Investing in property has proven a hugely successful financial pursuit in recent years, with over 1.8 million Australians currently owning an investment property. Offering a wide range of benefits from a consistent passive income to the several tax benefits you may accrue, property investment is a fantastic method of making your money work for you! However, these investments are only effective when you invest in the property that is right for you.
In choosing your investment property, there are a number of factors you need to keep in mind, and it’s natural for you to think, “is there a mortgage broker near me to help me through this process?”. Thankfully there is, and the team at Greenline Home Loans has devised the following tips to help you make these important financial decisions.
Desired Location
Where you’re a pair of first home buyers or a seasoned investment professional, an absolutely crucial factor to consider is location. When you’re searching for your investment property, you must ensure you select a location that has both tenancy demand to secure the property’s immediate future, and owner-occupier demand to ensure you will be able to sell the property in the future.
A deal-breaker on location is its proximity to transport links to ensure a smooth and easy commute for your tenants, whilst also ensuring that key lifestyle facilities are within arms reach of the property. These may include parks, shopping centres, restaurants and cafes. The closer your investment property is to these key facilities, the higher your rental yield is likely to be.
It’s important to also consider whether the area is likely to provide you with capital growth, as choosing the right location can account for 80% of your property’s capital growth. By investing in a growing locality, most favourably before it is subject to high demand, is a great way to ensure your investment property experiences capital growth throughout the duration of your investment.
Property Type
In searching for your investment property, it’s vital that you consider which property type will suit your budget, but also the demand conditions that the location is likely to be subject to in the future. For instance, investing in an area with an older population may mean that investment into a townhouse property spanning over three levels may not be the wisest investment decision.
By the same token, investing in an area populated by young families of first home buyers and high tenancy demand makes the purchase of a property with ample living space a suitable decision. To maximise the return you receive on your investment, it’s always important to purchase a property that is likely to satisfy the demands of the individuals most likely to reside within the area. Contacting the expert team at Greenline will help you gain a greater understanding of the demographics and demand patterns within your chosen area, and help you determine whether an apartment, house, or townhouse will best suit your expectations and the market demand.
Maintenance Requirements
Once you’ve decided upon the location and type of property you’d like to invest in, you must consider the additional costs and maintenance that will be associated with the occupancy of the property, just as you would if you were moving in yourself. Keep in mind that a home with a large garden and swimming pool will require greater effort and cost in preparing it for tenancy, and by holding greater maintenance requirements, you may be limiting your potential pool of tenants.
Similarly, an apartment situated in a luxurious complex with multiple, high-quality communal amenities will result in higher strata fees, and these expenses must be covered by the property owner rather than the tenant. This would limit your potential return and subject you to high recurring financial costs. Generally, investment into properties with minimal maintenance requirements and ongoing costs makes for a sound investment decision that will maximise your return.
Why Choose Greenline For Your Investment Property Home Loans?
Before you invest in a property, it’s crucial that you contact an expert team of lending professionals who can offer you individualised, specialist advice on your investment. If you require an investment property home loan to help finance the purchase of your additional property, look no further than Greenline, as we offer the lower rates on these all-important home loans, helping you secure your financial future with minimal hassle.
With many lenders in the market offering their services, it can be difficult to know which company is right for you. However, if you’d like to invest in property but you’re in need of expert advice from a company that will make the process easy to understand and reduce your stress, a simple search for a “mortgage broker near me” will direct you to our devoted team of professionals.
Reach out to Greenline Home Loans today!
Whether you’re looking to purchase an investment property, require information on home loans, or you’re first home buyers looking for expert advice, get in touch with our team of experienced brokers at Greenline Home Loans. With access to 50 lenders and a strong relationship with several major banks, we’re always able to assist you and offer a customised solution that will meet your needs.
At Greenline Home Loans, we will tailor the best solution for your requirements, and take you through the entire process from the first day you consider a construction loan or small business loan. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!
Why Is Leveraging In Property Lucrative?
Financial leverage refers to borrowing money in order to achieve bigger property growth and investment. It allows an investor to place more money into purchasing an asset than they otherwise would have been able to. Ultimately, this creates the possibility for increased gains.
The bounds for using leverage is that by obtaining serval sources of capital, an investor is able to enhance the prospective return generated on their equity and unlock deals at a scale otherwise inaccessible due to capital constraints.
So how does leveraging in property work?
If you are a first home buyer and you have, for example, applied for a loan of $250,000, you can use this money to purchase an apartment outright. You would then obtain a strong cash flow that an unmortgaged investment would bring in due course. On the other hand, you could use this money to place a deposit on five separate apartments. Presuming that these properties that you purchased were bought in a prime location with the potential for growth and had neutral to positive cash flow, all of these five properties would admirably be looking after themselves in regard to cash flow while also increasing in value in the long term.
