In this article:
1. Tap into your equity
Consider using the built-up equity in your home or rental property as a ready-made deposit for buying another property. Equity is the difference between the market value of your property and the balance of your home loan.
Once your property has increased in value, any additional equity can be used to negotiate further lending. By increasing your mortgage or refinancing your loan, you can free up some of this equity to spend on an investment property purchase. Because you’re using property value rather than cash reserves to build wealth, your reliance on savings is significantly reduced.
How to access equity and use it as a source of funding varies according to personal circumstances, so be sure to seek the advice of your local Yellow Brick Road mortgage broker.
2. Investigate rentvesting
If where you want to live and where you can afford to live don’t match up, rentvesting might be an alternative path to property investment.
Rentvesting is the name given to a version of property ownership where you buy an investment home in an affordable suburb but pay rent and live in another suburb. It has given many young Australians a foothold into the property market, but there are several important issues to consider before jumping in. Approaching rentvesting with a clear strategy and the advice of your mortgage broker will help you get the most out of it.
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3. Commit to learning
Make the time for continual learning to stay on top of changes and developments in the property market. To assist with savvy decision-making, educate yourself about issues like what makes an investment grade property, taxation, budgeting, house price predictions, interest rate forecasts, regulatory changes and investment structures.
If you’re new to investing, take the time to understand your financial capacity and risk profile, and from there the type of property that will best suit your investment strategy.
4. Grow your network
Of course, you can’t know everything, and this is where a great support team comes in handy. Successful property investors have a group of expert mortgage brokers, investment advisors, solicitors, accountants and property management agents around them who can assist with all aspects of a property purchase.
Be aware of people who may not have your best interests in mind. A real estate agent, for example, is there to sell the property so although they can be a good source of information, don’t rely on their word alone.
The same applies to smooth-talking salespeople. Do your research and triple-check all the fine print before you enter purchasing schemes like rent guarantees and off-the-plan purchases.
5. Have appropriate insurance cover
Landlord’s insurance is a must for property investors but make sure your insurance offers appropriate cover. Your insurance should not only cover you for damage to buildings and contents, but also for rental default and damage by tenants. Make sure you read the fine print because cover and service can vary significantly between policies.
6. Be ready for what comes
They’ll always be reasons for why you should or shouldn’t invest in the current climate. It’s important to keep in mind that the right time to leap is when you can afford to do so. The low-interest rate environment has reduced home loan repayments and made borrowing more affordable, so the next step is to secure a loan that suits your investment goals.
Of course, a long-term strategy and a reasonably cautious approach are essential ingredients. After all, you’re investing to improve your life, not to end up with a mortgage that is too high. Circumstances change, so ensure your finances are ready to deal with an unexpected blow like losing your job, a period of rental vacancy or a rate increase.