Whether you’re looking at buying your first investment, planning your future lifestyle, or building your wealth, investing in property can be a great option. At Rhythm Finance Co our mortgage brokers can help you wherever you are on your journey of purchasing an investment property.
Investments of any kind can be both exciting and challenging, buying the right investment property is often solely a financial decision. If you’re looking with your heart instead of your head, it might be difficult to find the right property – one that could provide you with all the rewards you’re after.
Here are some things that may be helpful to consider when purchasing or constructing an investment property…
Understand how much you can borrow
If you already own a home that’s gone up in value since you purchased, or if you’ve made extra repayments, you could utilise the equity in this home towards the purchase of your investment property, either as security or to help with the deposit. We can help you understand the amount of equity you have available and your borrowing capacity.
Know the upfront costs
There are various costs that come with buying an investment property, and it’s important to budget for all of these. Your biggest upfront cost will be your deposit, which is generally 20% of the property value to avoid paying Lenders Mortgage Insurance (LMI). Then there’s the upfront cost of Stamp Duty, being a state government tax on all house purchases calculated as a percentage of the purchase price. Other costs associated with purchasing an investment property can include:
- legal and conveyancing fees
- building and pest inspections
- real estate leasing fees
- accounting and taxation advice
- building insurance
Budget for the ongoing costs
Once you’ve purchased your investment property, there’ll be ongoing costs to consider for your budget such as:
- Mortgage repayments
- Council rates
- Body corporate or strata fees
- Building and landlord insurance
- Property management fees
- Repairs and maintenance
- Accounting fees
You may also need to allow for an occasional vacancy period between tenants, but once you’ve got a clear picture of all the relevant costs, you’ll better understand the cash flow impact of your investment.
Choose the right loan
Investment property home loans have a range of features and benefits that can help you achieve different results to suit your individual needs. Choosing the right loan and repayment structure for your needs can provide the flexibility to suit your goals and lifestyle. Here are some options to consider when selecting your loan…
- Principal and interest loans
- Interest only loans
- Variable interest rate loans
- Fixed interest rate loans
- Split loans
- Mortgage offset
- Redraw facility
Positive Gearing or Negative Gearing
Your property is positively geared when the annual rental income is higher than the total interest repayments and associated property costs. It’s worth noting you’ll be expected to pay tax on any surplus income generated for the financial year.
Negative gearing occurs when your annual rental income is less than the total interest repayments and associated property costs. This can reduce your taxable income and the amount of tax payable.
Depreciation
Claiming depreciation can be a great way to maximise the taxation benefits of your investment property, a professional quantity surveyor can prepare a depreciation schedule for accounting purposes.
Throughout your investment property journey, we always encourage you to seek independent taxation and financial advice.
At Rhythm Finance Co we’ll help you navigate every step of the process, so that you can relax knowing we’re working hard for you. We don't charge any fees for our service, because the lender pays us once your loan has settled. It’s important to understand that we work exclusively for you and your best interests. Rhythm Finance Co is family owned, our brokers are local to the Coffs Coast and are keen to help you with buying your investment
