10 TIPS TO BUYING AN INVESTMENT HOME
If you’re thinking about buying an Investment Property, these 10 tips will help you in your journey.
1. BE CLEAR ABOUT THE OBJECTIVE OF YOUR INVESTMENT
The first step is to ask yourself this question “Why am I buying an investment property?” Sure, its because you want to improve your financial position, however, how will this particular investment help you achieve your strategy of increasing wealth!
Not all investment homes are the same. Some Investment Homes are more suited to renovations. Others are best knocked down and replaced with a new home. Some can be developed into multiple dwelling. Some offer better rental returns whilst others will improve in value either because of their location or because they will follow the market trend.
Each Investment Home presents a different opportunity and often they will also differ in the amount of time that will be required to obtain a profit.
Choosing the option best suited to you, will be influenced by your expertise, your skills and how much money you have access to.
2. DECIDE WHAT YOU WANT! HOUSE… UNIT… LAND…TOWNHOUSE
If you are new to investment, then consider if you want to buy a unit, townhouse, land or a house.
Each of these investment options have different factors that influence your purchase, which is why it is advantageous to identify which investment is better suited to your needs before you start actively looking for your investment.
If you decide to purchase a unit, then predominantly focus on viewing apartments so that you can compare apples with apples.
Keep in mind that units and townhouses are part of Body Corporates.
3. NEW VERSUS OLD
A new property or relatively new property will benefit from a higher depreciation than an older established property. This choice will influence the financial benefit you get from your Investment Property.
The choice may also influence the financial gain that can be achieved from the investment.
If the difference between the benefits of new versus old are not clear to you, then seek advice from your accountant before jumping in.
4. DO YOUR RESEARCH
The more informed you are on the market, the wiser your decision. Take the time to visit open homes, do your research on individual suburbs, read good articles and find time to talk to other investors about their experiences.
Agents are a very good source of information, so take the time to ask questions at open homes and request information on different areas.
5. LOCATION, LOCATION ….. LOCATION
We’ve all heard the saying, now practice it when looking for your investment property.
Buying close to public transport is always a bonus. Access to good schools and local shopping facilities is also an advantage.
Consider the neighbouring properties and the state of the street. Consider any changes that may occur over time if your investment strategy is over 10 or more years.
6. BE AWARE OF THE DEAL OF A LIFETIME
Often if its hard to believe, it really is. Whilst opportunities to find an incredible deal is always a possibility depending on the market conditions, there is a remarkable difference between a great deal and a lemon.
Whenever something seems hard to believe, then it usually is.
Always consider the scenario that you may have to sell this investment. When this time presents itself will this property sell quickly and at market value?
7. DON” T BECOME EMOTIONALLY ATTACHED
You should never purchase an investment property based on emotions. Never feel as though this is the only property for you as another possibility is most likely around the corner.
Every property is different and the guidelines and principals you use to purchase a house for you to live in with your family are somewhat different to an investment property.
Emotional attachment has cost many investors considerable money especially at auctions.
8. SURROUND YOURSELF WITH EXPERIENCED PEOPLE
Don’t wait until you purchase the property to surround yourself with the people and companies that you will need to work with.
You will require a Lawyer to handle your conveyancing. You will require a Mortgage Broker or a Lender for your loan and you will require agents to show you properties.
The sooner you establish these relationships, the more you are likely to benefit from their expertise and advice.
9. CHOOSE A LENDER OR A MORTGAGE BROKER EARLY
A lender will offer a choice of loans that they provide. A Mortgage Broker will offer you a choice of loans across many lenders. For example, NAB can only offer you a choice of loans that are offered by NAB, whilst a Mortgage Broker will offer you the best loan across as many as 40 lenders.
The individual needs of each investor are not generic which is more appealing to one lender versus another. Similarly, the location and condition of your investment will be more appealing to one lender than another. A good Mortgage Broker understands these differences and will know the best lending options for your investment loan.
