Live The Dream With a Second Home Abroad

Buying a second property abroad can seem like a distant daydream, or if you’re the nervous type, fraught with difficulties and a potential disaster. Realistically, it can be a bit of both: there are pitfalls to watch out for, but if you’re wise it could be a fantastic investment and a lot of fun.There are several reasons to consider buying a second property and it’s important to consider what you need and want to use it for. Perhaps you’re looking for a tranquil, rustic paradise in which to spend holidays or to move to after your retirement; or do you want to make money by letting out your property when you’re not there? Sometimes it’s a good idea for a group of several friends to club together to buy a holiday home and then take it in turns to stay there, sharing the costs of upkeep and any improvements.First of all, be clear on what your priorities are. It’s not as simple as just choosing a country, although of course that’s a very important decision and probably the first one you’ll need to make. Next up, think about the specific location; do you want your property to be near the beach, the city and shops, the airport, the golf course? Or away from it all in some secluded beauty spot? After deciding these, you’ll need to consider what the actual property should be like – flat, house, or mansion? How much space and how many bedrooms do you need, and would you like a large garden, grounds, farmland or a vineyard, a swimming pool perhaps… or is that just going to be too much work?Giving serious thought to questions like these, and having clear priorities in mind before you start looking, will help you avoid the trap of snapping up the first place you fall in love with, which might not turn out to be right for you in the long term and mean overlooking better deals.Make sure you have a firm grasp of the language, culture and legal issues relating to the buying process in your country of choice. This will generally involve speaking to expert local solicitors as well as your financial advisor at home. It always makes sense to get as much expert help on board as possible, but be aware before you begin that you’ll need to budget for the costs of this advice in addition to taxes, travel and other expenses.Also, on top of the price of the property, there will be ongoing costs such as bills, property taxes and charges for maintenance and upkeep of the home. Have the property surveyed so you know if there are any outstanding repairs or renovations needed, then work out what the probable costs of these are and whether you really want to take them on. Most of us aren’t sitting on a big pile of cash to invest, but if you’re keen to get what you have into overseas property then consider the various secured loans available against your current home; by taking out a loan, you could own your dream home now and enjoy it while repaying the loan over many years.

Direct Investment in Property in Australia Through a Good Investment Loan

An investment property is becoming a more popular choice for those seeking to create a revenue stream and also achieve capital growth through the investment property value increasing over time.This can also be part of a strategic financial plan and should be considered by investors as part of a diversified portfolio. When considering an investment purchase you should also source the best investment loan structure for you. With any investment your investment loan can make a difference to your return. If you are negatively geared through an investment loan the cost to you of that investment loan can effectively be reduced.If you purchase wisely, once there has been capital growth in the investment property over time there is the option of using this built up equity to move into another investment property, take out another investment loan and thereby continue to further increase your investment portfolio.Aside from the traditional belief that tax advantages are the key driver for taking out an investment home loan there are many other factors to consider when purchasing an investment property.Below are some key points for your reference, by using these points as a guide in conjunction with a detailed discussion with your accountant or financial planner you will be in a better position to ensure your investment purchase and investment loan is a financially sound decision for the long term.In relation to property enquiry therefore, you should consider:* What is the infrastructure like in the area? Are there enough schools, hospitals, shopping centres, doctors and dentists, freeways or main roads?* What has the historical capital growth been in the area over the last two decades?* Is the local council planning to increase housing density or add a new road to increase traffic flow?* If you are purchasing in a new subdivision, are there more new land blocks and house and land packages planned nearby. New developments can impact on the value of your home as purchasers often prefer a new home to one that might be 2 or 3 years old in the same area.* What length of time will the investment be held? And will this tie in with planned infrastructure development which will in turn accelerate capital growth?There has been recent press to suggest that investment and home property values in Sydney have a potential capital growth of 18% over the next 3 years so buying off the plan as an investor may be an attractive option in the current market. If you find a good property development, suitable for investment, which has a completion date in say 2010 – 2011 then you can exchange contracts with either a 10% cash deposit or a deposit bond (as a guide the cost of a deposit bond of around $86500 for say settlement September 2011 will cost you approximately $9000- $9500 (significantly less than the interest you would pay over the period if you borrow $86,500 at current interest rates of 9% p.a). The general feeling is that direct investment into property as opposed to into managed property funds is a better way to go – you are in control of your investment and avoid the high management fees so often charged by share and property investment funds.Do some research on the internet to see which areas have the greatest potential for capital gains – remember if you are looking for an investment property you should invest with your head not your heart. An investment property needs to be well located to transport and other facilities so that those renting can easily access these services.When considering which investment loan would suit you best take the following into account:1. Does the investment loan allow you to split it into a number of investment loan accounts. This is a good feature to have in an investment loan because you are positioning yourself for the future – if you use the investment property at a later date to gear into another investment purchase then you can split the account so that the investment loan portion relating to the new purchase is clearly identified. This allows you, and your accountant, to easily track the costs associated with the new purchase.2. If you use your home property (with an existing home loan) as security for the investment loan then it is imperative that you do not mix any home loan debt with your investment loan borrowings. The ATO in Australia requires you to apportion any additional repayments to a loan where the borrowings are “mixed”. You want to apply any additional repayments to your home loan before your investment loan. You are paying your home loan off in after tax dollars – whereas you can deduct the interest you are paying on your investment loan against the income form the investment property.3. Does the investment loan allow you to capitalise interest? It is always a good idea to include a capitalising feature as a part of your investment loan to protect you against any unexpected costs in relation to the property. It also means that instead of subsidising the investment costs and interest shortfall on your investment loan you can capitalise these and make additional repayments to your non-deductible home loan debt.4. If you have sufficient equity in your home then you may be better to consider a 100% + costs investment loan for the investment acquisition and use any savings you intended for the investment purchase to pay down your home loan debt.If you consider all these points your investment loan will be working in your favour at all times.