Tag Archives: finance

How to Finance Your Property Investments

Financing Property Investments Now

 

Is your primary goal to add value to property through renovation or development? Why focus on one or two key strategies and specialise? We’ve seen many people try so many different strategies, never really giving any of them the focus required to get results.

Finance property investments for most residential real estate investments…it means you could be in a position to borrow and buy an investment property with a typical deposit (or surplus equity in another property) of 20% of purchase price.

While you can borrow more than 80% loan to value ratio (LVR) with some lenders, you need to factor in higher interest rates, lenders mortgage insurance and higher risks of larger mortgage payments.

Finance or be it raising funds or cash required for a deposit, plus allowing for closing and holding costs on an investment property is probably one of the biggest stumbling blocks, even if you get a 90%+ LVR loan…

Finance property investments is all about knowing how the numbers stack up, taking action and knowing what action to take:

  • Stamp duty
  • Settlement costs
  • Conveyancing costs
  • Bank fees
  • Title transfer fees
  • Other miscellaneous costs
  • Holding costs until rental income begins
  • Others sources of finance

Equity is the difference between your property’s market value and outstanding balance of all loans on property. Recycling equity is  the process where investors leverage/borrow against equity in each existing property they own to help to fund the next deal…

finance property investments
How to Finance Your Property Investments and Maximise Your Returns from Property Investments…

Finance property investments using money gifted, borrowed or pledged from family members as guarantors as a source of finance or your deposit for your next real estate investment.

Superannuation funds (SMSFs) can purchase real estate for investment. Legislation changes made in 2008 mitigated the risk to an individual’s investment portfolio by making property investment possible.

Mortgage brokers and non-bank lenders can either belong exclusively to a particular financial institution or work for a mortgage lending company which can apply for loans on behalf of their clients across various financiers.

Vendor finance – where the seller (also known as the vendor), instead of demanding 100% of the sale proceeds at settlement, accepts terms that allow the borrower to pay an initial amount at settlement e.g. 80% and then repay the balance of the property’s sale price over a fixed term e.g. 20% over 2 years at an agreed interest rate.

Types of finance property investment loans available consist of interest only whereby the borrower only pays the cost of annual interest on the loan each year and does not have to repay the principal until a later date.

Principal and interest loans whereby you’re paying a principal and interest loan means you’re paying the current monthly interest due and progressively reducing the outstanding balance on mortgage and making principal repayments, so you’re progressively paying off the mortgage.

Revolving line of credit enables you to use generally up to 80% of your equity as collateral for further credit to make future purchases. It is an option chosen by real estate investors wanting the flexibility to top-up their mortgage to pre-agreed level without having to take out a separate mortgage each time…

Non-recourse financing means the borrower, in the event of failing to fulfill the terms of loan, has their liability limited to property which the mortgage is secured against only and does not offer other asset security or personal guarantees.

Full doc loans requires the documentation of all income, assets and liabilities and is the most common type of mortgage loan used

Lo doc loans need less for stringent income information than full doc loans, but still rely on a good deal of documentation to get approved.

Low start loans offers borrowers low establishment costs, a very low variable rate for the first 6 to 12 months and no monthly fees.

Refinancing  is the process of re-financing, topping up or consolidating existing and/or new debt with the same or new lender/s. Always check the full cost of doing this and especially break fees on existing mortgages.

Deposit bonds are alternatives to a cash deposit for borrowers who have existing equity in property and want to use bond/guarantee rather than a cash deposit.

This is common when buying off the plan with a 12-24 month settlement as it avoids paying a (borrowed) cash deposit and then paying the interest on the money while it sits in trust awaiting project completion and settlement…

Finance property investments and financial competence as this proves several points:

Please never overlook the discipline of a very good understanding of banking, finance, accounting, tax and importance of cash flow management, financial due diligence, budgeting, tracking and reporting because it’s often easier to get lots of money than a little.

Frequently going after small investors is the most troubling of all and it’s better to aim at people which are more substantial.

The magic word (no) is frequently the best way to make somebody want to get involved with you even more.

Knowing your numbers and business is what makes people want to move forward. Money always follows expertise and when you demonstrate you’re an expert with tactical skills in specific areas, money flows in a big way.

And sometimes so much money flows…you just have to say no.

The loan approval process using conditional and formal approval letters:

If a loan application meets certain broad guidelines at the initial assessment stage, a lender or finance broker may approve the application in principle or indicate pre-approval.

