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Investing In Property

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Unit or House?

Research and having the right people to help you are the keys when investing in property.
Research and having the right people to help you are the keys when investing in property.

It definitely pays to do your homework on the property market before you dive in, and we’re thrilled to be on board to help you when it comes to financing your decision. Recent share market slides, tight rental markets in most capital cities and a whiff of increase in property prices are seeing many mum and dad investors retreat to bricks and mortar.

Generally, property in Australia is still considered to be a sound investment due to steady and consistent increases over time.

But it’s not a quick win. Property usually has a seven to ten year cycle, with highs, lows and steady stints in between.

Fortunately, an ongoing housing shortage in Australia and a tax system that allows negative gearing on property (where any investment losses can be claimed as tax deductions) continue to favour housing as a solid, long-term investment.

Cover Your Investment


Make sure you take out landlord’s insurance. This will cover you for damage caused by a tenant and unpaid rent if a tenant skips out, in addition to other standard risks, such as a house fire or a storm.

Any Interest?


Many property investors take advantage of interest-only loans because interest payments are tax deductible. That means you’re taking a punt that the property’s value will increase over time, leaving you with a financial gain in the long run.

This is a good strategy for high income earners who are taking advantage of negative gearing.

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Location


Of course, you’ve heard this before. But location can mean different things when it comes to rental properties. Renters are often looking for maximum convenience so consider properties near schools, major shopping centres and public transport.

Remove The Emotion


One of the worst mistakes you can make with any investment is to buy with your heart instead of your head. Remember, your rental property is not your ‘home sweet home’. A well-presented property is desirable, but think sensible, not swank.

Manage Your Investment


Managing a property takes time and energy.

Appreciate Depreciation


The ATO will give you a discount off your tax bill for wear and tear on property.

Taking Ownership


If you need both incomes to be considered in the lending equation, speak with us to get the right advice on the best ownership equation for your circumstances.

Here are some tips to help you find the right rental and reap the most rewards.

Unit or House?


House prices often increase in bigger strides than units, offering more potential for capital gain over time. But a rental home also comes with added responsibilities, including gardens and lawns (and sometimes a pool) to maintain.

Don’t Forget The Extras


An investment property requires regular financial commitment beyond the loan repayments.

Cover Your Investment


Make sure you take out landlord’s insurance. This will cover you for damage caused by a tenant and unpaid rent if a tenant skips out, in addition to other standard risks, such as a house fire or a storm.

Any Interest?


Many property investors take advantage of interest-only loans because interest payments are tax deductible. That means you’re taking a punt that the property’s value will increase over time, leaving you with a financial gain in the long run.

This is a good strategy for high income earners who are taking advantage of negative gearing.

Location


Of course, you’ve heard this before. But location can mean different things when it comes to rental properties. Renters are often looking for maximum convenience so consider properties near schools, major shopping centres and public transport.

Remove The Emotion


One of the worst mistakes you can make with any investment is to buy with your heart instead of your head. Remember, your rental property is not your ‘home sweet home’. A well-presented property is desirable, but think sensible, not swank.

Manage Your Investment


Managing a property takes time and energy.

Appreciate Depreciation


The ATO will give you a discount off your tax bill for wear and tear on property.

Taking Ownership


If you need both incomes to be considered in the lending equation, speak with us to get the right advice on the best ownership equation for your circumstances.

Take the next step


Let us contact you

Common Questions

Why invest in property?

Australians are among the most active property investors in the world, with an average of one in every three new mortgages each month arranged for investors. Most of these investors are ordinary people with ordinary jobs earning ordinary incomes. So, why is property investment so popular?

Capital growth. Capital growth is the increase in value of property over time and the long term average growth rate for Australian residential property is about 9% a year. Importantly, because property markets move in cycles, property values go through periods of stagnation as well as decline. This is why taking an investment view of at least 10 years is important. Note: if your investment property increases by 7.5% a year, over a 10 year period it will double in value.

Rental income. Rental income, also known as yield, is the rent an investment property generates. You can calculate this by dividing the annual rent by the price paid for the property and multiplying it by 100 to produce a percentage figure. As a general rule, more expensive properties generate lower yields than more moderately priced properties. There is also usually a direct, inverse relationship between capital growth and rental income. Those properties producing a lower rental yield will often deliver greater capital growth over the long term.

