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Boost Mortgage Investment Property Returns in COVID

19th May, 2020 | Articles

In this article:
Here’s why purchasing an investment property through mortgage during COVID could be worthwhile.

If you are financially secure, the returns on an investment property during current times of uncertainty could be significantly higher. Here’s a quick peek into the factors that could make purchasing an investment property through mortgage worthwhile.

Rock bottom rates 

With two successive rate cuts, experts opine that the RBA is unlikely to slash them any further on account of the punitive action it may have on savers. Rates in all probability will stay at their current levels till the economy begins to recover- which as per the RBA’s recent outlook announcement is likely to take two years. Current rates are the lowest in Australian history and this two-year window, therefore, provides a fantastic opportunity to maximise returns on investments procured through a mortgage.

Risk averseness of the mortgage industry

With lenders getting more cautious and conservative with dispensing loans, if you are in a financially secure position, securing the right mortgage offering may become relatively straight-forward. You are likely to see lesser competition from other buyers who are in high risk industries like hospitality, tourism and retail.

Seller motivation

As per a CoreLogic March 27, 2020 report, the market size has already shrunk with a 20% dip in listings. Existing property listings may, therefore, be from motivated sellers. You may be in a significantly better-negotiating position with a lot of sellers seeking immediate financial respite through a property sale.

Buyer Competition

The wide-spread impact of COVID caused hardship has led to several buyers postponing or cancelling property purchase decision. This could result in a significant decline in competition from other buyers you would face under normal circumstances.

 

Tenant prospects 

The entire search to purchase process can take anywhere between two to three months. By this time, much of the economic fallout from COVID-19 is likely to be in full play, giving you better clarity. Post-purchase, finding a tenant will take another 2 – 3 months, by then there would be a meagre chance of the pandemic adversely affecting the financial prospects of your tenants.

 

Inspection

If the thought of physically inspecting properties and the risk of virus exposure is worrying you, opt for virtual inspections. In the wake of the prime minister’s recent auction ban, most real estate companies have been providing prospective buyers with digital inspection facilities. Inspect properties online and book a private one-on-one appointment for short-listed options only.
While current circumstances undisputedly provide an excellent opportunity to benefit from an investment property mortgage, there are a few things you should keep in mind.
  • Do not get blindsided by the low property rates. Research well on anticipated returns as per area, infrastructure and other significant property rate affecting criteria.
  • Do not get pressured into making an offer that you are not comfortable with. Remember that this currently is a buyer’s property market.
  • Make sure your mortgage rate is most competitive.
  • Go for a mortgage solution that has features to match your specific circumstances. For instance, would you need a mortgage with an offset account? Should you fix a part of your loan and leave the balance on a variable rate?
It’s best to seek professional expertise to understand your financial goals and navigate the complexities of the mortgage market to zero in on the right option for you.