A benefit of working with small Mortgage Broker is the opportunity to establish a personal relationship and achieve a higher level of service both during the transaction and post transaction.
The Finance industry is complex and rapidly changing. Having an expert by your side that you can trust will be to your advantage.
10. GET PRE-APPROVED AND GAIN PURCHASING POWER
The best position of negotiation is being able to make a cash offer on a property.
Seller’s ultimately want certainty, especially if they are selling in order to upgrade their home. An unconditional cash offer is much more attractive to a seller than a contract with a bunch of conditions.
The next best position in negotiating a contract is to have your loan pre-approved.
A Mortgage Broker can lodge an application with a lender before you find the property to purchase and get you formal pre-approval for a loan up to a fixed amount. This pre-approval gives you confidence that you will have the money to complete the purchase of your property. The pre-approval also provides confidence to the seller and the agent which results in a better negotiating position for you.
Beware of online pre-approvals which often are not worth the paper they are written on.
Speak to one of the Specialists at Brisbane Home Loans to get your pre-approval.
TIPS TO GETTING A LOAN PRE-APPROVED
If you’re in the market for a new property, then it’s important to be realistic about the amount of money you can afford to borrow.
Most people looking to purchase a property either for investment or personal use, will need to borrow money. Having a Pre-Approved loan is one way of ensuring your property search stays within a budget that a lender will approve.
Brisbane Home Loans, always recommends a Pre-Approval as the first step in your home buying journey to avoid unnecessary applications, and costs that cannot be recouped.
Loan Pre-Approval means that you submit a preliminary application to a lender prior to finding a property to purchase. The lender will review your application and confirm what type of loan and the maximum amount the lender will provide.
When applying for a Pre-Approved loan you will need to provide documentation, such as proof of deposit, proof of income, current monthly expenses, and any current credit commitments like personal loans or credit cards.
Irrespective of the amount the lender approves as part of the process, we always encourage clients to be prudent and borrow within their ability to service the loan.
What Are The Benefits Of Obtaining A Pre-Approval Loan From Your Lender?
- It is free and valid up for 3 months
- It gives you clear guidance on how much money you can spend.
- You won’t be setting yourself up for disappointment if you think you can spend more than your lender agrees to lend you.
- It allows you to shop with confidence and bid at auctions should your dream home come onto the market.
- It shows your estate agent that you are serious about buying a home.
What Are The Conditions Of Pre-Approval?
- That all eligibility information supplied to the lender is true and correct.
- That the lender has received all the documentation necessary to verify deposit, security, assets, liabilities and income.
- The lenders satisfactory assessment (including a valuation) of any property offered as security for your client’s loan(s).
- Whether Lenders Mortgage Insurance is required. If it is required (generally when the loan amount is for more than 80% of the value of the security property) the loan(s) will be provided only if the insurer agrees to provide the insurance. The borrower will also need to pay the Lenders Mortgage Insurance premium.
How Long Will The Pre-Approval Last For?
The duration of the pre-approval will vary depending on the type of pre-approval and the lending institution. Once we understand your needs, our Mortgage Brokers will offer possible options.
What Do You Need To Get Pre-Approved?
In general terms, we need to establish what you need and understand your personal financial position. You can use the following as a guide:
- How much deposit you have saved;
- An indication of the price range of the properties you’re considering
- Your income;
- Your assets;
- Your living expenses;
- Other loans you may have; and
- Credit card debts.
As each client is different, this list is just an indication. We will provide a more definitive list as part of our initial meeting.
What Should I Do Next?
Either book an appointment online or call us on 07 3889 9250 and we can book a phone appointment with one of our experienced Mortgage Brokers.
Once the appointment is booked, we will send you an email containing a list of the information you should start to gather to make the process quicker.
We can also, email you and provide you access to our client portal via the internet where you can upload the necessary information prior or after out telephone meeting.