Tax benefits. The Federal Government allows you to offset against your taxable income any losses you incur from owning an investment property. For example, if the amount you receive in rent from tenants is $5,000 less than the cost of servicing the mortgage, and paying rates, water and other fees associated with the property, at the end of the year you can add that $5,000 to the amount of income on which you don’t have to pay tax. If you work as an employee, with income tax automatically deducted from your pay, this means you’ll receive a refund from the Australian Taxation Office (ATO) after the end of the financial year.

Low volatility. Property values generally fluctuate less than the stock market. Many investors say they experience greater peace of mind for this reason.

Leverage. Property enables far greater leverage than many other investments. For example, if you have $100,000 in savings, you could invest it in a portfolio of shares, or use it to buy a property worth $500,000 by taking out a mortgage for $400,000. If shares go up by 10% during the year, your share portfolio would be worth $110,000 and you would have gained $10,000. If property goes up by 10% during that same year, your property would be worth $550,000 and you would have gained $50,000.

You don’t need a big salary to invest. If you are buying to invest, lenders will take rental income as well as your own income into their assessment. If you already own your own home and have some equity in it, you may be able to use this as a deposit, meaning that you can buy an investment property without having to find any additional cash. If you don’t own your own home and feel you may never be able to afford one, buying an investment property may be a good stepping stone to one day being able to afford your own home.

What fees/costs should I budget for?

There are a number of fees and costs involved when buying a property. To help avoid any surprises, the list below sets out many of the usual costs:

Stamp duty — This is the big one. All other costs are relatively small by comparison. Stamp duty rates vary between state and territory governments and also depend on the value of the property you buy. You may also have to pay stamp duty on the mortgage itself. To estimate your possible stamp duty charge, visit our Stamp Duty Calculator.

Legal/conveyancing fees — Generally around $1,000 – $1500, these fees cover all the legal requirements around your property purchase, including title searches.

Building inspection — This should be carried out by a qualified expert, such as a structural engineer, before you purchase the property. Your Contract of Sale should be subject to the building inspection, so if there are any structural problems you have the option to withdraw from the purchase without any significant financial penalties. A building inspection and report can cost up to $1,000, depending on the size of the property. Your conveyancer will usually arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).

Pest inspection — Also to be carried out before purchase to ensure the property is free of problems, such as white ants. Your Contract of Sale should be subject to the pest inspection, so if any unwanted crawlies are found you may have the option to withdraw from the purchase without any significant financial penalties. Allow up to $500 depending on the size of the property. Your real estate agent or conveyancer may arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).

Lender costs — Most lenders charge establishment fees to help cover the costs of their own valuation as well as administration fees. We will let you know what your lender charges but allow about $600 to $800.

Moving costs — Don’t forget to factor in the cost of a removalist if you plan on using one.

Mortgage Insurance costs — If you borrow more than 80% of the purchase price of the property, you’ll also need to pay Lender Mortgage Insurance. You may also consider whether to take out Mortgage Protection Insurance. If you buy a strata title, regular strata fees are payable.

Ongoing costs — You will need to include council and water rates along with regular loan repayments. It is important to also consider building insurance and contents insurance. Your lender will probably require a minimum sum insured for the building to cover the loan.

How often do I make home loan repayments — weekly, fortnightly or monthly?

Most lenders offer flexible repayment options to suit your pay cycle. Aim for weekly or fortnightly repayments, instead of monthly, as you will make more payments in a year, which will shave dollars and time off your loan.

How much will regular repayments be?

Go to our Repayment Calculator for an estimate. Because there so many different loan products, some with lower introductory rates, talk to us today about the deals currently available, we’ll work with you to find a loan set-up that’s right for you.

How much do I need for a deposit?

Usually between 5% – 10% of the value of a property, which you pay when signing a Contract of Sale. Speak with us to discuss your options for a deposit. You may be able to borrow against the equity in your existing home or an investment property.

How do I choose a loan that’s right for me?

Our guides to loan types and features will help you learn about the main options available. There are hundreds of different home loans available, so talk to us today.

How much money can I borrow?

We’re all unique when it comes to our finances and borrowing needs. Get an estimate on how much you may be able to borrow (subject to satisfying legal and lender requirements) with our selection of calculators. Or contact us today, we can help with calculations based on your circumstances.

Buying a home


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Refinancing your home loan


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Becoming a first home buyer


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