Understanding Investment Loans for Established Properties
As a pharmacy assistant, you're likely considering ways to build wealth beyond your primary income. Buying an investment property, particularly an established property, represents a proven pathway to long-term financial growth. Investment loans differ significantly from home loans, and understanding these differences is crucial when applying for an investment loan.
Established investment properties include apartments, townhouses, and stand-alone dwellings that have been previously occupied. These properties often provide immediate rental income and come with established rental histories, making them attractive options for first investment property purchases.
Key Features of Investment Property Loans
When researching property investment options, several loan features distinguish investment loans from standard home loans:
• Interest Rate Structure: Investment loan interest rates are typically higher than owner-occupier rates, with both variable interest rate and fixed interest rate options available
• Loan to Value Ratio (LVR): Most lenders require a maximum 80% LVR to avoid lenders mortgage insurance (LMI)
• Rental Income Assessment: Lenders typically assess 75-80% of projected rental income when calculating borrowing capacity
• Tax Implications: Investment property loans may qualify for negative gearing benefits
The Application Process for Investment Loans
The investment loan application requires thorough documentation. Finance & mortgage brokers can streamline this process by helping you prepare:
- Income Documentation: Recent payslips, tax returns, and bank statements
- Property Research: Rental yield calculations and market analysis
- Financial Position: Assessment of existing debts and assets
- Investment Strategy: Clear articulation of your property investment strategy
A streamlined application process through experienced finance & mortgage brokers ensures you access investment loan options from banks and lenders across Australia, potentially securing interest rate discounts unavailable through direct applications.
Calculating Costs and Repayments
Before buying a rental property, understanding all associated costs is essential:
Upfront Costs:
• Stamp duty (varies by state)
• Legal fees and building inspections
• Lenders mortgage insurance (if LVR exceeds 80%)
• Loan establishment fees
Ongoing Expenses:
• Calculating investment loan repayments based on your chosen interest rate structure
• Property management fees
• Insurance and maintenance costs
• Council rates and body corporate fees
Rental yield calculations help determine whether the property generates positive or negative cash flow, influencing your overall property investment strategy.
Choosing the Right Property Type
Established investment properties come in various forms, each offering distinct advantages:
Apartments: Often provide higher rental yields in urban areas, with lower maintenance responsibilities but potential body corporate fees.
Townhouses: Balance between apartment convenience and house-like features, appealing to families seeking rental accommodation.
Stand-alone Dwellings: Typically offer stronger capital growth potential and greater tenant appeal, though with higher purchase prices and maintenance costs.
Building Your Investment Property Portfolio
Many successful property investors start with one established property before expanding their investment property portfolio. This approach allows you to:
• Learn property management fundamentals
• Understand local property market dynamics
• Build equity for future investments
• Refine your investment strategy based on experience
Finance & mortgage brokers can help structure loans to support portfolio expansion, ensuring each investment aligns with your long-term financial objectives.
Working with Professional Support
Invest in real estate successfully by leveraging professional expertise. Finance & mortgage brokers provide:
• Access to multiple lender options and loan products
• Guidance on investment loan interest rate structures
• Support throughout the entire application process
• Ongoing advice for portfolio development
Property investment loan features vary significantly between lenders, making professional guidance valuable for securing optimal terms and conditions.
Making Your Investment Decision
Buying an investment property represents a significant financial commitment requiring careful consideration. Factors to evaluate include:
• Your current financial position and borrowing capacity
• Local rental demand and projected rental yields
• Long-term growth prospects in your chosen area
• Your risk tolerance and investment timeline
Established properties offer the advantage of known quantities – existing rental histories, established neighbourhoods, and immediate income potential.
Investment loans provide the vehicle for property investment, but success depends on thorough research, appropriate property selection, and professional guidance throughout the process.
Call one of our team or book an appointment at a time that works for you to discuss your investment property goals and explore suitable loan options for your circumstances.