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How To Buy An Investment Property In 2024

Can I Borrow Enough To Purchase An Investment Property?

If you have followed on from our previous processes I’m sure you will be able to see a trend. The initial steps to purchasing your first investment property are again similar to buying your first home or purchasing your next home. Best course of action is to speak with us so we can assess your maximum borrowing power and look at strategies that may help you get your first investment property sooner. In addition to the usual home loan procedure undertaken when applying for a home loan, lenders will look at an investment loan a bit differently as they factor in other items such as the rental income you may receive to help you service the loan. They will also look at your home loan repayment history.

What Is Positive And Negative Gearing?

Both methods have their pros and cons. Positively geared properties can increase your cash flow however negatively geared can increase your tax refund. The key item here is a non-operating expense known as ‘depreciation.’ Depreciation is higher on new properties as you can write off costs for plant and equipment items in the earlier years if you are the first owner of the property. In terms of rental yield ideally what you are looking for is a return of at least 4%.

 

Whether you are looking for cash flow in your pocket now or a bigger tax refund you really can’t go wrong with bricks and mortar!

Should I Get A Pre-Approval?

Just like when you purchased your first home, after meeting with us we will submit your application for a conditional pre-approval. This means that the lender has approved your application with some conditions that need to be met in order to get the final approval or make it an unconditional offer. This step is crucial in order to move on to the more exciting part of the process. 

Are There Any Government Grants Or Concessions?

Unfortunately there are no government grants once you have already purchased a property in Australia. However, there is a concession available to you if you purchase a property off-the-plan. Off-the-plan concessions can be quite complicated but the basis of them is that you only pay stamp duty on the dutiable value or market value, whichever is greater. The dutiable value of a property is the contract price minus the construction or refurbishment costs incurred on or after the contract date. The dutiable value is often less than the contract price. 

What Are The Upfront Costs For An Investment Property?

Buying an investment property will result in additional upfront costs but be aware of costs you might not have considered. 

Below is a list of costs you can expect to pay:

  • Deposit

  • Stamp duty

  • Lenders Mortgage Insurance

  • Insurance

  • Inspections

  • Conveyancing

  • Removelists

  • Borrowing Fees

  • Settlement Fees

  • Connection of Utilities

What Are The Ongoing Costs Of An Investment Property?

Maintaining an investment property has its fair share of expenses. It is important to know what expenses can be deductible in the year they occur and what expenses have to be depreciated over time. An example of expense categories that have to be claimed over several years are depreciation and borrowing costs. The following list are expenses that can be claimed in the year they are incurred, otherwise known as tax deductible expenses:

  • Council and water rates

  • Building insurance

  • Landlord insurance

  • Body corporate fees

  • Land tax

  • Property management fees

  • Repairs and maintenance

  • Bank fees

  • Interest payments

Do I Have Enough For A Deposit?

Having a 20% deposit will help you when applying for a loan and avoid paying Lenders Mortgage Insurance on your investment property. However this can be hard to do as you are paying off a home loan. You may have equity in your current home that can be released and used as your deposit. So essentially you will be buying an investment property without using any of your cash reserves. Contact us today to better understand the options available to you.

Found The Perfect Investment Property?

Think you have found the perfect investment property for your family to help you generate passive income and capital growth over time? Download our free Investment Property Analysis Template to help you make an informed decision​ on whether to buy or to pass it in.

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Get Started With Your Complimentary Investment Property Strategy Session Today!

At no obligation or cost, you cannot afford to do this alone! Book a call today!

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