3 ways to get funding for your investment property
Venturing into the world of property investing for the first time is not unlike going into unknown lands. There's a language you need to learn, such as industry terms, and unfamiliar processes to go with it.
There are also other things you need to think about, like where you're going to buy, who's going to look after the home and what strategy you'll use to manage your investments. But one crucial detail that should be at the forefront of your mind is how you're going to pay for it.
Regardless of if you've owned property before for your own residential purposes or if you're a first-time buyer, this is one thought you'll need to think through before buying. The trick is finding a way that meets your current financial circumstances and won't harm your future goals, whatever they might be.
If you're a current home owner, the ability to secure an investment property is actually quite simple. By refinancing your home loan, you can access funds that you've already paid into your current mortgage and use them elsewhere. While some people may typically refinance to access money for things like renovations, you could put your funds to work for you instead.
Fortunately, current market conditions are positive for existing home owners who want to refinance and invest. Interest rates are low, property values are picking up and vacancy rates are tightening.
However, before you take action and refinance, you'll need to check if it will impact your financial circumstances. Refinancing can usually incur a small fee from your lender, so work this out before you go ahead with any changes.
At the same time, you might also want to consider if there are any loan features that could benefit your investment goals further. Changing repayment frequencies or amounts to reduce debt, securing a different interest rate or allowing extra repayments could all be features to look at.
2. Saving up
It can take time to save up a deposit for a property, especially if you're a first home buyer. But it doesn't have to take forever if you're buying a property from new. Purchasing an off the plan property allows you to just pay for the deposit at the time you sign the contract. The remaining money for the home is payable once it has been completed. This means that you'll just have to pay for the deposit first, giving you ample time to continue saving and take out a loan.
You could also ask to borrow some funds from family members to help get your investment portfolio up and running.
3. Investing with family
One of the benefits about investing in Australia is having access to self-managed super funds (SMSFs). This system allows people to take the reins and invest their money where they see fit. Some common types of investments include shares, equities and term deposits, but one popular option is property.
If you set up an SMSF with your family members or other loved ones, you could have access to a substantial amount of funding to go towards property. Don't forget that you can also borrow more funding using your SMSF, which could create a strong residential property portfolio.
Also remember that this area of investment is highly regulated, so it's crucial to receive expert advice to ensure you're making wise choices.
With the property market showing strong conditions for investment and the cash rate low, starting on the path to wealth shouldn't be the last thing on your mind. Start looking at your finance options and how they can get you to reach your goals.