Benefits Of Leveraging In Property For A First Home Buyer
- You Get More For Less
In instances where you place all your cash into one investment property, that is it. Whereas, in cases where you leverage in property, you have the option to go for another property. You have the ability to obtain extra mortgages meaning you are able to own several properties. Assuming that each of these properties is acquiring reasonable returns, this would transcribe to more rental income and real estate wealth on your behalf.
- Less Risky
The power of leveraging in property lowers your risk. If you use all of your cash to obtain only one property investment and it does not perform well, it can result in a bad investment decision, and you will be left with nothing. Contrastingly, if you obtain several leveraged properties, you will still be acquiring income in the chance that one or two of your properties perform poorly.
- Tax Benefits
On the occasion that one of your tenants decides to relocate, you will be left to offset the expenses that go along with it. You will certainly be making negative cash flow, but with many investment properties in your portfolio, you will be able to make up this income from the rest of your investments in order to offset such expenses.
Be Smart With Leveraging & Minimise Risk
In order to get the most out of your investment, you should be highly meticulous in minimising your risk and maximising your investment. Here are some tips that investors should follow when leveraging in property.
- Purchase in metro areas where there is a demand for renters and a chance that properties are able to retain their value
- Purchase properties that have a potential for growth
- Buy properties that have a strong yield where they are able to pay themselves off
- Stay away from high-risk investment properties
- Have an exit strategy in place – if you had to sell quickly, would you be able to get your money back?
- Protect yourself against any unexpected costs – an adequate buffer in place, such as 2 months’ worth of rent
- Get a payment you will be able to live with – find a balance between your down payment and your monthly payments
- Be conservative in your appreciation expectation
How Can I Start Leveraging In Property Now?
Our mortgage brokers here at Greenline Home Loans are able to help you with the process of leveraging in property. When it comes to leverage, it is important that you have a clear and precise process and plan in place to figure out how you are going to set out your finances. If you plan on purchasing two investment properties, it is important that you have enough equity that allows you to cover the costs of the deposit, stamp duty as well as the buyer’s agent fees for both purchases.
Reach out to Greenline Home Loans today!
If you are a first home buyer, buying a residential property or wanting an interest-only residential home loan, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider leveraging a property. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!
It is a no-brainer that the affordability of housing has become a major challenge for Australians. It can be quite difficult for many first home buyers to get their foot into the property market. A great option available for potential investors to help them break into the increasingly difficult property market is through the use of a SMSF (self-managed super fund). It is important to keep in mind that you are unable to invest in and purchase property with a standard industry super fund.
Below we have outlined the various benefits that come with using your super to invest in property:
Provides Tax Advantages
Particularly if you have a high-yield property, it may be beneficial to purchase and invest in the property using your superannuation. Any income that you earn will be taxed at 15% as compared to your personal tax rate, which is usually much higher. The tax rate on capital gains can drop to just 10% after you have held your property for over a year. If you do plan on selling your property after you enter into your pension phase, you will no longer pay tax on capital gains.
In addition, the interest this is accrued is tax deductible for your SMSF. This can aid in reducing your SMSF’s tax obligations.
Aids in Saving for a Deposit
As the cost of living keeps increasing, it is becoming impossible for people to keep up with this trend, meaning it is very difficult for them to save up for their first home deposit. Using your superannuation to get into the property market sooner rather than later provides individuals with the extra leg up that they need to purchase their very first home.
Benefits are Enhanced for Business Owners
Business owners can hold their commercial premises under their SMSF and pay market-value rent to the SMSF. By purchasing your business premises in a SMSF, business owners can minimise the tax paid on rental income and can guarantee an asset for their retirement without the need to alter their business cash flow. In this case, your business is becoming a tenant of your SMSF and pays rent to it like it would to any other landlord.
Strengthens your Retirement Income
When it comes to your self-managed super fund, it can catch all of your income and capital gains from the property investment in your super. Plus, if there happens to be no loan on the property that your SMSF owns, you can utilise this rental income to help fund your pension account. This investment income is known as Exempt Current Pension Income (ECPI) and may be tax exempt.
Why Choose Greenline Home Loans For Your SMSF?
A self-managed super fund is a great way to leverage your superannuation into an investment property to secure your future. Greenline Home Loan’s self-managed super fund loans are designed to cater to a wide range of investors, and we can consider both residential and commercial properties on a loan term of up to 30 years. We understand that depending on the location of your property, you may find it difficult to obtain approval for your SMSF loan with other lenders. Rest assured, Greenline’s product caters for inner-city properties as well as high-density and regional properties.
Our competitive loans are ideal whether you a purchasing a property or looking to refinance. Here at Greenline Home Loans, we accept applications for both new SMSFs and established SMSFs. Unlike other lenders, Greenline’s unique product does not have a minimum balance required and accommodates for SMSFs without liquidity and a cash buffer. Greenline’s SMSF loans can be either variable or fixed, and investors can choose to make interest-only repayments or make both principal and interest repayments.
