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All Your First Time Investor Questions Answered

All Your First Time Investor Questions Answered

Are you thinking about diving into the world of property investment, but have a million questions swirling around in your head? Don’t worry, you’re not alone!

Making your first investment can be daunting, but when you arm yourself with the right information you’ll find your confidence growing.

In this blog post, we’ve got you covered with all the must-know answers to your burning questions. So whether you’re completely new to investing or just need a refresher, keep reading!

Are investment properties safe to buy?

Investment properties are a safe investment as long as you buy the right kind of property in the right location. You need to look for a homeowner-quality property in an area that will have significant population growth over the next 20 years. It can help to consult with financial and real estate professionals to help you make an informed decision.

How does buying an investment property work?

The process of buying an investment property doesn’t have to be complicated. Start by raising the deposit either through cash savings or equity in another property. Talk to your bank about how much you can borrow and get pre-approval. Find a great property in a great location. And make sure you calculate the cash flow before you seal the deal!

What value investment property can I afford?

This depends on your income and your deposit. For example, a $100,000 deposit means you can spend between $400,000 and $1,000,000, depending on your borrowing capacity. Don’t forget to check that the cash flow after tax works for you also!

Can I buy an investment property without a cash deposit?

It is possible to purchase an investment property without providing a cash deposit if you or a family member have equity in another property. In this case, the bank can consider that equity as the deposit, eliminating the need for cash. This type of loan typically involves an 80% investment against the property, while the deposit and costs are secured against the other property.

Do I need a 20% deposit to buy an investment property?

Not always. If you are a strong applicant to the lender, your deposit can be as little as 5%, But keep in mind you will also need approximately another 5% to cover purchase costs. If your deposit is less than 20% you will have to pay Lenders Mortgage Insurance which protects the bank’s loan to you.

Can I join forces with other people to invest in property?

Yes, you can join with family or friends to purchase a property. This is great for people who are struggling to break into the property market on their own. It’s important that you have a solid agreement in place about how long you will keep the property before it’s sold. 

I have a high income but no deposit. Can I buy an investment property? 

Yes, you may have several options available to you. You could join forces to buy a property with someone else who has equity or a cash deposit but a low income. Another option is a guarantor loan if you have someone willing to be your guarantor, in this case you don’t need a deposit.

Are investment property interest rates higher?

Yes, investment property interest rates are generally higher than rates for a typical home loan. However, it’s important to keep in mind that you can claim the interest payments for an investment property on your taxes. This means that after tax, the effective interest rate is below a typical home loan rate

Do I lose the first home buyer grant if I buy an investment property? 

If you buy an investment property before buying your principal place of residence, you can still claim the first home buyer grant later when you buy a home to live in.

Any more questions? We’d love to help! Book a FREE Consultation with property investment expert Michael Sloan.