How to Finance Your Property Investment

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Unless you’ve won the lottery, working out how you’re going to finance your investment property is usually the thing which puts people off.

The reality is though, there are several ways to find finance and with expert advice you may be able to realise your dream of owning an investment property. Even if you don’t currently own a home, there are financial opportunities available.

We’re not financial specialists, and you should always seek financial advice from a specialist, however here are some sources of finance to think about when looking at how to finance your property investment.

Equity

A common way of raising finance is to borrow money against the equity in an existing property you already own. Equity is the difference between your property’s market value and the balance of your mortgage; this can be a valuable resource for buying your next property either for buying a property out right or using the equity as a deposit.

Superannuation Funds

Under some circumstances, you can release some of your superannuation for property investment. There are certain stipulations though such as it must meet the ‘sole purpose test’ of solely providing retirement benefits to the fund member.

Look to Other Lenders

Banks aren’t the only source of a mortgage. Mortgage brokers work with numerous financiers and can often find you a better deal than approaching the bank direct. There are also now many non-bank lenders offering loans.

Type of Mortgage

Some financial institutions are still offering interest free loans and if you do have a property, it might be worth investigating A line of credit (LOC) loan. These are also known as home equity loans, and enable you to draw funds out of the equity in your property as and when needed.

Vendor Finance

This isn’t a very common form of finance. Sometimes the seller is in a position to offer the buyer a settlement term of an initial lump sum and then repay the balance of the property’s sale price over a fixed term at agreed interest rates.

Lease Options

Similar to vendor finance in that the owner is acting as your financier, a lease option combines a residential lease with an option for you to buy the property. At the beginning of the deal, you’ll negotiate an agreed price, and on or before completion date by which you’ll pay the agreed money.

Family

This may be a last resort for many, but there may be members of your family who will lend you some money or act as guarantors.

There are other ways to creatively finance a real estate investment but always do your homework. Make sure you fully understand the risks involved with your finance option so you can reduce your risk by planning for the worst-case scenario.

Once you know your budget, come to us and we’ll help you find the investment property of your dreams!

Give us a call on 02 4956 9777 or we’d love to meet you in our office.

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