A property investment loan is a type of home loan that someone takes out to buy a property for investment purpose. It is a mortgage solution for those who want to buy a property and rent it out to receive income from it.

Many things about investment loans are different to how standard home loans work because they have stricter eligibility requirements. Investment loans often require a higher loan-to-valuation ratio (LVR), meaning investors need to raise a larger deposit before applying for a loan. They also have a slightly higher interest rate on average than residential home loans do.

Expenses that you make for your investment property can be claimed as tax deductions to reduce your taxable rental income while you’re renting it out, and your capital gains tax if you sell the property. The tax deductions you can claim for an investment property include:

  • Interest on the investment loan
  • Home and contents insurance and landlord insurance
  • Real estate agent’s commission
  • Maintenance costs
  • Council rates
  • Decline in value of depreciating assets
  • Construction costs (“capital works”)
  • Travel expenses to the property to do an inspection, maintenance or repairs

Thorough property research is an important part of the planning process. We can assist you with your research by providing a property report that captures key information, including:

  • Property sales history
  • Government valuations
  • Recent comparable sales
  • Suburb profile
  • Comparable rents

Before deciding to invest in property, it is important to consider the following points:

  • Rental returns – Rental payments from your tenants provide the cash flow income for your property, which can be used to help meet the loan repayments and other expenses of the property, but rent is only one component of your overall investment return.
  • Tax benefits ­– Tax benefits are a very important part of investment property ownership whether your property is negative or positive.
  • Passive appreciation – This is where the property value goes up in line with the general property.
  • Active appreciation – This is where you add value to your property through either buying at below market value or by renovating and adding more overall value than the cost of the renovation.

A top performing investment will have a balance of each of these four elements.

Top Reasons to Invest in Property

  • Rental Income
    The great thing about investing in property is that because you are receiving rent, which assist you to pay off your investment loan.
  • Tax deductions
    Any money you spend on your investment property, including maintenance costs, depreciation and the interest is tax deductible against your income.
  • You’re investing in an appreciating asset
    Over time, property has proven to appreciate well.
  • A predictable investment
    Over the long term, investing in real estate has proven to be a reliable investment, making it a low risk option for investing.
  • Build wealth
    The equity you build in your investment property will grow over time and this will give you the opportunity to use that equity to purchase future properties.
  • Setup up for your retirement
    With good planning, investment properties can be a great source of reliable income, especially in your retirement.

Some important considerations while purchasing an investment property

  • Property investment in Australia is a popular way to generate wealth – it’s an asset you can see and touch and you can generate income from first day you own it.
  • There are several costs involved in purchasing an investment property and it’s a good idea to understand these costs so you can accurately plan your investment.
  • When you’re comparing investment properties, it’s important to keep the properties tenant appeal top of mind. You should always ask yourself – can you attract good, long-term tenants to this property?
  • When you’ve decided on an investment strategy you’ll need to make sure you’ve selected a loan that will maximise your goals for cash-flow and capital growth.
  • Once you’ve selected a loan product, a formal pre-approval is the next critical step in purchasing an investment property.
  • Once the sale is finalised and you’ve taken over possession of the property you will need to find tenants and a manager for the property.

You may think that owning an investment property will cost you thousands of dollars upfront, and hundreds of dollars each week to finance; this is not necessarily the case. You may be able to buy a property by accessing the equity in your existing home.

We can talk you through the options available for purchasing an investment property and help you understand the process.

Can we help you?

If you are looking for a property investment loan, please contact us to make an appointment for a free no obligation consultation. Contact us