Investing in property is a long-term financial decision, and a clear plan is key to success. Commonwealth Bank of Australia (CommBank) has provided prospective buyers with a clear five-step guide to help them embark on their property investment journey.
Step 1: Prepare a deposit and calculate the amount you can borrow
The first step to buying an investment property is preparing a deposit and understanding your borrowing capacity. This can come from cash savings or from the equity in your existing property.
For example, if a property is currently valued at A$500,000 and the loan balance is A$350,000, the borrower can use up to A$80% of the property's equity, or A$50,000, for investment purposes. However, it should be noted that using equity will increase the existing loan balance and the repayment amount will be adjusted accordingly.
As well as the deposit, you'll also need to calculate the other costs of buying an investment property, such as council rates, government taxes, utilities and property management fees.
Step 2: Determine your investment strategy
It’s crucial to have a clear understanding of your investment objectives. Buyers should consider whether they want to achieve a high immediate return or are willing to incur short-term losses in the hope of long-term growth in the property’s value.
generally,Capital appreciation propertiesSuitable for investors who seek long-term value growth.High-yield propertiesIt is more suitable for investors who want a stable cash flow.
Step 3: Research the property and the area
Once you've decided on your investment strategy, the next step is choosing the type and location of property. Areas close to public transportation, medical facilities, shops, and childcare centers are generally more popular with renters.
CommBank's mortgage specialists can provideProperty and Regional Reports, allowing buyers to obtain comprehensive information about specific areas, including sales prices and rental yields, to help them make informed decisions.
Step 4: Choose the right loan plan
Choosing the right loan is crucial to your investment journey. Banks offer a wide range of investment mortgage options, including fixed and variable rates, bonus accounts, and interest-only repayments, allowing them to be tailored to your needs.
Step 5: Complete the transaction and manage the property
After the property is settled, buyers will need to hire a property manager to handle day-to-day operations, including tenant screening and lease management. Furthermore, purchasing relevant insurance can further protect the investment.
Disclaimer
This article provides general educational information only and does not take into account the reader's financial situation or needs. It should not be used to make financial product decisions. Commonwealth Bank of Australia recommends that readers seek independent professional tax and financial advice. All loan applications are subject to credit approval and minimum requirements. Please refer to the loan terms and conditions for further details.
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