Property investment has helped many Australians build long-term wealth and create an additional income stream. The really great thing about property investing is that the principles are relatively easy to understand. It can also be as easy or as difficult, as passive or as aggressive as you’d like it to be. If you’re thinking about building wealth for your future this way, here are 5 simple steps to get you started.
Step 1: Talk to us about your borrowing power and loan structuring
The first step involves a friendly chat with us about financing your investment.
To work out how much you can borrow, we’ll look at your:
- personal financial circumstances being your assets, liabilities, income, lifestyle and credit history,
- savings amount for a deposit on the investment property, or
- existing equity if you are already a home owner.
We’ll guide you through loan structuring to ensure your finance is set up to achieve your investment goals. After selecting the most suitable lender and product, we’ll organise a pre-approval so that you can have the confidence to make a purchase when a deal comes along.
Step 2: Work out your investment strategy
Ask yourself what your end goal is – do you want to build a big portfolio of 10 properties or more? Or are you more interested in paying off your own home sooner and perhaps using 1 or 2 investment properties to do so?
When formulating your investment strategy, we always recommend seeking advice from professionals. A financial planner, accountant and property lawyer can help you set up the right investment vehicle for you.
You can rest assured that you have a solid strategy, your assets are protected, and you’ve maximised your tax benefits through professional advice. Ask us for a referral if you don’t already have these professionals on board.
Step 3: Become an expert by doing your research
The key to buying the right investment property is to spend plenty of time researching. Become an expert in the area you wish to invest in. There are two key focuses for financial return on your investment – capital growth potential (which is the growth in the property’s value) and rental yield (the income the property will generate from the tenants). Also consider other indicators such as stock on market, vacancy rates and time on market.
These factors are driven by supply and demand. An ideal property will be one that is in high demand by both renters and owner occupier buyers. Ask us for assistance with your research, we have access to the latest market data and can provide you with latest property reports.
Step 4: Crunch your numbers
There are many costs to factor in when buying an investment property. Success in property investment is a balance between income, costs, tax deductions and how they affect your overall cash-flow.
The costs to factor in may include the following:
Initial costs
- Deposit
- Loan establishment fees
- Lenders’ mortgage insurance
- Stamp duty
- Conveyancing and legal fees
- Building and pest inspection
- Quantity Surveying
Ongoing costs
- Council Rates and land tax
- Body corporate fees
- Utilities not paid by the tenant
- Property management fees
- Repairs and maintenance costs
- Insurance
- Mortgage repayments
Assessing these costs along side your rental income and capital growth potential, will give you a clearer picture of what the investment property will do for you. We can help you make sense of the numbers as it’s important that the property fits into your investment strategy in step 2.
Step 5: Seal the deal and finalise your finance
Once you have decided on a property, talk to us, it’s always good to get a second opinion. We’ll share some tips on negotiation and go through a checklist to make sure you’re in the best position to sign the contract.
The final step involves us helping you secure an investment loan for your property. Once you have signed the contract, the bank will have the property valued before granting formal approval of your loan. Our job is to also liaise with the real estate agent, your conveyancer and the bank to ensure everyone is on the same page and settlement happens smoothly and on time.
If you’re thinking about joining the thousands of Australians building wealth for their future through property investment, don’t wait to give us a call.
We are here to give you expert guidance about investment loans and structuring your finance.
Contact Your Future First on 03 9362 1458 or email andy@yourfuturefirst.com.au