Buying an investment property can feel overwhelming, especially in Sydney's diverse property market. Whether you're looking at your first investment property or expanding your investment property portfolio, choosing the right property is crucial for your long-term financial success.
At Raiti Finance, we help residents across Marrickville, the Inner West, and Canterbury-Bankstown areas make informed decisions about their property investment strategy. Let's explore what you need to know about investment property selection and how to secure the right rental property loan for your goals.
Understanding Investment Loan Options
Before diving into property selection, it's important to understand your borrowing capacity and investment loan options. Finance & mortgage brokers can access investment loan options from banks and lenders across Australia, giving you more choices than approaching a single bank directly.
Key factors that affect your application process include:
• Your income and employment history
• Existing debts and financial commitments
• The deposit amount you can provide
• Your loan to value ratio (LVR)
• Bank statements showing your saving patterns
Most lenders require a minimum 20% deposit to avoid lenders mortgage insurance (LMI), though most will accept lower deposits with LMI included in the loan amount.
Choosing Between Property Types
When researching property options in areas like Marrickville, Newtown, Leichhardt, or Canterbury, you'll encounter three main types:
Apartments
Apartments often provide higher rental yield due to lower purchase prices and strong rental demand from young professionals and students. Areas like Newtown and Leichhardt have particularly strong apartment rental markets.
Townhouses
A townhouse offers a middle ground between apartments and standalone dwellings. They typically attract families and provide steady rental income with moderate capital growth potential.
Stand Alone Dwellings
While requiring a larger initial investment, standalone houses in suburbs like Strathfield, Concord, or Earlwood often provide stronger long-term capital growth and appeal to family tenants who tend to stay longer.
Location Research is Critical
When buying a rental property, location research should focus on:
- Transport links - Properties near train stations in Ashfield, Belmore, or Dulwich Hill often command higher rents
- Employment hubs - Proximity to business districts affects tenant demand
- Population growth - Areas with growing populations like Padstow and Panania show promise
- Rental vacancy rates - Lower vacancy rates indicate strong rental demand
- Future development plans - Infrastructure improvements can boost property values
Financial Considerations Beyond the Purchase Price
When calculating investment loan repayments, factor in additional costs:
• Stamp duty (varies by state and property value)
• Legal and inspection fees
• Property management costs
• Insurance and maintenance
• Council rates and strata fees (for apartments)
Understanding negative gearing is also crucial. This occurs when your rental income is less than your property expenses, creating a tax deduction that can reduce your overall tax burden.
Interest Rate Options
Most investment loans offer either:
Variable Interest Rate
Fluctuates with market conditions. You'll benefit when rates drop but face higher repayments when they rise.
Fixed Interest Rate
Provides certainty for a set period (usually 1-5 years). This helps with budgeting and protects against rate rises during the fixed term.
Many investors choose a split loan, fixing part of their loan amount while keeping the remainder variable.
Investment Loan Application Process
The streamlined application process typically involves:
- Pre-approval based on your financial situation
- Property selection within your approved loan amount
- Formal application with property details
- Property valuation by the lender
- Final approval and settlement
Having your financial documents organised speeds up the process significantly. This includes recent bank statements, tax returns, employment letters, and existing loan details.
Maximising Your Investment Returns
To invest in real estate successfully, consider these property investment loan features:
• Interest-only repayments (reduces monthly costs but doesn't build equity)
• Offset accounts (reduces interest charges)
• Redraw facilities (access to extra repayments)
• Interest rate discounts (often available through brokers)
Calculating potential rental yield helps compare properties. Gross rental yield equals annual rent divided by purchase price, multiplied by 100. Properties in Balmain might offer lower yields but stronger capital growth, while those in Punchbowl or Roselands might provide higher rental returns.
Local Market Insights
The Canterbury-Bankstown and Inner West areas offer diverse investment opportunities. Marrickville's proximity to the CBD makes it attractive to young professionals, while family-oriented suburbs like Strathfield appeal to long-term tenants.
Consider demographic trends in your chosen area. University proximity benefits student accommodation investments, while growing families seek properties near quality schools and parks.
Working with experienced finance & mortgage brokers who understand local markets can provide valuable insights into which areas align with your investment goals and borrowing capacity.
Choosing the right investment property requires careful consideration of your financial position, market conditions, and long-term objectives. With proper research and professional guidance, you can build a successful investment property portfolio that generates positive returns for years to come.
Call us or book an appointment at a time that works for you to discuss your investment property financing options and start building your wealth through real estate investment.
