Are you investor property 'ready'?

By Lisa Montgomery, Head of Consumer Advocacy at Resi Mortgage Corporation

With the extended period for the First Home Owners Grant Boost over, a now bullish property market is even more appealing for established borrowers looking to take advantage of renewed investment opportunities, as activity and competition from the first home owner sector decreases.
 
And as the adage goes - out of something bad, comes something good and the property market is a prime example of this as the current climate can now provide some solid opportunities for potential investors who may have thought that boat had already sailed.
 
So for those who can hear opportunity knocking - how do they determine if they are investor property ‘ready’?
They can start by asking themselves:
 
Do you have a defined financial plan or retirement structure - and does an investment property fit comfortably within that structure?
 
With many people still not confident with the level of stability provided by other asset classes in the current market, property can offer reliable long term investment potential – which is why it regularly remains a key component of the retirement plans for many Australians who like the stability that bricks and mortar offer.
 
So for those who may be re-evaluating their retirement and financial strategies in the wake of the last two years, it’s important to stick to the following principles:

• Research all of your options from a range of reliable and independent sources to ensure you’re not taken in by optimistic salesmen or marketing spin;
• Be flexible with your strategy so that it can accommodate any changes to your personal circumstances;
• Be realistic in what you can expect from your investment as part of your overall strategy;
• Invest your time – speak to your lending partner who should provide you with a genuine level of service you can readily access when you need it, and remember;
• Property is not a set and forget investment – it will require ongoing management and maintenance to maximise its potential.
• It’s also important to remember that it’s never too late to revise your retirement plan.
  

In fact - baby boomers are arguably in one of the most appealing positions to take advantage of the current market...as they are not only cashed up, but generally confident with their level of financial literacy and more attuned to identifying their life goals - as well as the commitment and discipline they need to apply to achieve them.
 
Have you attained significant equity in another property which will allow you to comfortably borrow against that property?
 
As a result of the rising property market over the ten years prior to the credit crunch there are still many homeowners who before that time had built up substantial equity in their own home and are now feeling comfortable with servicing their current repayment levels.
 
If you find yourself in this position and provided your employment, income and lifestyle remain stable - now could be an opportune time to apply that discipline, knowledge and experience in the market to purchase another property.

However, ensure you go into the transaction knowing all the additional costs and possible expenses that it may entail, such as Lenders Mortgage Insurance, which may apply if your total loan amount exceeds eighty percent of the total value of your property.
 
Are you currently in a situation where you are able to funnel any surplus cashflow into your mortgage or a savings account?

If you are in such a position, this surplus money could also allow you to either build up enough funds to pay for the deposit and initial costs to purchase an investment property, or if you already have enough equity in your home and can borrow against that - the extra money can provide a reliable buffer for when rates rise again.
 
When calculating projected figures for any property purchase, potential buyers should always allow for a rise of two percent in interest rates at any point in time, so that they can continue to meet the financial obligations of that property - as well as any others.
 
And if your comprehensive research has been completed, purchasing an investment property can be readily factored into your long term financial plans as long as you’re realistic about crunching numbers on:

• Current and expected yields: Research is always key so don’t rely simply on the latest figures. Carry out a thorough historical audit of what prices in your target areas have commanded and can continue to in the future.
• Effect of rising and falling interest rates: Be familiar with the nature of rate cycles and what can occur and how this will tie in with your projected financial plans.
  
• Effect of an un-tenanted property for any period: Properties can become un-tenanted for many reasons and the risk of that occurring should always be deemed a possibility. You also need to crunch the numbers on lower than expected rental yield as well as any extended periods without a tenant.
  
• Paying for repairs and other expenses for the property: Only repairs deemed ‘essential’ are tax deductible so ensure you don’t get caught up in the total renovation ‘thing’ without any due thought of how you will justify them.
  
• Taxation implications: Consider carefully how property related issues such as depreciation, repairs, tax deductible expenses and the long term value of the property can affect your immediate financial situation and your long term retirement plans.
  

It’s an exciting time to be a potential property investor – as long as you apply a healthy dose of realism and restraint to your research and decision making.
 
We invite you to make an appointment with your Resi Lending Specialist to discuss your property investment potential by calling 1800 243 000 before 31 December 2009. You will receive a free signed copy of Crossing the Ditch - the book, after the appointment.
 
Crossing the Ditch is an enthralling story documenting the journey of two young Australians whom Resi helped through sponsorship to ‘own their dream’ of crossing the Tasman Sea in their kayak from Australia to New Zealand – a world first!
 
Could now be the right time for you to ‘own your dream’ and make your move into property investing?

Resi Home Loans offers an ideal range of home loan and home mortgage products to suit your every need. To find the best home loans for you, check out our mortgage calculators and our current home loan rates today.