Understanding Investment Property Types
When buying an investment property, selecting the right property type significantly impacts your rental yield and long-term investment success. Each property type offers distinct advantages and considerations for your property investment strategy.
Stand Alone Dwelling
Detached houses typically provide:
• Higher rental yields in suburban markets
• Greater potential for capital growth
• More control over maintenance and improvements
• Stronger appeal to families seeking long-term tenancies
Apartments
Unit investments offer:
• Lower entry costs with reduced loan amounts
• Minimal maintenance responsibilities
• Higher rental demand in urban centres
• Access to amenities that attract tenants
Town Houses
These properties combine benefits of both options:
• Moderate purchase prices
• Shared maintenance costs
• Appeal to diverse tenant demographics
• Potential for steady rental income
Investment Loan Application Process
Applying for an investment loan requires thorough preparation. Lenders assess your borrowing capacity differently for investment properties compared to owner-occupied homes.
Essential Documentation
- Bank statements from the past three months
- Tax returns and employment verification
- Details of existing property investment portfolio
- Research property valuations and rental assessments
Loan to Value Ratio Considerations
Most lenders require lower LVR for investment properties, typically capping at 80-90%. Higher LVR may trigger lenders mortgage insurance (LMI), increasing your overall investment costs.
Investment Loan Interest Rate Options
Understanding interest rate structures helps optimise your investment returns:
Variable Interest Rate
• Fluctuates with market conditions
• Often provides access to interest rate discounts
• Allows additional repayments without penalties
• Suitable for investors comfortable with rate variations
Fixed Interest Rate
• Provides certainty for calculating investment loan repayments
• Protects against rate increases during fixed periods
• Helps with budgeting and cash flow planning
• Typically available for 1-5 year terms
Property Investment Strategy Considerations
Negative Gearing Benefits
When your rental income falls below property expenses, negative gearing allows you to claim tax deductions on the shortfall. This strategy works effectively when:
• Property values appreciate over time
• Your marginal tax rate is substantial
• You maintain adequate cash flow for ongoing expenses
Rental Yield Calculations
Calculate annual rental income as a percentage of property value to compare investment opportunities. Consider both gross and net yields, accounting for:
• Property management fees
• Insurance and maintenance costs
• Council rates and strata fees
• Vacancy periods
Accessing Investment Loan Options
Mortgage Motion Finance can access investment loan options from banks and lenders across Australia, providing you with comprehensive choice for your rental property loan needs.
Streamlined Application Process
Working with experienced mortgage brokers ensures:
• Comparison of multiple lender policies
• Assessment of various investment loan options
• Professional guidance through documentation requirements
• Support from application to settlement
First Investment Property Support
If you're purchasing your first investment property, professional guidance helps you:
• Understand different lender criteria
• Identify suitable loan features for your situation
• Navigate stamp duty implications across states
• Develop a sustainable property investment strategy
Investment Loan Features to Consider
Modern investment loans offer various features that can enhance your investment returns:
• Offset accounts to reduce interest charges
• Redraw facilities for accessing additional funds
• Split loan options combining fixed and variable rates
• Interest-only repayment periods
• Professional package discounts
When buying a rental property, consider how these features align with your investment goals and cash flow requirements.
Property Market Research
Successful property investment requires thorough market analysis:
Location Analysis
• Employment growth and infrastructure development
• Rental demand indicators and vacancy rates
• Proximity to transport, schools, and amenities
• Historical capital growth patterns
Property Condition Assessment
• Building and pest inspection results
• Potential renovation or improvement costs
• Strata reports for apartments and townhouses
• Rental potential and tenant appeal
Selecting the right investment property type and securing appropriate financing creates the foundation for successful property investment. Professional mortgage broking support ensures you access suitable loan products while understanding the full implications of your investment decisions.
Call one of our team or book an appointment at a time that works for you to discuss your investment property goals and explore suitable loan options.