As the application progresses, information provided by the potential borrower such as identification details, salary and overall financial situation is subsequently confirmed and credit check reports are received. The lender or broker will form an opinion of the applicant’s ability to service a loan and a conditional approval letter will be issued if lending criteria are satisfied.

Approvals confirmation – Once all the necessary paperwork has been completed, it’s normally only a short time before approval.

Make sure you read and understand everything before signing up. Keep your conveyancer or solicitor in the loop. Ask questions if there is any confusion – taking on a housing loan is the largest financial decision most people will make.

The bank valuation is a basic part of a property loan approval, which is confirmation by the lender that the valuation of a property being offered as security is sufficient to cover the loan.

Lenders instruct a bank panel valuer to perform a market valuation and analyse what percentage of the purchase price is being financed with risk profile of the loan taking into consideration other factors such as location and average time to sell property…

Finance Property Investments

What Does It Mean to Get Preapproval for a Mortgage Loan?

How to finance your property investments?

Preapproval  and the reality is for most residential real estate investments you can borrow to buy an investment property...

People interested in buying a house can often approach a lender, which check their credit history and verify their income, and can provide assurances they would be able to get a loan up to a certain amount.

This pre-approval can then help a buyer find a home, which is within their loan amount range.

Buyers can ask for a letter of preapproval from the lender, and when house hunting or shopping for a home get a possible advantage over others because they can show the seller they are more likely to be able to buy the house.

What Does It Mean to Get Preapproval for a Mortgage Loan?
What Does It Mean to Get Preapproval for a Mortgage Loan?

Often real estate agents prefer to work with a buyer which has a pre-approval as it demonstrates they are well-qualified to receive financing and are serious about buying a home.

A pre-approval is based on documentation the borrower supplies at the time of application, and any actual eligibility to receive the pre approved loan depends on terms and conditions of the pre approval and ability to secure the loan before the pre approval expires

Why get preapproval for a loan? Because you’ll be in a better position to negotiate, and understand the whole process involved before pulling the trigger.

Before starting the preapproval process, get familiar with your credit and how credit works. Review your credit reports to be sure there are no errors.

Mistakes can hold up the process and prevent you from getting the loan you deserve. Mistakes can also be fixed, but the process can take a while.

Choose a Lender: Shop around for a good lender. Check with banks, credit unions, and online lenders to see what they offer. They all cater to different borrowers, so figure out which one is the best fit for you.

A local credit union is often a good starting point, yet credit unions do not always offer the best rates.

Find out what each lender’s interest rate and fee structure would be. If you’d like to have the option of paying off the loan early (who wouldn’t?) then investigate prepayment penalties.

Finally, make sure it’ll be convenient and affordable to pay the way you want to pay — by paper check, bill pay, or electronic transfer.

Get Prepared: When you get preapproved, your choice of lender needs relevant information from you. Get information ahead of time so your application can get through the underwriting process.

Lenders want to know about your finances. You’ll need to document how much you earn (you need income to repay the loan), and it may help to show you have other assets available to you (such as cash in bank accounts).

Your lender may ask for the following items, and more:

  • Pay stubs
  • Bas statements (PAYG) instalments
  • Tax returns
  • Bank account statements
  • Other account statements

You may not need to provide copies of these documents in order to get pre-approval, and you would at least find out where they are and get familiar with them because it’s important that anything you say on an application is accurate.

You may also have to provide information about the thing you’re buying. If it’s a house, is it a family residence, or is it a n apartment, townhouse or unit in a building with 50 units?

The more detail you…the better because your lender’s offer may change depending on what you want to buy.

Apply for the Loan: Once you’ve picked a lender and prepared yourself, it’s time to apply. There’s only one way to find out how much you can get so go ahead and fill out an application to wait for an answer.

An offer may come quickly, or it may take a while. Lenders do a quick once-over when you get preapproved, so you should have an answer within one day.

Be aware some lenders claim to preapprove you without really looking at your finances. If they don’t run your credit or ask about your income, it’s not a good sign.

You want a preapproval that actually means something, and lenders can only make a realistic offer if they know something about you. If you get a fake or not a genuine preapproval, you may later find out you can’t really borrow as much as you hoped.

Preapproval

Property Finance – What’s Stopping YOU?

Is Property Finance a Problem for You?

