Investment Property Loans | Compass Lending & Finance

Investing in property

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The keys to investing in property

It’s important to do your homework on the property market before you dive in, and we’re here to help you finance your decision. Many investors continue to see value in bricks and mortar, viewing property as a stable and long-term investment choice.

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Whether you’re starting up, sustaining success, or wanting to make the most of new opportunities, the right finance can help fund what you’re looking for.

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Research and having the right people in your corner are the keys to property investing.

It pays to keep a cool head, research, and seek advice before taking the plunge.

Property remains a popular choice for investors looking to build long-term wealth. With demand for affordable rentals consistently strong, many see real estate as a way to achieve steady capital growth and reliable rental income. That said, it’s essential to carefully research the market and ensure any investment you make is financially sound, not just today, but well into the future.

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Make a confident rental choice and get more from your investment

Unit or house?

Although houses are generally more expensive than units, values usually rise faster, offering more potential for capital gain. While units may come with additional body corporate costs, for landlords, they are often lower maintenance than rental homes, which may have lawns and sometimes a pool to maintain.

Location, location, location

Of course, you’ve heard this before. However, location can mean different things when it comes to rental properties. Renters often seek maximum convenience, so consider properties near good schools, major shopping centres and public transport. Research target areas, including recent property price movements and future predictions, rental vacancy rates, average weekly rents, and proposed infrastructure improvements. It would be best to scout as a renter to get a first-hand look at the local market.

Remove the emotion

One of the worst mistakes you can make with any investment is to buy with your heart instead of your head. Remember, your rental property is not your ‘home sweet home’. A well-presented property is desirable, but think sensible, not swank. Ideally, you want a neutral interior colour scheme, serviceable and resilient flooring and window coverings, a low-maintenance yard and good storage. And if buying an older style unit, look for one with an internal laundry, a garage or car space and few stairs (unless there’s a great view to be had higher up, which can add to the property value).

Don’t forget the extras

An investment property requires regular financial commitment beyond the loan repayments. Ensure you can cover land and water rates, and maintenance and repair costs. Tenants are entitled to repairs or replacements as quickly as possible under their rental agreement, so you must have the means to pay. Apartments or units also come with body corporate fees, which can run to thousands in some modern complexes with professional landscaping and shared amenities, such as swimming pools. Be wary of any older buildings that may need repairs or paintwork that may require additional contributions to a sinking fund.

Cover your investment

Make sure you take out Landlord Insurance. This will cover you for damage caused by a tenant and unpaid rent if a tenant skips out, in addition to other standard risks, such as a house fire or a storm. If you invest in a strata title property, ensure the body corporate has sufficient building insurance to cover the cost of rebuilding the complex at today’s prices. It’s often hard to determine what you need to cover versus what the body corporate covers. A good rule of thumb is everything from the wall paint inward is yours, and everything outside of that is covered by the body corporate.

Any interest?

Many property investors take advantage of interest-only loans because interest payments are tax-deductible. That means you’re taking a punt that the property’s value will increase, leaving you with a financial gain in the long run. This is a good strategy for high-income earners taking advantage of negative gearing. Suppose you choose to positively gear your investment (i.e. generate a profit from the rental income after costs). In that case, you might want to consider a principal and interest loan and use the profit to shave off the principal. Just remember, you will pay tax on any income from your investment. Talk to your accountant about your tax situation so your broker can find the right loan.

Manage your investment

Managing a property takes time and energy. Suppose you don’t have much to spare. In that case, you should get a professional property manager to advertise the rental, screen and select tenants, collect and pay the rent, coordinate repairs and maintenance, provide condition reports, and manage disputes. Ask other local landlords for referrals for reputable managers. You should also conduct twice-yearly inspections yourself. Any associated costs, including travel and accommodation, are tax deductible. If you decide to self-manage, you must be well-versed in tenancy laws and prepared to organise repairs, including those that arise after hours.

Appreciate depreciation

The ATO will give you a discount on your tax bill for wear and tear on the property. It’s known as depreciation and can be a handy windfall for investors, especially if you buy a new property. The formula is quite complex and depends on the age of your property, building materials and the various fittings. That’s where a professional quantity surveyor comes in. For a fee, they’ll assess the property and complete a Tax Depreciation Schedule, which your accountant can incorporate in your tax return.*

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General information only. Your personal objectives, financial situation and needs should be considered before making lending decisions.

*DISCLAIMER

Please note we do not provide tax, legal or accounting advice. Any information provided is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in or considering the appropriateness of any transaction.