it is feasible for you to invest, start looking at property and start speaking to the right people. Experts in the field can help you make informed decisions and assist you in planning your future investments.

Are you looking to invest in property? Due to their high demand nature, this could be an investment decision that produces great financial rewards. Beyond the monetary gain, there are also a variety of added advantages including an increase in personal wealth and your investment portfolio. How else can you benefit from investing? Read on to find out more.

Property over other investment options

Unlike other investment options, investing in property is more secure and subject to less fluctuation than investing in shares on the stock market. Shares can quickly lose value, depreciating to significantly less than the purchase price. When this happens you have effectively lost money, however those that invest in the stock market are generally aware of such a risk.

Property investments are usually of lower risk and where you buy a property in a good location, it may significantly increase in value, leading to high profits. Whilst stock may not be as expensive to buy, you can still purchase smaller properties, before using the equity in your existing properties to buy bigger and increase your wealth. As an investor, getting a loan can be easier and you may be entitled to borrow 90% to 95% LVR!

What should I invest in?

Whether it’s a duplex, unit or studio apartment, starting off investing in these properties types is a good start. Without taking on a large financial responsibility and burdensome mortgage, you can still receive high yields and build your investing experience before purchasing a larger property type. Once you have experience and funds, you can then move onto investing in larger homes or take on more ambitious projects such as converted hotels or display home purchases.

And it doesn’t end there! You can invest with other people by pooling your funds together, use a trust as a vehicle to purchase or enter into a property syndicate. There are opportunities to invest in residential or commercial property and the list goes on!

High returns

There is a great potential for high returns when investing in property. Where you ensure that you research the area you are buying in, plan, save and budget as well as seek advice from a financial advisor, you are likely to make a decision which will produce significant monetary benefits.

Property prices are going up, the housing market is tight and houses are selling quicker than ever. A good property in a prime location will usually increase significantly. Why leave your money in the bank account to sit there, when it can grow in an investment property? Although there are associated costs, most of these can be covered by rental income and careful financial planning.

Rental income alone is a very durable income source and can often be more than the amount that you are required to pay on your mortgage. This means that any surplus left over can be enjoyed, or go towards additional costs of property ownership.

Investors should engage in positive gearing, so that the rental income on their property covers the cost of all related expenses including mortgage repayments and other costs. Where it doesn’t, this is called negative gearing. However, any losses made on the property are tax deductible. Knowing how much you can seek to gain by investing, how can you use your investments to further invest? Read on to find out.

How can I increase my investment portfolio?

Once you buy something, whether its small or large, it will be easier for you to get finance from major banks. Unlike ordinary loans, investors can borrow 90% to 95% LVR, depending on their circumstances. Although Lenders Mortgage Insurance (LMI) applies, this can often be included in the loan amount.

Some investors can also use the equity in existing properties so that they don’t have to offer any deposit! This way you can secure more finance and go on to purchase more property. Once you have invested and made prompt mortgage repayments, banks will see that you are a low risk borrower and a more likely to lend. You can then begin increasing your investment portfolio!

Get the right advice to receive maximum benefits

Speaking to the right people can help ensure that you make an investment decision which produces the best financial results. Buying in the right area when the market is good and making sure that you have the income to cover the repayments and costs, will minimise the financial pressure involved and guarantee a better return.

Finding the investment home loan that is right for you

Looking for the right Investment Home Loan that matches with your financial status and lifestyle? Finding the perfect loan can be difficult, especially when you aren’t getting the right professional advice.
Where you are looking for a second property for investment purposes you want to be sure that it becomes an asset and not a liability!

There are many risk involved in purchasing property, especially when you are already under an existing financial obligation. This is why it is important to ensure that you know exactly what your loan type entails, as well as the features of the loan. Comparing products from various financial institutions will ensure that you get the best deal around.

What to consider?

There are many things that you need to consider when looking for a home Loan. These include the amount you are able to borrow from the lender, the interest payable and the repayment options. These vary significantly from bank to bank so it is important that you read each lending policy carefully and accustom yourself with the lending criteria, to ensure that you get approval the first time round and minimize any risk that the loan may pose.

What do I need to qualify?

Most lenders will typical assess the risk that your loan poses, by reference to a few criteria. These include your employment stability, income, credit history and your credit score, which is calculated using specific formula which is individual to each bank.

Where you have been in a stable job for many years and are making enough to cover the loan, this will usually not be a problem. However gaps in employment history are generally questioned by the banks. Any credit issues, defaults or other late payments may also need to be thoroughly explained to the banks so that they know that this will not be a continuing pattern.

Do I need a deposit?

For investors, the mandatory 5% deposit that is required of first home buyers, does not apply. The banks will use the equity in any of your existing properties in order to secure your loan.

How much will my repayments be?

