So you’ve decided you want to start investing in property! That’s great! But you may be wondering ‘how on earth am I going to finance this investment property when I’ still trying to pay off the mortgage to my home?’. You may be surprised to find out that this is more doable than what it first may seem! Here are some simple budgeting tips for financing your property investment to help ensure you are getting the most out of your investment.
A recent survey of Mortgage Brokers shows that a large majority of them believe having the right budget is key to successful property investing. Setting up a budget which considers cash flows, expenses, fees and maintenance will lead to easier and more educated decisions when it comes to picking the right investment property. However, not all of us are financial planners or accountants and the mention of the words ‘budget’ and ‘financing’ alone can summon a headache.
Another budgeting tip is to eliminate, or at the very least reduce, any unnecessary expenses. When applying for a property loan, the lenders will review all your financial activity such as the transactions in your recent bank statements, your debt-to-income ratio, previous loan repayments, how much savings you have, or if you have any other investments. They will even take your credit limits into account when determining how much they will lend you. To increase your chances of securing the loan for your investment property you can do things like saving as much as possible for your down payment and paying off as much of your debt as possible by closing any credit card accounts you no longer use.
When financing property investment, another crucial piece of advice is to conduct in-depth research on the location and the specific type of property you are interested in purchasing. Did you know that the location of your property has around an 80% influence on how profitable your investment is? Look at the demographics of already established areas to identify areas where the average population has a higher-than-average disposable income and where the majority of properties are home-owner occupied. Why? Because it shows that these areas provide for a certain desirable lifestyle which ultimately people are able and willing to pay higher prices for, meaning more profit for you! We recommend investing in a property that is priced lower than what it would cost to build an equivalent house on an equivalent block of land. This is why we always try to avoid construction and new build/off-the-plan properties as they usually have inflated prices as a result of builder’s fees and commission.
If you apply these factors to a well-constructed budget, you’re going to be able to make better investment decisions. To help get you started on planning and creating a budget for financing your property investment, be sure to check out the free online calculators on our website!
Here at Simply Property Investment, we are driven by our passion to genuinely help people, not take advantage of them. If there’s a way to reduce fees so why not ado. Unlike a buyers agent, we will not receive any commission from the sale of the property, instead, a one-off fee will be charged for the service. But don’t worry, this fee won’t be an upfront, out-of-pocket expense as we will account for this in the borrowings of the investment property loan .This means there will be no underlying motive to act against your best interest in an attempt to inflate commissions nor will you have to worry about financial burden of acquiring hidden costs and fees throughout the process. Take the stress out of property investment and contact us today by calling 07 5570 2579, or email us at contact@simpleproperty.au. Otherwise, visit our website to learn more about our business and the services we have to offer.
