Investing in property is one of the safest investments bets in Australia. Although there is always some degree of risk, history shows there’s good money to be made in the property market.
The first step in buying an investment property is knowing if you can afford one. For this, you need to establish whether you qualify for an investment loan, whether you can use equity to buy an investment property and then determining how much money you need to (and can) borrow.
Having the funds to buy an investment isn’t the only hurdle. You need to determine the potential return on investment, evaluate how the loan repayments will impact your life, and weigh the risk with the rewards.
To qualify for an investment loan, you need to have a sufficient 5-10% deposit. You’ll also need at least 3-months of savings in your bank account, a clear credit history, and stable income and employment.
How much money you can borrow will depend on the lender, but it is generally between 85%-90% of the property value. However, if you can borrow 80% of the property value or less, you will avoid Lenders Mortgage Insurance (LMI) fee. Based on the Gold Coast’s median house price, the LMI would be $35,000 to $38,000.
There are many other associated fees to factor into the cost of buying an investment property, including stamp duty, which can be as much as 6% of the property value, the valuation fee, transfer fee, legal fees and conveyancing costs, loan fees, and landlord insurance.
To make your investment property the best investment it can be, try to pay a 20% deposit to avoid Lenders Mortgage Insurance (LMI). Based on the Gold Coast’s median house price, a deposit of around $142,000- 147,000 would be required.
Think of the 20% deposit as a micro-goal in order to achieve your primary goal – it goes back to saving for a goal. Review the tips outlined on our I Want to Save for a Goal page to help you reach this goal.
While many buy an investment property for the long term financial gains, there are significant tax benefits to avail from along the way.
Negitiving gearing is the most attractive tax benefit, which you can take advantage of if your investment expenses, including loan interest, outweigh your rental income, resulting in a loss. In such cases, the loss is offset against your income to reduce your tax.
If you would like to know more about the tax benefits, need help acquiring a home loan, or need expert financial advice to maximise your savings to help you save for a 20% deposit, get in touch with the financial advisors at Centaur Financial Services.
The information provided on and made available through this website does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Centaur Financial Services do not warrant the accuracy, completeness or currency of the information provided on and made available through this website. Past performance of any product discussed on this website is not indicative of future performance.
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