You need to be prepared to buy an investment property. That might mean having a dedicated savings account for an extended period of time, reducing any credit card debt and maintaining a steady employment history. The last thing that you want to happen after finding your dream home is to discover that you aren’t able to afford it.
At EasyPlan we can assist you in preparing your finances and find the best investment property loan to suit you. We can identify key areas to make your loan application successful, including:
- Your savings
- A lending organisation such as a bank or credit union
- Your equity in an existing property, such as your home or existing investment properties
Your borrowing capacity
Your borrowing capacity and your ability to borrow will differ significantly from lender to lender. Regardless of how much the lenders will lend you, you also need to know what costs you will be up for when applying for a loan.
Determining costs of purchase
This involves detailing the various elements associated with buying a property. This will give you an accurate handle on the funds you will require to cover the purchase such as:
- Stamp duty land transfer associated with the purchase
- Stamp duty associated with the mortgage (if applicable)
- Legal fees and disbursements including mortgage transfer fee, land transfer and registration fee
- Application and any ongoing fees
- Incidentals which includes strata searches, pest and building reports and renovations
Ongoing property costs
Ongoing day-to-day costs associated with a property will also need to be considered. These come all at once, so you need to prepared for the following:
LOAN REPAYMENTS: To work out if you can really afford a loan, factor interest rates at 1.5%-2% higher than the current average interest rate.
INSURANCE: You may need to factor in building and landlord premiums if you take out insurance as an absolute minimum. If you are buying the property as an investment, we recommend you consider landlord’s insurance. When it comes to property investment, insurance premiums are fundamental (and tax deductible) and should cost you less than $500 per year.
RATES: Council rates are a government charge and depending on the state and type of property, you may need to pay water rates.
PROPERTY MANAGEMENT FEES: These fees are charged by the letting agent to manage the rental term of a property. These fees will range from 5% to 8% (plus GST).
LETTING FEES: These fees are payable each time the property is let and you can expect to pay anywhere from one to two weeks rent, plus marketing costs. Some property managers also charge additional nominal fees, so find out what’s involved before you sign any agreement.
REPAIRS AND MAINTENANCE: The amount needs to be reviewed and can vary depending on the age of the property and whether there are any foreseeable large expenses which may have been identified in the building inspection report or strata report.
STRATA, MAINTENANCE, MANAGEMENT FEES: Buying a unit, apartment or townhouse means you will most likely have to contribute a quarterly strata levy fee to cover these costs. The costs for properties with additional facilities such as a lift are usually higher.
DEPRECIATION: This is a non-operating expense and depending on when your property was constructed or renovated, will determine whether or not you can claim depreciation. Visit our depreciation page for more information about what you can claim.
Making the application
We will assist you in making your application to ensure you secure the best investment property loan for your needs. Contact us on 02 4207 3110 or make an enquiry.