14 Jan Are you ready to invest in a second property?
The thought of buying a second property can be, for some, an exciting proposition. Moving from an owner-occupier into a genuine property investment is viewed by many Australians as a positive way to increase future wealth potential through growing your asset pool.
Like any other major life decision, there are a number of factors to consider before you’ll know you’re ready to invest into a second property. Taking your time to understand these factors before you begin to dive into what’s available on the market is an important step of any informed purchase. These include…
An understanding of the equity available in your first property
How is your LVR sitting? Do you have the equity you need to be able to apply some of it to a new property, without placing your first property in a risk position?
A thorough analysis of your income and savings capacity
If you’re struggling to make ends meet with just the one property, now may not be the best time financially to commit to the risk of another mortgage. If your earnings have remained stagnant for a number of consecutive years, you may not also have the cashflow capacity required to be approved for an additional or increased mortgage. Taking a hard and thorough look at your financial situation is key before making any moves into the property investment market.
Your taste for risk
If you’re a conservative personality type, who prefers not to have risk in their portfolio, you won’t be comfortable purchasing property unless it’s under very specific market conditions. However, you may find the property market is going through a riskier cycle than your propensity for risk allows. How do you feel emotionally about the prospect of taking on additional debt? Do you have a clear understanding of the impact on your weekly cashflow, your debt capacity, the requirements on a practical level to find a positively geared property, or your ability to play the long game and purchase a property better suited to long-term capital growth?
An awareness of current interest rates
Is now a good time from a lending perspective to apply for a new loan? Having visibility across prospective interest rates, and an awareness of what that means on a loan the size you’d need to secure an investment, is crucial in knowing whether you can financially sustain a second investment.
Your growth strategy
If you’re fresh to the property investment market, knowing the difference between positive and negative gearing, high rental yields and capital growth potential, and understanding the tax benefits an investment property may offer to you is crucial. Do your research before you move into the market, so you can be sure you’re stepping in fresh, competitive, and with the full awareness of the factors you need in order to make a strategic and well-informed purchasing decision.
Once you’ve considered your current position, give us a call at 0488 814 148 for a chat to see how we can work together to secure the investment property best suited to your asset strategy and borrowing capacity.
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