The Loan Process | Things to Consider
Nine Things to consider when buying an investment property
Many people believe that those who make millions in property investing are just lucky. Property investing is hard work but it is possible for the average Australian with the right education, elbow grease and commitment can make a million dollars within 15 years with just 2 well researched investment properties. However to start building your property investment portfolio you need to know how to find the right property at the right price.
Buying in one name or joint names?
This is a tough question and one that you need to consider if you plan on building a portfolio. If you buy with someone else and then go and try and buy in your own name then lenders will attribute half the rent of your jointly owned properties to you and all the debt so it reduces your borrowing capacity.
Buying initially in individual names is a good strategy if you can purchase what you want on just the one income. If you are buying with your partner and your incomes were vastly different and you were in different tax thresholds then buying in one name over the other could make sense depending on your property investing strategy ie positive cash flow properties for instance maybe better in the lower income earners name. It is worth speaking with your accountant before you start investing as often you can not fix up your buying entity (without paying stamp duty again).
So if you are going to buy with your friend, sister or Mum and you may in the future want to purchase a property in your own name or with your partner remember this initial property purchase may effect your borrowing capacity in ways you never imagined.
Consider costs of refinancing. In most cases you are refinancing for a better interest rate or because your current lender does not have the products, finance structure or services you need. Find out all the costs though before you move
Lenders Mortgage Insurance
You need to be educated on the facts Mortgage insurance is a once off fee that you should see as an opportunity cost, this allow many property investors to grow their property portfolio quickly.
Banks and lenders look at you as a risk and what you are buying as a risk. You need to know what lenders are looking for so you can position yourself in the best possible way to get the loan that you want. Credit scoring is becoming more and more important so understand what the banks are looking for.
Improve your borrowing capacity
You can not depend on banks online calculators - every lender and every person’s circumstances are different. You need to know how to improve your borrowing capacity. For those in the Gold, Diamond and Inner Circle Mentoring you have access to an online calculator that will not only show an estimate of what you can borrow but also specific areas that you can afford.