Steps to Buying an Investment Property

Buying an investment property is one of Australia’s favorite ways to invest and generate wealth. An investment property should be about  securing your financial future. But investing in a property can be challenging . Here is a guide to help you understand the investment property buying process and get you your investment property sooner.
Build a team of Professionals

First and major step is to create a team of professionals. These professionals can help you with building your property portfolio . It is strongnly recomnded to ask your friends and family if they have used the services of a professional and they would like to recomnded. There professional are :

      • Mortgage Broker
      • Accountant
      • Conveyancer
      • Building and Pest inspector
      • Quantity Surveyor
      • Property Manager


Review your Personal Budget and Cashflow

Just like buying your first home, when purchasing an investment property, it’s essential to budget.  If you’re unsure of the best way to budget for an investment property, speak with your MFAA Approved Finance Broker, they can help you to get on the right path.


How much can I borrow and Pre-approval

Home Loan Experts at Josh Financeial Services will discuss your plans and your circumstances with you to determine what you can afford.  Your broker will also provide statutory documentation to initiate the lending process and work out for you what loan products will be appropriate in your circumstances.


Your borrowing power depends on your income and financial commitments, as well as your current savings and your credit history. It also depends on your living expenses, so you can repay your loan. Once you know your budget contact Experts at Josh Financial Services to arrange a pre-approval. It is recommended that you get pre-approval for an amount so you can go searching for a property with certainty based on how much you can spend.


Most of the lenders can lend up to 90% of the property value, however, you will need to show you have at least 5% of the property value in genuine savings.


Your borrowing capacity and interest rate will depend on the type of repayment you select like Principal and interest or interest only.


The costs involved in the purchase.

When purchasing an investment property there is a certain cost involved.  Here is the list most common ones.

    1. Stamp duty: This is the largest expense. The stamp duty tax is charged by the state government and varies from state to state. Use a stamp duty calculator to find out the cost
    2. Mortgage stamp duty: This is a tax levied by the state government based on the loan amount. It has now been abolished in most states.
    3. Transfer fee: This is a government fee for registering your name on the title of the property.
    4. Mortgage Registration fees: This is a government fee for registering your lender’s mortgage on the title of your property.


There is a range of additional costs involved when purchasing a property.

    1. Buyer’s Agent Fee: Buyers the agent will charge a fee for finding the property for you. It can vary from a few thousand to  ten thousand
    2. Lenders Mortgage Insurance: If you’re borrowing over 80% of the property value then the lender will charge Lender’s Mortgage Insurance
    3. Conveyancing costs: You’ll need to hire a conveyancer or solicitor to handle the transfer of the property into your name. This will cost approximately $1200 to $1,500.
    4. Building/Pest Inspection Reports: You may need a building and pest inspection and a strata report. These report can cost up to $800 in total. These are usually organized by your conveyancer.
    5. Loan fees: Most of the lenders charge an application fee, settlement fee or valuation fee.
    6. Council and utility rates


Find a Conveyancer or Lawyer

Conveyancing is a necessary process in buying a property. A conveyancer or conveyancing solicitor helps with the settlement and title transfer process . The also ensure that their client is meeting all legal obligations and that their client’s rights are protected during this transaction. They will also arrange proeprty inpections and guide you if there are issues with building.


Searching for a Property

It is always advised that you do you won research as you are the one investing in property. You can also seek professional advice from your accountant, real estate agent, buyers agent or property adviser. Josh Financial services can help your find the right property and they can also advise you what to buy and most importantly what not to buy.


One of the things you need to consider when buying a property is if you would like to buy an old or new property Other criteria if to buy a uni, townhouse or an independent house.


Also, you will need to find out information about the local market you are considering buying in, what are properties selling for, how long are they on the market, etc. In addition, it is recommended to gather information on the demographics of the suburb, its location to important amenities such as transport, shops, universities, and schools, etc.

It is strongly recommended that you don’t become emotionally attached to the property. Treat it like a business and it’s an investment, and your focus should be on maximizing capital and cash flow.


The buying process

The buying process for your investment property involves the following:


  1. Make an offer: If you are buying at an auction, you are required to pay a deposit (usually 10% of the purchase price) immediately. If you are buying privately, you are usually required to pay a holding deposit of 0.25%.
  2. Contract of Sale: The Contract of Sale, prepared by the agent or by the vendor’s solicitor, outlines your offer, the date of settlement, and any conditions that must be met before the sale goes ahead.
  3. Offer accepted: This is an outright offer to buy a property. You should be 100% sure that this is the property you want and that you have access to the money to buy the property.
  4. Signing Contract of Sale: Discuss the Contract of Sale with your solicitor before you sign it.  You will be required to pay a holding deposit of 0.25% of the purchase price and cooling off period starts the day after contracts are exchanged.
  5. Unconditional approval: If you have pre-approval, you can finalise your loan by contacting your  Mortgage Broker. Your broker will arrange a valuation and coordinate with the bank to arrange unconditional approval. Once you received unconditional approval you can go ahead and pay the remaining amount of the deposit usually 9.75%.



Hire a Property Manager

After you find the property next step is to decide if you like to use the services of a property manager or manage it yourself. It is always recommended to use the services of a professional property manager as they can avoid you the headaches down the track.


Property Investment and  Accounting

Once your investment property is settled and you have reliable tenants paying their weekly rent.  Now you need to keep a record of your the rent you receive (if self-managing), the interest you pay the bank and other costs like repairs, council rates water rates. In addition, it is always recommended to obtain a depreciation schedule.  Follow the link to find out expense you can claim on an investment property.


If you are using the services of a property manager they will keep a record of your monthly income and expenses and be able to provide you with a statement each month and at the end of the financial year for your accountant.


Make sure you seek professional advice from Finacial Adviser or accountant to determine whether property investing for your individual needs.



If you have any more questions about Property Investment, talk to our experts on 1300 537 000.


This article is for information only; please seek advice from a tax adviser or accountnat before making any decisions.


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