As a pharmacy assistant, you may be considering diversifying your income through property investment. Understanding investment loan fundamentals is crucial when you're ready to invest in real estate and build long-term wealth through rental properties.
Understanding Investment Loans
An investment loan is specifically designed for buying an investment property that you intend to rent out to tenants. Unlike owner-occupier home loans, these loans are structured differently and often carry higher interest rates. When applying for an investment loan, lenders assess your borrowing capacity based on the rental income the property is expected to generate, plus your existing income.
The application process requires thorough documentation including bank statements, proof of income, and detailed information about the property you wish to purchase. Lenders want to see that you've conducted proper research on the property and understand the local property market conditions.
Types of Investment Properties
When buying an investment property, you can choose from various property types:
• Apartments: Often more affordable entry points with potentially lower maintenance costs
• Town houses: Balance between affordability and space, popular with families
• Stand alone dwellings: Typically offer higher rental yields but require larger loan amounts
Each property type has different rental yield potential and appeals to different tenant markets. Your choice should align with your property investment strategy and available deposit.
Key Investment Loan Features
Investment loan options from banks and lenders across Australia offer various features:
Interest Rate Options:
• Variable interest rate: Fluctuates with market conditions
• Fixed interest rate: Locked rate for a set period, providing payment certainty
• Split loans: Combination of fixed and variable rates
Loan Structure:
• Interest-only periods to maximise cash flow
• Principal and interest repayments for faster equity building
• Interest only loans may suit investment strategies
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Pharmacist Home Loans today.
Loan to Value Ratio and Lenders Mortgage Insurance
The loan to value ratio (LVR) represents the percentage of the property value you're borrowing. Most lenders require a minimum 20% deposit for investment properties, meaning an 80% LVR. If you borrow more than 80% of the property value, you'll typically need to pay lenders mortgage insurance (LMI).
Some lenders offer no LMI loans for pharmacists, which can reduce upfront costs when buying a rental property. Understanding these costs helps in calculating investment loan repayments accurately.
Financial Considerations
Negative Gearing:
This occurs when your rental income is less than your loan repayments and property expenses. The loss can be claimed as a tax deduction against your other income, potentially reducing your overall tax liability.
Rental Yield Calculations:
Calculate gross rental yield by dividing annual rent by property purchase price, then multiply by 100. This helps assess the property's income-generating potential.
Additional Costs:
• Stamp duty varies by state and property value
• Property management fees if using an agent
• Council rates, insurance, and maintenance costs
• Annual tax return preparation for investment properties
Building Your Investment Property Portfolio
Starting with your first investment property is often the most challenging step. Once established, expanding your property portfolio becomes more achievable as you build equity and experience. Many investors begin with a single rental property loan and gradually add properties over time.
For pharmacy assistants, investment loans for pharmacists may offer specific advantages or interest rate discounts based on your profession's stability and income potential.
Streamlined Application Process
The investment loan application involves several steps:
- Pre-approval: Understand your borrowing capacity before property hunting
- Property research: Analyse potential rental yields and growth prospects
- Formal application: Submit complete documentation once you've found a suitable property
- Property valuation: Lender arranges independent valuation
- Final approval: Complete remaining conditions before settlement
Having organised bank statements and financial records ready can help expedite the process.
Getting Started
When you're ready to access investment loan options from banks and lenders across Australia, professional guidance can help you understand which rental property loan suits your circumstances. Whether you're purchasing your first investment property or expanding your property portfolio, understanding these fundamentals helps you make informed decisions.
Property investment can be a valuable wealth-building strategy for pharmacy assistants looking to supplement their income and build long-term financial security. With proper planning and the right investment loan, you can take advantage of Australia's property market opportunities.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan options and start your property investment journey.