Property investment is all about the numbers stacking up. Property financing an investment property is not always straightforward. The reality is lack of money should never stop you because a good property deal finds finance…

When it comes to real estate investing there sure is a lot to learn.  Real estate is not only about the market or strategy…it’s more about the deal, which means property finance.

Each and every property you are going to see must be the very best deal in context to your investment goals and profit margins, which means you have to do your homework. Due diligence makes your life easier, mitigates risks and property investments profitable…

How to effectively finance your property investments…

Getting the most effective finance for your investment properties is absolutely critical to building wealth through property. As a property investor,  you can spend a lot of hours researching the many different finance options available through many different lenders.

The result can provide you with the knowledge on how to structure your investments and lending criteria which enables continued growth of your property investments portfolio.

Understanding each lenders assessment criteria is extremely valuable in selecting the right lender each time you make a purchase.

It may surprise you just how different each lender assesses the scenario you present them. If it is outside their preferred lending guidelines, they may not be able to assist you with finance.

So you understand how to source property finance for yourself, right? If not you’ll want to make a big effort to educate yourself on the options available to know various strategies so an educated decision on the right finance solution can be made.

Do you need an assessment?

If you would like a review of your current finance setup or require finance for future purchases, we can provide you with an honest assessment on what you have in place now and make recommendations based on your objectives.

Property finance is the foundation which every property investor does and should know.

property finance
Property finance includes using effective property strategies for profits…

Property financing must be set-up right because it makes every deal possible with or without a deposit (unless a major industry change happens).

Do you understand the most effective multidisciplinary nature of property investment and property development including:

  • Property investment analysis
  • Property portfolio analysis
  • Property finance and taxation
  • Feasibility studies
  • Property strategies for profits

Do you know how to develop the analytical and decision making skills necessary for property investment and property development as a property investor?

1. What is your single biggest obstacle which is stopping you from profiting from property investments?

  • Lack of finance
  • Not enough time
  • Lack of education to raise finance from private investors (your network)
  • Lack of education
  • Unable to find deals in your area

2. What one additional skill would enable you to make more money from property investing?

  • Raising finance from the people you know (your network)
  • Knowledge so you can use one deposit to buy multiple properties
  • Knowledge to maximise your return on investment
  • Knowledge so you can invest in property renovations
  • Sourcing below market value deals

3. What property goals have you set yourself for 2014?

  • Buying your first investment property
  • Buying 5 investment properties in a year
  • Buying 10 investment properties in a year
  • Sacking your boss and being a full time property investor

4. How can we better help you learn skills you need to make money from property investment?

  • More online trainings
  • More books or reports
  • More CD sets
  • More events

Loan Analysis

We would love to hear from you! Please take a moment to fill out this form and we'll get in touch with you shortly...
  • If you want us to call you back?

Property selection criteria…have you ever found yourself working harder and harder only to go backwards?

The principles for selecting investments properties include:

  • Property must be in an area of existing or potential high mid-to-long term capital growth
  • Property must be in an area of high population growth and high employment
  • Property must be close to schools, shops and transport etc
  • Property should be new or renovated to allow maximum depreciation and therefore biggest taxation savings
  • Property must be high quality in terms of design, materials and construction
  • Property requires minimal maintenance
  • Property must be in an area, which has a sound long term rental history

Check list with must ask questions for every property investor – how to of find an area to invest in and understanding specifics of individual property:

  1. What is the cashflow of the property?
  2. What is the vacancy rate of the area?
  3. What improvements are being planned for the area?
  4. What is the population growth?
  5. What is the competition?
  6. Is the property tenant friendly?
  7. What structural condition is the property in?
  8. Does property have furniture?
  9. Is there a body corporate?
  10. Is there a rental guarantee?
  11. What is the current property management arrangement?.
  12. Is there a leaseback?
  13. In the case of a new or off the plan property, who are the developers? This particularly in relation to companies like the ones you’re looking at
  14. Is there a dual purpose if this is a niche market ( purpose built ) property?
  15. What is the land availability in the area?
  16. What is the proximity of the area to a large city?
  17. What is the age of the property?
  18. Is the property at market value or under market value?
  19. Is the town you are considering based on just one industry?
  20. 20. Are you being commercial in your approach?

Want a clear and concise approach to creating profits, cash flow and equity through property investment?

Want a detailed roadmap with a step-by-step guide to property finance, buying property with no money down, instant equity and much more?

Want property investment financing solutions and strategies that work?

Property Finance