New to Property Investment or a Seasoned Investor?
Would you like to know how to get started with financing your first property investment? Are you already an investor looking to build a relationship with an experienced mortgage broker?
Whatever your situation we can help
It's a challenging lending environment at the moment with the Reserve Bank imposing restrictions that limit how much you can borrow on an investment property mortgage. Currently you can borrow up to 80% of your owner-occupied property to leverage as a deposit on a rental property. For the rental property you will need a 30% deposit if using a major bank. This 30% deposit can be leveraged from borrowing up to 80% of your owner-occupied property.
For example, if your owner-occupied home was worth say $800k and you had a $200k mortgage. You can potentially use 80% of the $800k to leverage a deposit on a rental property. So $800k x 80% = $640k. Then deduct the existing mortgage of $200k from $640k, means $440k available equity as a 30% deposit on a property(s) worth $1,446,000.
We would help you structure the mortgage to get the best tax advantage (on accountant's advice) and potentially splitting lending so no one bank had a hold over all of your properties. The above scenarios do not take into account actual affordability on the banks' servicing calculators and is merely an equity calculation.
We do have non-bank lenders that can do an LVR to 80% of a residential investment property (sometimes higher). Alternatively we have some banks (not all) that will look at a construction loan on an investment property to 80% LVR.
It pays to talk to us first to discuss your personal situation. Holiday homes may still be purchased with 80% LVR, and dollar-for-dollar refinances on investment properties may also be done at over 70% LVR. It's a 'moving target' with lending criteria at the moment and each bank is applying their own restrictions on top of the Reserve Bank restrictions!
What is Your Property Strategy?
Are you looking for low return but high capital growth properties? Or are you looking for properties that may be cheaper in less desirable suburbs but have a higher rent return? Or you may even find a combination of both!
The key is to treat property investment as a business, even if you just buy one rental and work hard to pay it off quickly with the tenants help.
A quick way of working out a gross return on a property is take the weekly rent eg $300 on a property purchased for $300,000. Times it by 52 weeks to get an annual income = $15,600. Then times $15,600 by 100, then divide that figure into the $300,000 purchase price which should equal 5.2% return. Ideally you want your return to be higher than the mortgage rate. The more the income covers expenses, the less you have to top up the shortfall.
Remember banks will only take into account a % of the rental income (usually 75%) in their loan servicing calculator. This allows for expenses and down time between tenancies.
With any rental purchase you need to at least understand all the basic numbers. Calculate all the relevant property expenses eg interest, rates, insurance, body corporate fees (if unit title), property manager. Then deduct from the income to determine how much you will need to cover yourself from your own income. Banks will want to see that you have a good surplus income to cover such shortfall.