How to buy an investment property

Australians love investing in property and it’s easy to understand why. Property investment can provide steady returns and tax benefits in the right conditions, without the unpredictability of other types of investing. 

If becoming a property investor appeals to you, there are several things to consider. We’ve already put together a guide for beginners which you can read here, but it’s also important to know the steps you’ll need to go through when investing in property. We’ve got you covered there too – keep reading to learn more about purchasing an investment property.

Borrowing amount

First up, you need to determine how much you can borrow. To find out, a lender will look at your income, your deposit amount, your financial obligations, your spending habits and your credit report.

We have a borrowing calculator on our website to help you get a ballpark idea of where you sit. It’s definitely worth getting some further guidance though to ensure your numbers are correct. One of our home loan specialists will be able to assist you, or you can speak with a broker or financial adviser.

Costs to cover

While property investment can sometimes have tax benefits, there are upfront and ongoing costs that you will need to consider. It’s important to factor these in when you’re working out how much you need to borrow and reviewing your budget.

Some of these costs include: 

• stamp duty 
• Lender’s Mortgage Insurance (LMI)
• legal fees 
• pest and building reports
• land tax
• strata fees 
• ongoing property maintenance costs
• agency and/or management costs (if you plan to rent out the property).

Pre-approval

Once you know how much you can safely borrow, the next step you should complete is applying for pre-approval. To do this, you’ll need to choose a lender to finance your home loan and complete their pre-approval application process.

Pre-approval means a lender has agreed – in principle – to lend you a certain amount of money to fund your investment purchase. It’s important to remember though that pre-approval is not a guarantee of unconditional approval. To explore why pre-approval may not lead to a home loan, read this blog article.

Property hunt

Next up, is finding your investment property and buyers often know what they’re looking for before they begin the search process. Once you know how much you can borrow, it can narrow the scope and help you search with more confidence.

Everyone has their own criteria for what an investment property should be. Buyers often look for low suburb vacancy rates, good public transport and popular schools. Strong suburb capital growth is also something that can influence an investor’s buying decision. 

Get reports

When you start getting serious about a property, it’s important to make sure there are no hidden flaws, such as pests or building defects. Obtaining reports from reputable inspectors – and getting a valuation of the property – can answer these questions and give you the information and peace of mind you’ll want before you make an offer. 

You can take the guesswork out of buying with our free property profile report, available here.

Make an offer

Once you have all the information you need to make an informed decision, you can proceed with making an offer to the property agent. If your offer is accepted, it’s time to go back to your lender of choice to get final approval on the home loan. 

Settlement

You’ve made it to the final stage of the process. Your investment property is almost yours.

As part of the completion of sale, your lender will perform a valuation of the property. Then you’ll need a lawyer or settlement agent to go through the contract and ensure everything lines up. Generally, they will negotiate a settlement period – which is when your deposit and loan funds are released to the seller in exchange for the Certificate of Sale. The sale is then finalised, and after settlement the property is handed over to you, and you become a property investor!

If property investment is one of your financial goals, we can help you reach it. With flexible options and competitive rates, you’ll wish you talked to us sooner about home loan options. We have a team of home loan specialists ready to assist you – request an appointment or give us a call on 13 25 77.