What you should consider
Buyer beware, investing in property can present some fantastic opportunities to grow your wealth and secure a healthy income, however, if not timed carefully or applied for without sufficient research, and the right kind of help, property investing can present serious challenges to any borrower.
Whilst investing in property can offer you a steady stream of income, one of the biggest reasons most borrowers get into the property market is for the potential capital growth, not to mention the possible tax benefits you could receive over the life of owning the property (you will need to speak to a financial adviser regarding the last point).
Purchasing an investment property should not be considered a short-term solution, it is a long-term investment and should be given the respect and thoughtful consideration it deserves. Yes, if timed right and researched well, property investing could turnover a great profit, however, if or when that happens, you’ll need to consider the impact owning an investment property will have on your after-tax cash flow and your standard of living. Think carefully whether to invest in a property if the intended cash flow it produces significantly impacts your everyday living expenses or brings into question your serviceability across ALL your debt; the last thing you want to do is have to live off bread and water or worse, run the risk of not only losing your investment property but also your family home if you can’t service the loan.
The key to property investing, understand the ‘why’.
Why are you wanting to invest in property? Is it for capital growth? Is it for the income?
Once you work out the why, the next step is working out what type of property you want, and where. Do you want a house or an apartment? Do you want to buy in a certain suburb? Are you looking to develop? All of these questions (and more) must be asked before you can even begin your search. The approach to property investing must be targeted, know what you want before you start looking or else it’ll be information overload and you’ll most likely end up with a property that doesn’t meet you brief and doesn’t achieve the result you intended.
Another factor to consider when investing in property (and probably the most important), are you financially ready for this level of commitment? Don’t assume the income an investment property produces is guaranteed or whether (at times) it produces any income at all. How will you continue to service the loan if it’s vacant for an extended period of time? What if you have to reduce the rent, will that impact your living expenses? How will you fund the shortfall? These, and many other important questions, need to be addressed before you commit to investing in the property market, especially if you are using your principal place of residence as security.
Are we telling you all of this to scare you away from buying an investment property? No.
Quite the opposite. Buying an investment property can be one of the most exhilarating experiences of your life, and if done well, could potentially improve your wealth significantly, but only if it’s thought-out properly and managed with the proper help. This is where we come in.
If you’d like help finding the right lending solution and/or restructuring your current debt to assist with funding your first or next investment property, please contact us, we’d love to help and be a part of your journey.