Investment Loan Benefits
With signs that the economy is slowly improving, experts suggest that property will also begin to improve as an attractive long term investment, especially for anyone looking to recover their financial position prior to retirement.
With the share market bouncing back (but remaining unpredictable) and investors seeking greater control of their superannuation funds, real estate is now expected to have greater appeal.
The outlook for rental and property prices is positive, particularly in Sydney where there is a significant shortfall in residential property and markets have been flat for some time. Demand continues to exceed supply in Sydney, and this, coupled with reasonably low interest rates, should mean that property is definitely on the investor radar.
In addition to improving economic conditions, housing affordability in Sydney and Melbourne is at its best level in a decade. Adelaide price levels are below other Australian state capitals which indicates scope for property price gains there. Further reports show that average monthly mortgage repayments are now less than average rental in many suburbs. All of this makes property look attrtactive as an investment.
It is expected that with there will be greater investment activity in property not just with individuals but also those buying through a self-managed superfund (SMSF).
Recent changes in legislation enable investment property to be purchased through a SMSF. These changes allow a SMSF to borrow (at conservative levels) to invest in property which means that a SMSF can better diversify its investment portfolio and 'spread the risk' across a broader range of assets.
Depending on the borrowing entity (individual or self-managed superfund) the structure of the investment loan will differ. The best way to work out which is the best option is to talk with a mortgage broker or mortgage manager who specialises in investment loans. He/ she will be able to provide you with information on the correct structure for your investment loan.
Its also worthwhile noting that interest on investment loans is still a deductible expense against rental income, so negative gearing will continue to attract investors into 'bricks and mortar'.
Individuals with an existing home loan who are considering taking out an investment loan should also seek advice because borrowings should be carefully structured to maximise negative gearing. It is important these investors ensure that wherever possible surplus income is being applied to the repayment of their non-deductible home loan debt; as opposed to subsidising the costs of maintenance and outgoings such as council and water rates on their investment property.
To maximise wealth potential, you should consider an investment loan that is interest only and allows you to capitalise interest, provided of course, that you remain within your investment loan limit. There are only a select number of lenders who will allow you to capitalise interest on an investment loan and their terms and conditions may vary.
But, as mentioned above, if you check out your investment loan options with an experienced mortgage broker then you can ensure that from the outset that your investment loan is working for you and enabling you to build your wealth through property investment.