Tips for Investing in Property

“Equity is only one consideration the banks will assess when considering whether to approve a loan” Synergy Business Finance Officer Stephanie Sander said.

“Other factors include your income, age, dependents, and other debts” Stephanie added.

When considering accessing your equity, it would be the Synergy Business Finance team’s recommendation to assess all aspects of your individual or family finances simultaneously to ensure long term success.

“Ensuring that a specific property is a worthwhile investment often comes down to finding the right location” Synergy Business Finance Manager Brendan Philp said.

Researching the local market, understanding the rental demand, prices and expectations of renters will ensure the best return for your investment property longstanding.

Assessing investment property expenses in line with the expected ROI is essential – accurate calculations from the outset will ensure that an investment decision is realistic for your circumstances.

“Maintenance can vary considerably between properties depending on the age, condition, and inclusions of the property. For example, additional costs should be expected for older properties, or properties with extensive gardens, lawns, or a pool” Brendan added.

Many investors utilise the “Rule of Four”. This rule is used to estimate the prices of an investment property based off the useable equity on hand. The rule of thumb involves multiplying your useable equity by four to arrive at a purchase price.

“Investors use a multiplier of 4 (four) as banks will lend against the investment property up to 80%” Stephanie said.

This rule allows for a 20% deposit and other costs, such as stamp duty which is payable upon accessing your usable equity.  

For example, if your useable equity was $200,000, this would be multiplied by 4 to generate a starting point of $800,000 for a potential investment property purchase.

Determining whether adding an investment property to your portfolio is the right decision can often seem overwhelming. Discussing the options with your broker can assist in forming your decision into the future.

We’d welcome the opportunity to discuss your investment property options one-on-one. Feel free to contact our Synergy Business Finance team to book an appointment.