Our unique variable product allows you to make unlimited extra repayments and gives you access to a 100% offset account on all your variable loans. You will have the ability to be able to customise your loan to your own preferences by creating multiple splits with no extra costs. Plus, our market-leading and user-friendly platform provides you with full access to your SMSF loans and your transaction accounts, along with unlimited transactions on all your accounts.
Reach out to Greenline Home Loans today!
If you have been considering buying your first home, buying a residential property or wanting a residential investment property loan and are looking for the best home loans, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider purchasing an investment property with your super. Contact our friendly team of brokers to speak about low rate home loans on 1800 705 505 to get started today!
Over the past year we have had many inquiries from people looking to purchase a house & Land package or complete a knockdown-rebuild on their existing home.
Building your own home is an experience like no other. Having the ability to choose exactly what your home will look like, inside, and out, rather than buying a house designed by someone else, means you get to live in your dream home. But there are a few things to consider, pros and cons, which we thought you should know about.
To begin with, you will need to apply for a construction loan which is different to your standard mortgage loan when buying an established home.
What is a construction home loan?
The construction loan is also known as a progressive Drawn-down loan. The loan is progressively drawn down as required to pay for each stage of the construction.
The loan is typically provided on an interest only basis for the first 12 months, allowing you to manage your cash flow more efficiently during the building stages. Once construction is finalised, the loan typically reverts to Principal and Interest repayments.
How do progress payments work?
Typically, there are 5 stages of the construction process which will trigger the progression of the draw down.
- Slab down or base
The initial portion of the loan, which is designed to cover the ground levelling, plumbing and waterproofing of the foundations. - Frame stage
The portion of the loan which is designed for building the frame of the property. This covers the initial brickwork, windows, roofing and trusses. - Lockup
The portion of the loan which is designed to support the construction of external walls, along with putting in place windows and doors, making the property lockable. - Fixing
The portion of the loan which is designed to support payment for the internal fixtures and fittings. This covers plumbing, electricity, installation of cupboards and external gutters. - Completion
The final portion of the loan which is designed for the conclusion of items that form part of the construction contract, putting in place the finishing touches.
For the purpose of calculating the interest applicable on the loan, the repayments are calculated based only on the amount that has been drawn down. For example, if the total approved construction loan is $400,000 but you have only drawn $100,000 to pay for stage 1, your interest is only based on the amount drawn of $100,000. This means you are not forced to pay any interest on funds that have not been used, saving you in interest repayments and supporting your cash flows.
While the rates on construction loans might be slightly higher to begin with, once construction is completed the loan can revert to a standard mortgage loan, enabling you to benefit from lower rates.
Now that you have a simple understanding of construction loans let us talk about some of the issues our clients have faced with their construction purchases and loan applications and how we have helped solve every issue and get our clients to achieve their dream of owning their self-designed home.
Limitations on lending
Determining the amount of borrowing the lender will approve depends on several factors which include the valuation of the property upon completion of the construction stages.
While most lenders will allow you to borrow up to 95% of the property value when applying for a loan on an existing home, construction loans can be limited, and the maximum lending can change from lender to lender.
In current market, most lenders limit that borrowing for construction purposes to 90% which means you need higher savings to support this type of purchase. Some lenders even limit the lending amount to 85% and even 80%.
Greenline Home Loans ensures we are kept up to date with the lending market to ensure we can find our clients the most suitable solutions and when required find them the lender to support the purchase on the 95% LVR basis.
Essential repairs
When signing a construction contract with a building company it is important to understand what is included and what is excluded from the contract. Ideally you would want everything included in the contract, from the house interior including flooring, blinds or the air conditioning unit, and exterior all the way to the driveway, landscaping and fencing in the back.
The valuation report which supports the loan application will include any item excluded from the contract and an amount itemised under “Essential repairs” which the lender will want to ensure you have sufficient funds to cover. Essential repairs can amount to $20,000 or $30,000 at times and this means you will need to hold that amount in addition to your required deposit funds prior to the loan being approved.
At Greenline Home Loans we support our clients and have been able to secure lending for these out of contract items by providing the lender with quotes for these out of contract items and borrow funds to pay external contractors for the work.
Progress payments
Once you have secured the loan and settled on your land you will move into the construction stages. At this stage, the builder will issue invoices against every completed stage of the construction and will request payment. There are several steps that must be followed before payment is made by the lender including an inspection of the construction site by the bank valuer, and provision of supporting documents from the builder. Most builders request payment within 7 days of issuing an invoice, with penalties for late payments, which can put a lot of stress on the clients to ensure all requirements are met in a timely manner.
At Greenline Home Loans we take the stress away from our clients and support them throughout the entire process by managing all construction stage progress payments and liaising with the builders, lenders, and valuation firms to ensure a timely turn around time for each payment request. This takes the stress away from our clients and can save them potential penalties.
If you are considering building your dream home and need to discuss your finance requirements, talk to our team of experienced brokers at Greenline Home Loans. We will tailor the best solution for your needs and walk with you hand in hand from the first day you consider the house design and until you get the keys and move in.