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.

Is It Better to Buy a Short Sale or Bank Owned Home?

You might find a beautiful home in your favorite area and it may be remodeled and upgraded in your price range too. But you will have to be patient and wait for a short sale approval if you want to buy it.There are many declined properties on the market everywhere due to the real estate market crash. There are many good deals. These properties are being listed at low market value or what is called in real estate terms bottom of the market and some are even listed below market value.When you put an offer on a short sale the price is not final. The price is a list price set by the listing agent and the seller subject to the seller’s lender’s approval. All offers are subject to bank approval of all terms and conditions including the list price. Many times the approval from the bank comes back higher than the offer that was submitted to the bank.REO bank owned property listings are past the foreclosure process. The prices has already been approved by the bank. The list prices are final and also still negotiable. You don’t have to wait for the approval from the bank to open escrow on an REO. If you are not a patient person you might want to buy an REO instead so you do not have to wait for the approval from the bank.So what is the answer to which type of property is better to buy? Both REO and short sales are both priced to sell. Most banks just want the minimum or low market value because they want to get the property sold fast. It depends mostly on how patient you are. The bank does a BPO also called a broker price opinion it is a cheap appraisal done by a real estate broker or agent. They use this information to decide on a sales price. Banks price these pre-foreclosure and REO bank owned properties at low market value.Homes in all areas have a value range. A typical home owner prices his home at the top of this value range. The banks price their properties at the bottom of this value range most of the time so they are good deals. So, if you are willing to wait for an approval for 60-90 days or more go ahead and buy a short sale. If you cannot wait, then buy a bank owned home. I like bank owned properties myself. I don’t like to wait for the approval.