When it comes to buying your first investment property in Swan Hill, there are a few things that you need to consider. For example, do you have cash ready for a deposit or do you need to save first? Alternatively, if you already own the home that you live in, can you leverage the equity that you’ve built up?
You also want to ensure that you purchase the right type of property. This is where your local real estate agent can help because he or she will know exactly what renters in Swan Hill are looking for.
How will you fund the investment property?
Buying an investment property is similar to buying your first home. The more deposit that you have on hand, the less you need to borrow and the more likely you are to be approved for the mortgage. Here’s a checklist of what to consider:
- How much do you want to spend? For this you need to talk to your local real estate agent to work out what type of property you should be looking at and the average price this type of property is selling for.
- How much deposit do you need? It’s best to work on at least 20% of the purchase price so that you don’t have to pay lender’s mortgage insurance. You also need some cash put aside for incidentals such as stamp duty and conveyancing costs.
- Do you have enough cash or will you need to save? If you currently don’t have enough cash, you might need to instigate a budget and savings plan.
- Do you have equity in your current home? If you have enough equity in your current home, you might not need any extra cash because you can use this available equity as your deposit.
When applying for a mortgage for your investment property, it’s also important to consider the credit limit on your credit cards. This is because lenders will focus their attention on the credit limit rather than how you use the card.
For example, a credit card with a $12,000 limit will have the lender assume a minimum monthly payment of $360. That’s 3% of the limit. This will ultimately reduce the amount that you can borrow.
Tips for evaluating the property you want to buy
The next step in the process is to evaluate the type of property that you should invest in. Talk to your local real estate agent and the property manager to determine what renters in Swan Hill are primarily looking for in a rental property. Here are some other tips to consider:
- Will the property provide a positive cash flow? For this you need to do some calculations. For example, will the expected rent cover the mortgage payments as well as other expenses such as council rates and landlord insurance?
- What are your investment goals? For this you need to consider whether you want the property to supplement your income or whether you are using it to increase your long-term wealth.
- Is the property relatively low maintenance? It’s important to think about the future maintenance requirements of the property that you select as this will affect your cash flow and also the capital gain on the property.
Using the equity to help your kids get into the property market
Do you want to help your kids get into the property market? Many parents are considering the possibility of helping their children get into the property market by purchasing an investment property either one their own or jointly with a child.
If you purchase an investment property while your kids are still young, you can later use the equity in this property to help them with a deposit to purchase their own home.
Alternatively, you can sell the property down the track and use the capital gains that you’ve made to help your kids purchase their first home. You might want to talk to a financial adviser first to see whether this type of investment will work for you.
Can we help with your first investment property in Swan Hill?
We’re full of great ideas on how to buy your first investment property in Swan Hill and what you should be looking for, so why not give us a call on 03 5032 2507. We’re here to help.
