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Organising finance
There are many investment home loan products on the market today, each with different features and terms. To make sense of it all, do your research and talk to the experts. MyState Financial’s experienced home loan experts will work with you to explore each of the home loan options available to ensure you find the best product and home loan repayments to suit your needs. Make an appointment with a MyState Financial home loan expert today.
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Consider the location of the property as well as the property itself.
This is important for several reasons – long-term capital growth, quality of possible tenants and ability to fill a rental vacancy between leases. For example, are there shops or schools nearby? Are there good employment opportunities in the area? Are there any future developments that will contribute to the capital growth of your investment property down the track?
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Rental income - do your research
You need to make sure that your rental income on the property is going to make this achieves your financial objectives. Find out how much similar nearby properties are rented for and factor this in to your calculations.
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Inspection is a must
Make sure you organise a pre-purchase inspection on the property. Most often it is those little issues you cannot see such as cracking foundations or rotting floorboards that cost money and disappointment in the future.
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Minor modifications – adding value for capital growth and appeal
Are there any ways in which you can add value at low cost and in a short turnaround time to increase not only any capital value of the property, but increase the appeal of the property and allow you to ask for more rent? For example, fixing up the bathroom, a coat of paint or new window furnishings.
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Do you need Lenders Mortgage Insurance (LMI)?
Traditionally, other credit providers may only lend up to 80% of the total home loan amount, or maybe even less if you are borrowing for a rural property. However, LMI may allow you to borrow more for your purchase as it works by protecting your credit provider against risks associated with your property should you default on your loan. The premium you will need to pay for LMI depends on the purchase price of the property and how much you are borrowing – this insurance is paid by you at the time of settlement. (MyState Financial’s Home Loans may allow you to borrow up to 97% of the property value*).
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Identify your potential tenants and put yourself in their shoes
Look at the buildings and houses that surround the property and go for a walk around the neighbourhood. Is it appealing? Are there aspects of the property itself that are unappealing? For example, if you want to attract a family as tenants, are there any features of the property that may be impractical or dangerous for children?
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Budgeting for the little extras
Depending on the age of the property, from time to time you may have to spend money on the investment property to keep it in good rental order. These can include those unexpected expenses such as a new hot water cylinder, a new oven, plumbing and electrical issues and maintenance. Make sure you budget for these extras.
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Make sure you have your investment property fully insured
Talk to MyState Financial about our insurance options for landlords.
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Know when to bring in the experts
Depending on how much time you have and where your expertise lies, consider the option of a Property Manager versus self-management. If you decided on a Property Manager, you will have to factor this in to your financials. Also consult an accountant regarding any taxation implications of your investment.
*Subject to conditions and Lenders Mortgage Insurance approval.
This list is not exhaustive, and as such is not a replacement for specific advice from qualified lenders, financial planners, accountants, solicitors and building consultants.