A typical property investor in Australia is not a millionaire. But a small business owner or middle age salary earner hopes to make a capital gain and build up their retirement fund.
If you owned a home for a while, you might use your home’s equity to buy a second property as an investment.
Here are some critical questions you may want to ask before taking the leap and buying an investment property.
Why Are You Investing In A Second Property?
This seems like an honest question. You already know the reason why you bought your first home – “I want a home to call my own.” When investing in a second property, you need to think thoroughly about your strategy. Ask yourself:
- Are you investing for a short term or long term?
- Do you plan to purchase and hold for a decade or more until the market value increases? Or;
- Do you want to rent to keep a running profit?
How Much Deposit Is Needed For A Second Home?
Most lenders ask for a 10 per cent deposit. However, if you want to avoid Lender’s Mortgage Insurance, you will need a 20 per cent deposit. The good news is you can leverage the equity in your home as a deposit for your second property.
Is A Second Home A Good Investment?
The answer is, “it depends.” It can either be an investment that can offer successful returns or make you regret your decision. To make your second property a successful investment, you need first to identify the proper financial structure and project the property’s performance.
Hence, it is essential to meet with an experienced investment property adviser and discuss all pros and cons.
Should I Buy An Apartment Or A House?
Again, both options have their pros and cons that need to be evaluated based on your investment goal and financial situation. For instance, an apartment typically cost less than a free-standing house in the same suburb. However, when buying the house, the land component of the property grows in value, while the building depreciates over time.
What Type Of Home Loan Should I Get?
Many different types of loan products are accessible these days with competitive interest rates. These include loans with principal-and-interest or interest-only repayments and fixed or variable interest rates. To find the best mortgage for your investment property in Adelaide, speak to one of our lending specialists.
What Is The Rental Potential And What Improvements Are Planned For The Area?
You can always consult with a local real estate agent and ask about the current rental yield. Moreover, if there are any significant proposed developments in the area like a shopping hub or improved public transport, it may substantially appreciate its overall market value.
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Answer these questions honestly, and you will be well on your way to making a profitable property investment. If you feel confused at any step, make an obligation-free appointment to speak with one of our experienced investment property advisers.
