If you haven’t invested in property before, the whole experience can be overwhelming.
Blogger: Bob Korver, owner, Mortgage Choice Eight Mile Plains
Despite the fact that many of Australia’s lenders have raised their variable rates in recent weeks, interest rates continue to sit at historical lows.
Furthermore, vacancy rates in most markets are also at all-time lows. Take Sydney, for example: recent data from SQM Research showed vacancy rates are sitting at just 1.7 per cent.
With that said, it is clear that property investment can prove both a sensible and lucrative investment strategy, provided it is done correctly.
Of course, if you haven’t invested in property before, the whole experience can be overwhelming.
The good news is, it doesn't have to be. For first time investors, there are a few tricks and tips that can be followed to ensure the first purchase is a sound one.
Tip 1: Location, location, location
When buying an investment property, location matters. If your property is not close to transport, shops and other amenities, it may be hard to find tenants for the dwelling. Worse still, if the property you are looking to purchase is heritage listed, situated near high-voltage power lines or in a flood-affected area, you may have trouble financing the property. There are a variety of reasons why Australia’s mortgage insurers may be hesitant to approve finance for a dwelling, so it is best to check with a mortgage broker before agreeing to purchase a property.
Tip 2: Size does matter
If you are considering purchasing a studio or one-bedroom apartment, be warned, some mortgage insurers won’t approve finance for properties that are smaller than 40 square metres. And while some mortgage insurers may be happy to count a car park or balcony when calculating the size of the dwelling, others will not. At the end of the day, some lenders are more flexible than others, so it pays to do your research.
Tip 3: A dense idea
Some lenders will not finance a unit located in a high-density apartment block. High-density apartment blocks are usually three to four stories high and have more than 30 units. As a general rule of thumb, lenders don’t like to finance too many properties within the one apartment complex as they don’t want to ‘over risk’ themselves. Unfortunately, it is impossible for you to know how many properties one particular lender has financed in a specific apartment complex, so you can’t be too discouraged if you find your loan is rejected for this reason.
Tip 4: A clean record is best
Recent changes to the Privacy Act means a minor default on a telephone bill or a late gas payment could stop you from obtaining finance. As such, it is important for you to check whether or not you have multiple enquiries or defaults in your credit history before applying for a loan. You can order a copy of your credit file from suppliers such as www.mycreditfile.com.au. Once you know what you are up against, you can work with the relevant credit provider to resolve the issue.
Tip 5: Satisfactory statements
Ensuring your recent bank statements are free from any suspicious withdrawals or transfers such as sizeable sums of money into or from your accounts is advisable, as any suspicious activity may stop you from obtaining finance. If your statements do include some rather odd activity, include an explanation for the transaction in the loan application. Without an explanation, lenders may decline the application for finance.
Provided first time investors follow these tips, they should find the whole purchasing process runs smoothly.
Bob Korver is the owner of the Mortgage Choice Eight Mile Plains franchise in Queensland. He has more than 20 years’ experience in financial services, having held various senior positions at one of Australia’s major banks before joining Mortgage Choice in 2011.
With a Certificate IV in Financial Services and a Diploma of Finance and Mortgage Broking Management, Bob is well equipped to help his customers with a wide range of enquiries, including business lending, commercial property finance, equipment finance, car loans, personal loans and home loans.
Traditionally known for providing customers with expert home loan advice, today Mortgage Choice in Eight Mile Plains is well equipped to help customers with more than their home loan needs. The franchise can also help customers with their broader financial needs, including but not limited to, commercial loans, personal loans, business lending, equipment finance and even car loans.