Beginners guide to property investment

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Interest rate announcement – March 2019
Today the Reserve Bank of Australia met to review the official cash rate. After last cutting rates in August 2016, the RBA have again decided to keep the cash rate on hold at 1.50% this month. Inflation is at 1.8% which is within the RBA’s target range of between 2% to 3%.

Australians are big fans of investing in residential property. Generations of singles, couples and families have built their wealth on bricks and mortar. Residential real estate continues to deliver regular, tax-friendly rent returns and long-term capital growth. In fact, one in five Australians own an investment property, and there are good reasons why a well located, well-managed rental property is such a popular choice.

The potential to earn healthy-long term capital gains over time

Like all asset class, property values can experience short-term dips as well as steep climbs, but over the long-term, they generally trend up.

Short term dips in market values make it essential to regard residential property as a long term investment, and you should be prepared to hold onto your rental property for at least five to seven years. This will smooth out the returns on your asset and help to maximise capital growth.

The property you select isn’t the only aspect that will shape your success as an investor. Your investment loan can also have a big influence on your cash flow and long term returns.

Harvest Property Loans has helped hundreds of people, just like you, achieve their goal of becoming a property investor. We take the time to understand your reasons so we can recommend the loan options that suit you. We help you understand how much you can borrow, identify your likely loan repayments so you can compare real rental returns and explain how different loan features and options (such as interest only loans or fixed versus variable rate loans) can be especially useful for investors.

Make a plan before you invest

To succeed in property investment, you need one key ingredient – Planning. It is a substantial financial commitment and the best results come to those that take the time to get good advice and plan carefully before they act. So, before you start checking out “Open For Inspection” it’s worth considering the following factors.

Your current financial position

  • Can you afford an investment property especially during inevitable periods of vacancy,
  • Can you afford a quality property that will attract decent tenants and deliver healthy long term price appreciation?

Where are you heading?

  • Are you prepared, and you can afford, to hold onto your investment for the long term?
  • Will you need access to your capital (money invested) at some point in the near future?

How much can you afford to borrow?

Getting an indicative idea of your borrowing capacity is a useful starting point in knowing the type of property and location you can afford to buy in. We can help you obtain pre-approval so you’re ready to go when the right property appears.

Do you need a cash deposit?

If you own your home did you know you may be able to use home equity in lieu of a cash deposit?

Affordability

Its likely that for the first few years, your investment property will be negatively geared (meaning it costs more to own the property that you earn from rental income). While this can offer certain tax benefits, you need to be confident your household budget can cope with the expenses of owning an investment property, especially the loan repayments.

Even the best properties experience periods of vacancy so finding a more affordable place and maintaining a buffer of spare cash will help ensure you can afford your investment over time.

Tenant appeal

No matter how affordable the place is, if it doesn’t attract quality tenants it won’t be successful. Look for properties with good access to transport and plenty of local amenities (e.g. schools, shops entertainment). Good security, low maintenance gardens and off-street parking are also highly sought after by tenants.

Our Current Best Interest Rates

The best home loan rates we currently have available:

  • Variable rate of 3.55% pa (comparison rate: 3.60% pa)
  • 1 year fixed rate of 3.49% pa (comparison rate: 4.33% pa)
  • 2 year fixed rate of 3.69% pa (comparison rate: 4.95% pa)
  • 3 year fixed rate of 3.79% pa (comparison rate: 4.36% pa)
  • 5 year fixed rate of 3.99% pa (comparison rate: 4.00% pa)

Assumptions: <$500,000 loan, owner-occupied purchase, principle & interest, LVR < 80%.

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