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Investment Home Loans

Investment Home Loans

For those who have already purchased their first property and become home owners, many find their next step is to purchase real estate for investment purposes.

Thanks to the stability and security that comes with owning a home, many Australians find that it’s not long after they buy a house that they’re financially ready to start looking at property as more than just a place to live, but as an investment.

Becoming a property investor may seem daunting at first, but it can be as simple as securing financing for a piece of real estate you believe will grow in value over time. And the process can all start by contacting Future Financial and taking out an investment property loan.

 

Why invest in property over other assets?

Some people invest in stocks, others invest in bonds, others pool their money with a group of other investors into a managed fund. But increasingly, more and more Australians are deciding that the property market is where they should put their investment capital.

Property has a number of inherent advantages over other assets that explains its popularity. For one, the real estate market is less volatile than the share market, yet can still net a good return. Because of its volatility, shares are an investment not suited to all kinds of investors.  By contrast, property is a comparatively secure investment that can potentially net you a substantial long-term profit with the right choices.

Property is an asset that typically grows in value over time. By purchasing a property in an advantageous market and choosing the right location, it’s common to see houses substantially rise in value over years or decades. If you’ve picked an up-and-coming neighbourhood that is set to grow, for example, or your area happens to see some notable infrastructure developments come through, the home you purchase could considerably rise in value.

In fact, one advantage of investing in property is that you can have direct influence over this. You can refinance and use your current equity to make alterations, additions and renovations, each of these things can increase the value of your home.

That’s not the only direct input those with investment home loans have on their asset. Many people choose to invest in property because of the large degree of options and control compared to other assets.

Not only can you choose whether or not to make improvements to it, but you also determine how much cash you’re going to put into your investment and whether the potential for growth matches the money you initially fronted. You also have various choices in how to manage and maintain your property – whether you’ll take a more hands-on role or hire a property manager to look after various aspects.

And, of course, there’s something nice about having an asset that is real and tangible, rather than a stock that you’ll receive a report about periodically.

 

What can I use my investment property for?

livingThe equity that builds up in your investment property can be unlocked for a number of purposes.

Perhaps the most common reason people invest in property is in order to prepare themselves for retirement. Saving up for the golden years is a task that can literally take a lifetime, particularly if you want to enjoy them in comfort and relative luxury. Investing in a property that will grow in value over time is a great way to bolster your existing savings and superannuation.

Others invest in real estate in order to create and grow their wealth. By investing in a house, growing its value and selling or renting it, owners can use the resulting return to reinvest in another asset – including more property.

Investment home loans, when directed at the right piece of real estate, can also help you pay off your existing mortgage quicker. This is not only because of the profits you can reap from selling an investment property at the right time, but also due to the revenue stream you’ll get from renting out your property to tenants. and the tax benefits that can come with it.

The income you receive from your tenants each week may mean that the house practically pays for itself. But rent won’t simply help you pay back your investment property loan – over time, it can even contribute to your regular mortgage repayments.

 

The case of Jessica and Mitchell from Kew

Consider the story of one Melbourne couple, Jessica and Mitchell. Mitch and Jess have been home owners for a while. Jess is a nurse at St. Vincent’s Hospital, while Mitch works as a carpenter around the city. They have three young children – two girls and one boy.

They first bought their four-bedroom bungalow in Kew all the way back in 2002 for $325,000 when the market looked particularly advantageous for them. Since then, they’ve paid off just over half their mortgage and their kids have all started school.

But as Jess and Mitch hit one milestone after another, the prospect of retirement loomed closer and closer. They wanted to have a generous nest egg that would support them for as long as possible, without being put into the position of having to seek financial assistance from their children when they’re all grown up. They knew they had to start getting the wheels into motion now to make it a reality.

So, Mitch and Jess contacted the team at Future Financial and got an investment property loan pre-approved. They then worked with their real estate agent to find the right neighbourhood to buy in, secured a property and started marketing it to tenants.

A few years later, they’ve made serious inroads into paying off their original mortgage, and the equity on both of their houses has built up to the point where they stand to get a lucrative return once they sell. Now, Mitch and Jess aren’t worried about their retirement anymore. In fact, they’re even thinking they might get another investment property loan somewhere down the line.

 

What to do before buying an investment property

As the story of Jess and Mitch illustrates, investment home loans come before investment homes. It wouldn’t do much good to go shopping for properties without knowing what your financial limit is first, and ultimately it could disadvantage you compared to other buyers.

Instead, first work out your borrowing power. Look at aspects like your existing debt levels, yearly income, number of kids, living costs and if you have any existing assets in order to work out how much you might be able to borrow.

Once you’ve done this, you’ll have a better idea of how you can proceed – you’ll know which properties are out of your range and that you needn’t waste time on. You’ll also be more certain about those properties you might have been on the fence about.

Following this, it’s crucial to have enough funds saved up to cover the cost of a deposit, as well as any fees, the stamp duty and various insurance costs. Most home owners choose to use the equity in their existing home loan to cover these expenses, as borrowing for all of the above costs has many tax benefits.

Finally, it’s time to see a lender and get pre-approved. With a pre-approval, you’re better prepared to negotiate with agents, and not only will you know your limit, but sellers are more likely to take you seriously.

Future Financial can help you secure the right investment property loan for your needs, and help you climb a higher rung on the proverbial property ladder.

For any other enquiries on Investment Home Loans, don’t hesitate to contact one of our friendly staff below.


Your Home Your Mortgage:
A Home Buyers Guide

Your Mortgage Your Options:
A Home Owners Guide To Refinancing



From the moment you turn the key in the lock and take those first few steps through your new front door, the feeling of owning your own home is second to none.

Your Home Your Mortgage aims to arm home buyers and investors with essential know-how and proven techniques to ensure you avoid the common pitfalls of financing a property.


There’s no question the current mortgage environment is one of the most competitive in our nation’s history.

Refinancing provides Australians with a platform to get a better deal on their current mortgage, many of which may have been locked in some years ago at interest rates well above what’s on offer in today’s competitive market.



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