Investing in property forms the next logical step in your road to wealth and comfortable retirement, and needs to have appropriate finance structure to enable maximum cash flow, ease of accounting for tax and possibly future further investing.
Although a potentially lower emotional purchase than your home, you still need to devote considerable time and energy in researching areas for aspects like potential growth and vacancy rates, to name a couple.
A pre-approval for your investment loan would stand you in good stead and leave you focused on these important issues.
Depending on the complexity of the application a pre-approval can be issued in as quickly as 24-48 hours, and the banks will not only use future rent as income but they will also allow negative gearing on your income to be added back in!
Some key points to take seriously:
- Investments are the cornerstone of a healthy retirement, so make sure you are dealing with a lender that will allow you maximum flexibility
- Different banks have different lending amounts, so be careful who you choose if you want to maximize your investment capacity
- NEVER EVER cross collateralize your home with your investment, or your investments together
- Always use a broker that has cross-industry experience, not just finance, as this will come in handy for all aspects of your journey
- Buy where owner-occupied homes are in a majority
- Understand that if an estate is aesthetically pleasing, you’ve got a great audience for resales.
- Make sure there have been established resales within that estate. This is a good sign that you can sell and that there is a market.
When to Buy?
Have a look at this “property clock”, which has long been used to chart market cycles, but knowledge of the property media cycle that turns in tandem can be used to predict the clock’s swings and roundabouts. The property media cycle is divided into four segments: two periods of ‘mixed messages’ during the 12 noon peak and 6 pm trough, positive media during the upswing towards 12 noon, and negative media during the downturn from 12 noon to 6 pm. For best growth property should ideally be bought between 5 and 9 o’clock, and after 9 o’clock there is limited registered land. However still some good buying through to 10-11 o’clock.
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How is Land & Construction different to Off-the-plan?
Both a Land & Construction Package and an off-the-plan strategy use the strength of time in the market for an increase in value. It is essential to make sure you are buying into a market which is going to grow. A Land & Construction package differs from off- the-plan because you have an element of control over your growth in value with your input and involvement during the contraction phase. When purchasing off-the-plan you don’t need to be as involved as a buyer during the construction phase as this has already been negotiated and planned by the developer.
It’s important to understand there is a difference, but essentially it is the same idea – buy in a growth market, try and get the best possible property in that growth market, build it and see the value when it settles.
What are the benefits of a Land & Construction Package over an existing property?
Both strategies focus on creating equity. When purchasing an existing property, the idea is to renovate to increase the value. When purchasing a Land & Construction Package, the idea is to buy the land well, in an area where the value is set to increase from the time of purchase until construction is complete. From there, negotiate with a builder that is going to build a property of equal or greater quality for less cost than other builders in the area. A brand new property will appeal to the owner-occupier market from a resale point of view, which is where you will immediately see your profit. Be sure to look for benchmark sales in the area to gauge the potential value of your property from the start.
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