Buying an investment property

Thinking of buying and investment property? Here are some tips and background information to help get you started.

Before you buy

  • What’s the purpose of the new property?

    Will it be your new home? If so, will you keep your current property as an investment? Or do you want to remain in your current home and buy an investment property? It’s best to know the answers to these questions before you start your search.

  • Get advice

    Talk to a mortgage broker or credit professional who can give you a second opinion on your current situation, as well as a professional’s guide to what the market is currently doing. Their advice should help you answer the questions above and give you an idea of the most suitable loan for you. They’ll also look at your current and projected financial position to give you an idea of what you may be able to borrow.

  • Do your research

    If you want to rent out either your current or new property, look at the advertised rental prices of similar properties in the area to understand what your property could achieve. This will help you map out a budget of how much you need to contribute to cover the mortgage payments. If you’re looking to sell your current property, compare what similar properties in your area have sold for recently, and how long they’ve taken to sell.

  • Set a budget before looking

    Combine the advice your mortgage broker or credit professional has given you and your own research to determine how much you need to borrow. Use our repayment calculator as a guide to help you determine what repayments you’ll need to make on different loan amounts.

  • Start the application process

    Ask your mortgage broker or credit professional to get the application process started for you, so you’ll be ready to buy once you find your ideal property.

  • Start looking

    for your new home!

Things to consider

  • Bridging finance

    If you want to move into a new property before selling your current one, look into bridging finance. Take a look at this video to find out how bridging finance works. Then see our Go-Between Home Loan fact sheet for full details on our bridging finance.

  • Prepare your current property

    Whether you plan to sell your current property, or rent it out, you’ll need to make sure it’s in top shape beforehand. Finishing off odd jobs and completing all projects can have a big impact on either the sale price or rent you can charge.

  • Legal advice

    While you can act on your own behalf when purchasing property, the documentation and settlement process can be quite complicated and includes many legal requirements. We strongly recommend you use the services of a solicitor or conveyancer. These experts will ensure that everything runs smoothly and is completed correctly.

  • Take a good look

    When you’ve found a home you like, give it a thorough inspection before committing to purchase. It’s a good idea to inspect the property a number of times at different times of the day. If you can, visit on a rainy day to check for leaks in the walls or guttering problems. Look under carpet and rugs to see the state of the floor beneath. Also check on the other side of bathroom walls for water damage and take a good look around for cracks or signs of movement on ceilings and walls.

  • Arrange a professional inspection

    Organise a building and pest inspection. While they’ll cost a little upfront, inspections by trained professionals could help you avoid much higher costs in future.

  • Know what you want

    Work out a list of what you want (and don’t want) from the house you buy to work through when you inspect properties. This will help you decide on must-have and nice-to-have features which could help when weighing up one house against another.

  • Insurance

    You may need to consider four types of insurance when buying your next property; home insurance, landlords insurance (if you’re buying and investment property), Lenders Mortgage Insurance (LMI) and loan protection insurance.

    • Home insurance (also home and contents insurance) is compulsory for any loan to be approved. Look for policies that provide free cover from when you sign the contract up until the day you move in.
    • Landlords insurance covers your property if you’re renting it out. It not only covers the building itself, but can also provide cover for some of your belongings on the property and protect you for certain situations where the property cannot be leased.
    • LMI is offered by an external provider and enables you to buy a home with less than a 20% deposit. An up-front fee (or premium) paid to the external provider insures your lender against default on your home loan.
    • Loan protection insurance covers you for situations that may arise in future that could affect your ability to pay back the loan (e.g. death, disability or unemployment of anyone attached to the loan).

Note: This does not constitute taxation advice and may not be relevant to everyone.  You should obtain independent expert advice on your individual circumstances.

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