What is a residential investment property?

Residential property refers to a house, townhouse, apartment or unit that is rented to another party, and not used by the owner. The cash flow from the rental income can be used to speed up mortgage payments on your residential home loan.

1. How do you pick the best suburbs?

There are certain criteria you should look for to ensure a quality investment, and location plays a key role in your success. Locations with good transport links and local amenities such as schools, hospitals, shopping and leisure facilities attract quality tenants. The construction of new shopping centres and infrastructure such as rail lines and roads are signs of long-term capital growth.

2. Do I need a large deposit to purchase an investment property?

No you don’t. If you have owned your own home for a few years, you’ll have equity in your property. Your property may have increased in value too. Instead of finding a cash deposit, your lender will allow you to use the equity in your home as security on your investment property.

3. Who will manage my rental property?

Our qualified property managers are experts in landlord and tenant relations and have an excellent track record. They also have access to a database of reliable tenants. We will recommend a property manager who knows your chosen suburb well.

4. How can I use the equity in my home as a deposit?

You can use the equity in your home as security with the bank and borrow against it to buy an investment property. Banks will typically lend you 80% of the value of your home, minus the debt you still owe against it. However, by taking out Lender’s Mortgage Insurance you can borrow more than 80%. Our property professionals will show you how it’s done.

5. Will an investment loan be any different to my existing loan?

Most of the same types of home loans and loan features apply for investors as well as owner-occupiers. Some lenders may charge higher rates for investment properties if the risks are higher.

6. What happens if my income drops and I can’t service my debt?

Your loan should be set up with a three month leeway to give you room to move in the case of unemployment or illness. If you can’t pay your mortgage, you can simply sell your property. You can also protect your income with income protection insurance or personal trauma insurance.

7. What are the advantages of buying a new property over an old property?

When you purchase a house and land package, you can depreciate the construction cost at the rate of 2.5 % over 40 years. New houses are easier to rent than than older homes, and the building, fixtures and fittings require less maintenance. Newer buildings have a higher component of depreciable factors, which provide significant tax deductions and lead to lower holding costs over the long term.

8. What happens if interest rates rise?

When interest rates rise, rental incomes and property prices rise too. Interest is tax deductible, so with the increased rent and increased tax credits, the tax structure for your property becomes a safety net. A fixed interest loan is an option if you are particularly concerned about interest rate variations.

9. Why not buy an older house and renovate?

Whilst this is always an option, it’s not something we recommend. To guarantee good returns on the renovation of an existing property, you must purchase the house for a very low price. In addition, every day you are renovating is a day you’re missing out on rent and still paying interest on your loan. Older homes do not have a warranty, require more maintenance and offer no tax advantages for depreciation.

10. Can I buy using my super fund?

Our professional consultants will teach you how to buy property with your self-managed super fund. If it’s not a self-managed super fund, we’ll show you how to convert it to one.

11. What percentage of my income should I set aside so I can retire on at least half my current salary?

To retire on the equivalent of half your current salary, every year of your working life you must set aside approximately 12% of your wages. This falls short of the 9% contributed under the current superannuation guarantee charge. Living on half your wage would require a significant change to your lifestyle. Property investment provides a much better return.

12. What are my pension and superannuation options for retirement?

Over the years it has become more difficult to qualify for the aged pension, and signs point to even more restrictions in