How to Buy an Investment Property: Your Step-by-Step Guide
Building upon or starting your investment property portfolio is a great way to generate long-term wealth.
Investment properties can be bought in a few different ways with the help of an experienced mortgage broker.
If you’re looking for how to buy an investment property, look no further!
How to Buy an Investment Property
This blog will take you through the steps on how to buy an investment property so you can purchase your new place sooner.
Step 1. Talk to an Inovayt mortgage broker
The very first step when it comes to purchasing an investment property is to talk to an Inovayt mortgage broker.
Before they even look at your finances, a qualified mortgage broker will help you establish your ‘why’.
Why do you want to purchase an investment property?
How will this impact your other financial goals?
Does buying an investment property align with your long-term financial plan?
Once we’ve uncovered your reasoning for purchasing an investment property, your mortgage broker will analyse your financial situation, including all incoming and outgoing payments and genuine savings.
When they’ve established your financial position, they will be able to determine your borrowing capacity.
Along with your borrowing capacity, your Inovayt mortgage broker will talk you through your deposit options.
For investment properties, a deposit can either come from your savings or existing property equity.
Traditionally, you’ll need a 15 per cent deposit to purchase an investment property (this includes stamp duty and lender’s mortgage insurance).
If you don’t have an adequate deposit, our team will work out a plan to help get you there.
To learn more, read our blog, How to Use Your Equity to Invest.
Step 2. Complete some market research
After your initial meetings with a broker, it’s time to complete some market research.
This involves deciding what suburb or location you’d like to buy in, what type of property you want to invest in (commercial, residential, land) and if this type of property will put you on track to meet your ‘why’.
Your Inovayt mortgage broker can discuss your options for purchasing either a residential or commercial investment and offer advice on which one could suit you.
If you’re feeling a little overwhelmed with the property market and aren’t sure where to start, enlisting the help of a buyer’s advocate can relieve the stress associated with buying property.
A buyer’s advocate works for you to find properties that match what you’re after.
To learn more, read our blog, What is a Buyer’s Advocate?
Step 3. Apply for pre-approval
Once you’ve done your market research, it’s time to get the ball rolling!
Chat with your Inovayt mortgage broker about obtaining pre-approval from lenders.
When they’re preparing your pre-approval application, a broker will typically ask for things like:
- Latest payslips.
- Latest tax statements.
- Identification such as a driver’s license, passport, and Medicare card.
- Statements from the debt you may currently have (e.g. car loan, home loan, HECS debt etc.).
- Statements from your daily transaction or spending account.
Step 4. Secure your property
After you’ve been pre-approved, it’s time to find your property!
Regardless of whether you’re working with a buyer’s advocate or doing it alone, now is the time to attend as many open for inspections as possible, place offers on properties that tick the boxes, make bids at auctions and finally, have your offer accepted.
Step 5. Obtain formal approval
Once your offer has been accepted, your Inovayt mortgage broker will submit your application for formal approval with your lender.
This is where the lender will reconfirm what they assessed on your pre-approval before they unconditionally approve you.
Step 6. Property settlement
Congratulations, you’ve been given formal approval for your investment property!
All your documentation will be finalised through your mortgage broker, conveyancer, and real estate agent, making sure you’ve dotted your i’s and crossed your t’s.
After these documents are completed, your property is settled.
Step 7. Engage a property manager
If you’re planning on renting your property out (rather than using it as a holiday house), you’ll need to enlist the help of a property manager to assist with the management of your property.
Your property manager will help you find renters for your place and acts as the middle person between you and your tenants.
Step 8. Find a tenant
Finding a suitable tenant doesn’t happen overnight.
You may receive hundreds of applications but not find one suitable for your property.
A property manager helps you to sift through these applicants until you find one that you’re happy with.
Step 9. Seek a depreciation schedule
In time, you’ll need to get a depreciation schedule done on your property.
Your home can depreciate over time, and a professional can help determine its worth.
Knowing what your property is worth helps when it comes to selling it or charging the right amount of rent.
Step 10. Notify your accountant
When you acquire an investment property, certain tax implications must be considered.
Get in touch with your accountant and let them know that you’ve purchased an investment property.
Be sure to tell them whether you plan to rent it out (therefore, gaining an additional income) or use it for other purposes.
Why should I use a mortgage broker?
When it comes to figuring out how to buy an investment property, our Inovayt mortgage brokers are experts.
With a wealth of knowledge up their sleeves, our mortgage brokers have access to various lenders, meaning they can find you a great deal.
Not only that, but our Inovayt mortgage brokers and financial advisors are investment property experts.
We work with you through every stage of your journey – from the initial goal-setting stage right up until after settlement.
Purchasing an investment property is a great way to increase wealth and build upon your investment portfolio.
Using an experienced mortgage broker means you have the best chance of securing a deal.
If you’re wondering how to buy an investment property or want to increase your investment portfolio, get in touch with one of our mortgage brokers today.