To work out your loan repayments and the cost of other loan features and fees, see the following calculators which will assist you in determining how much you will have to pay:

Different Kinds of Calculators

Repayment Calculator: this computes the monthly repayment once you have specified the amount, interest rate and the duration of the loan.
Amortization Calculator: your monthly repayments as well as the remaining balance of your loan at the end of each month will be calculated through this system. It will also indicate how much principal and interest you are paying for each repayment.
Pay Back time Calculator: this will show the time it will take to repay a loan once you have signified your monthly payment, balance and the interest rate.
Stamp Duty Calculator: this will show the amount for the stamp duty and government charges you accumulate when buying a property.

Tools to help you make your decision

The most important thing to remember is that there are people who have experience in this industry and as such, they can help you make the right decision. When discussing your situation with your property investment advisor or consultant, they will take into account your income, the amount you want to borrow and they will help you assess whether or not you will be able to afford the loan repayments. Other things to consider include the possibility of making extra repayments on the loan amount, to reduce the interest payable.

Tips to help you find the right investment property loan for you!

If you are going to use your hard earned money, where will you invest it? This is a question that requires a lot of careful thought and research. Business minded people may invest in the stock market, FOREX (Foreign Exchange) trading; others venture their money in traditional businesses, while there are people who will invest in expensive cars. It just depends on what your interests are and where you see a potential for growth.

Whilst those involved in the finance world may choose to invest their money in this way, most ordinary people invest in the real estate market. If you are looking for your first home, or an investment property, but not have any idea what the first steps are, then read on for some great tips.
Which property is best?

Depending on your needs, you may choose to invest in a property that you can call a home, something that will produce high yields or a property to use as a holiday home. However, this decision is largely based on the state of your finances.

When choosing an investment property, it must be something that you can afford, not something that will cause you further financial stress or cause you to default under any existing loan obligations. This is principally why it is important to speak to the right people before committing yourself to further obligations and making that decision to invest.

Who can help me?

Looking for the right home or property is only half the task, finding the right company or financial institution to help you in your property loan is the other! Most banks offer competitive investment loans and rates and where you have existing properties, you can use the equity in those properties to borrow without a deposit!

Additional features of investment loans include redraw options, offset and additional repayments. It is also important to consider positive vs negative gearing.

Positive and negative gearing

These are the terms used to describe investors acquiring a loan to invest in property. Negative gearing is where the cost of owning the investment property outweighs the actual returns received, and positive gearing is the opposite. Negative gearing is beneficial as it serves to reduce the amount of tax payable on your regular income.

Interest only repayments are also available for a period of up to five years. This means that any other money that would be paid to cover the principal, is freed up to further invest.
With so many options available, it is important that you speak to a financial consultant. Getting advice can also help make the process simpler. So what tips do you need to guide your decision? Read on to find out.

Eight factors to consider when choosing a loan

When looking for the right investment loan, it is important to consider the following points:

• Loans with low repayments
• Loans with low interest rates and fees
• Loans with no hidden charges
• A loan that is in tuned with your present financial goals
• Seek advice about the right loan for you
• Think about buying property with friends and family
• Use the equity in any existing property
• Research the location and market price of the property

Ask the right questions

It is necessary to know the advantages and disadvantages of different property loans. Ask questions and make sure that you understand fully understand the terms and conditions of the loan and the financial institutions criteria.

Planning is also very important. Making sure that you have all your finances in order will better protect you in the event of any unforeseen circumstances that may affect your ability to repay the loan amount. Speaking to the right people and getting the right advice will ensure that you make the best decision possible for your situation, to minimize the risk involved and maximize your satisfaction with your investment choice.

Are you looking to refinance your existing loan? Debt consolidation through refinancing can help to simplify your loan and roll all of your existing debts into one loan.

Additionally, refinancing can free up some extra cash that you can put towards anything your heart desires! Consequently, this is an option that many people find highly attractive.

But what if you can’t provide the banks with adequate documentation? Can you still refinance? The answer is yes! Both major and non-conforming lenders can help you refinance your existing loan through a low doc home loan.

A low doc home loan is a loan option available to those who do not meet the lending guidelines as set by most banks. They may be self-employed and are unable to prove their income, or their Business Activity Statements (BAS) don’t adequately reflect their earnings.

Luckily, a low doc loan means that minimal documentation needs to be provided. So what do the banks require?

Most major lenders will require an income declaration along with an additional document. This may be either a BAS or an accountant’s letter or a bank statement. These documents will help them assess the risk associated with lending to you.

For those that are looking for a commercial loan or a loan for business purposes, you can apply for a no doc loan or asset lend. With this loan, you do not need to supply any documentation!

This makes the application and approval process relatively easy. All you have to do is sign documentation stating that you can afford to repay the debt. Simple!

Once you have successfully refinanced, you can release equity to free up cash. This can be done by switching lenders or staying with your existing lender. If you choose to switch lenders, as they may offer better rates, than you will need to complete a discharge authority.

Your new lender will request that this is completed and signed by your existing lender, before the ‘cash out’ will be released.

Since these loans are not conventional, it is best to speak to a broker! They can ensure that the application process goes as smoothly as possible and can make sure you get approval!