InvestorFi

4 Signs You’re Ready to Buy an Investment Property

09/08/2022

You’ve got your eye on a rental property, but you’re not sure if you’re ready. You might be scared that the market is too hot right now and you’ll lose money. Or maybe you’re worried about managing an investment property since it’s not like owning a car or even renting one out on AirBnB.

There are lots of reasons to hesitate before starting property investing, but there are also lots of reasons why it makes sense for many people today.

In this article, we’ll go over a few signs indicating now is the right time for property investing.

Signs You Are Ready to Buy an Investment Property

Start taking the leap if you want to build a passive income. Follow your gut and the signs and see if you’re ready to buy an investment property.

You Have Steady Income

If you’re looking to take a hand at property investing soon, the first question that needs answering is whether or not you can afford it. Owning a home requires ongoing maintenance and expenses, so it’s important to make sure that your budget can handle all of this before you start making offers on real estate.

You Feel Secure in Your Career

One of the biggest concerns about property investing is how long term it will be. Purchasing a rental property means committing yourself to be responsible for someone else’s living situation. If anything goes wrong with their home, it’ll be up to you as the owner/landlord/property manager to fix them. That’s why some investors choose only short-term leases (usually 6 months) as it gives them more flexibility should something go awry with a tenant’s lease agreement.

You’re Debt-Free (Or Almost)

Whether it’s student loans, credit card balances or car payments, any debt counts as negative equity during your quest towards being able to buy an investment property. The best way around this issue? Live simply whilst saving up enough money so that once those pesky bills have finally been paid off, you’ll have enough left over at month’s end. 

Your Credit Score Is High

Having a good credit score is important because it relates directly to your ability to qualify for a loan. 

High credit scores can be a sign that you’ve handled your finances well in the past and a good indicator of how well you’ll manage them in the future. It can also mean that if you ever need to make a loan, like for a mortgage, you’ll have lower interest rates available to you.

Things to Consider Before Buying an Investment Property

Traversing the rough road of investing is a risky move. However, if you have sorted things out and you feel all the signs are for you, there’s no reason to back out and dive in.

Have a Clear Strategy

When it comes to property investing, there are many reasons why people choose to take the plunge. Some want to increase their wealth or passive income, whilst others see real estate as being a good way of creating a nest egg for retirement.

Whatever your reason for property investing, you must have a clear strategy in place before moving forward with your decision. Your strategy will help guide all of your choices and ensure that you don’t get carried away with any one particular aspect of the process.

Before you even start thinking about what type of property you want to buy, you must have a clear idea of why and how you want to invest in real estate. Do you want to build passive income? Do you want an investment that will give your kids something when they grow up? Do you simply think investing in real estate is a good idea? These are all great reasons for buying an investment property.

A good financial plan is also crucial because it can help determine whether property investing is right for you—and what kind of return on investment might be expected over time based on various scenarios involving vacancy rates and rental prices (among other things).

Be Financially Ready For The Loan

The biggest risk associated with buying any investment is being unable to pay off the mortgage if things go wrong. If this happens, then not only do you lose your investment but also your home. Before buying any property, you need to make sure that there is enough money available each month after paying bills and covering expenses like maintenance costs or repairs on existing properties.

What Loans Can Be Used for Investment Properties?

Many people who are interested in buying an investment property aren’t aware that there are several options for financing those purchases. Here’s a look at the most common ones:

  • Investment home loans—If you’re buying a residential property to rent out or use as your second home, this is generally your first port of call. These can be used to buy new or existing properties but may have stricter borrowing requirements than commercial loans depending on whether it’s your first time buying an investment property.

Investment home loans are one of the most common types of loans used by investors. They are available with either a fixed or variable interest rate and can be used for new or existing properties alike.

With fixed-rate investment home loans, the interest rate remains the same for the entire term of your loan. This is ideal if you are planning to start property investing and hold onto it for a long time. However, if rates are expected to rise in the next few years, locking into a fixed-rate loan may not be in your best interest.

Variable-rate investment home loans have an interest rate that’s tied to the prime rate. The prime rate is typically one of the lowest rates available, but it can change from time to time based on economic conditions and other factors. If rates rise, so will your monthly payments; however, if they fall, you may be able to save some money by locking in a lower interest rate for a few years.

  • Commercial property loans—These are designed for business owners and professionals who want to invest in income-producing properties such as office buildings, warehouses and factories. They tend to offer higher interest rates than personal lending products because they’re considered more risky investments by banks due to the high demand for commercial real estate across Australia’s major cities.
  • Self-managed super fund (SMSF) mortgages—Whilst SMSFs can invest in any asset class including shares and managed funds, they can also take on debt through mortgages just like any other type of investor would do with regular savings accounts

Start Your Property Investment Journey with Investorfi

The decision to purchase an investment property should not be taken lightly. It requires careful planning and a clear understanding of the financial implications for both you and your future tenants. If you feel like now is the right time for you to invest and own your own home, then we hope this blog has helped you decide. Whether you need help to assess your situation and amplify your wealth or know your borrowing capacity, we can help you. Consult with us to start strategising how you can invest in a property that’s best for you.

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A Broker worth their salt has a playbook of ‘scenarios’. They are finance strategies that have worked in the past. He will offer up one, two or even three scenarios that he thinks will work best for you. 

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Gone are the days a single income could afford 2.5 kids, a pet, and a four-bedroom house in the burbs! 

At InvestorFi, our sole purpose is to reinvent the great ‘Australian Dream’. Because we believe it’s every citizen’s right to the security home ownership affords our families and community, not just for today but for generations to come.

But because it’s become so difficult, it requires complex solutions. One way is to seek finance strategy before purchasing a home. This way, you can leverage your full potential to live where you want to and invest where you can afford to. 

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