March 02, 2015
There has been a lot of talk in the media about the level of property investors over the past few months.So why are there so many more perceived investors in the marketplace? And is it effective?
Well, to answer the second question first, is it effective? Well Yes and No. This depends not only on the property market but also on you and the reasons (READ EMOTIONS) that you are buying one investment property over another.
There are a few different reasons investors invest:
- Property investment can be a great way to future-proof your wealth. And if done well, it can provide you with an excellent source of income heading into retirement.
- First homebuyers sometimes can’t afford to buy where they want to live so instead they buy an investment property where they can afford and rent where they want to live. This way their investment property grows in value to a point where they may be able to leverage the equity to then buy the property they really want.
- Some Mum’s and Dad’s want to help their kids, to give them a leg-up by buying them a rental property to live in.
Whatever your reason may be there are a number of things to consider when looking at property investment.
If you are considering investing in property, it is important to keep in mind that purchasing an investment property is a little different to buying an owner occupied property. There are a range of things to consider, such as the capital growth prospects, whether or not there is a strong demand for rental properties in the area and how you plan to gear the property. You should also take into account the level of maintenance the property will require and as a result, whether you are willing to take care of that aspect.
As a potential property investor, you also need to have a good idea of how you will finance the investment. You may have a significant amount of equity in your current home that you could tap into in order to purchase an investment property.
It is worthwhile noting that although there may be a significant amount of equity available, you may not be able to access it all based on how much your extra repayments may be.
Also, if you are intending to borrow more than 80% of a property’s total value (ie. that of your home plus the investment property), you will probably be required to pay lenders mortgage insurance, which can be quite costly.
Once you have settled on an effective investment strategy, it is extremely important to allocate time to pick a suitable loan. When doing so, think carefully about interest only vs. principal and interest loan options. While interest only loans will not reduce the loan amount, they will result in lower monthly repayments and allow you to make greater contributions to your principal place of residence, allowing the investment property to grow in value through capital gains.
Whatever the reason you are looking to invest in property, it should be done in consideration with the rest of your lifestyle. Talk to Mortgage Choice in Noarlunga today about making a plan for your future.
Call Fiona Manley on 0421 360 205 or Steve Pratt 0427 390 929, or
email at email@example.com