Investment Property Loan Carina
Brokering an Investment Property Loan on an Owner-occupied Home
This couple wanted to construct another dwelling on their existing land that housed a dwelling used as an owner-occupied residency. The new dwelling would be built for $190,000.
The client’s lending needs
The client wanted us to broker an investment property loan to pay for the costs of building the new home on their existing property. They intended to rent out the new property and they were expecting a weekly rental return of $300 per week. The rent return data from realestate.com.au shows a rent return more likely to be between $500-$700 per week giving clients quite a big return on their investment.
Loan Structure
Refinance, cash out for non-structural renovations, then build on the rest of the land on which the existing owner-occupied property is also situated. As a result, the transaction involves two properties with a single title.
The Refinancing Loan Lending Challenge
We have a couple who want to refinance their existing debt with Bank A so that they may take cash out to complete minor non-structural renovations on their owner-occupied property. On the same block of land, our clients would like to construct a new dwelling which they will use as an investment property and rent out at a very decent return based on their expected build cost of $190,000.
The benefit of this transaction is the rent return on an investment property built for $190,000 is very much on a positive note, allowing that mortgage to pay itself with change left over each time they receive rental payments. Also, the value of the property overall will increase substantially more than the build cost based on current market conditions.
This leaves the client is a beneficial state, giving them the ability to build wealth with almost instant ramifications once build has been completed.
Case Study Details
- Location – Carina QLD
- Type of Loan – Residential investment property loan
- Purpose of Loan – Build a second dwelling on this owner-occupied home to rent out.
What is an investment property loan in Australia?
An investment property loan in Australia is a type of mortgage specifically designed for purchasing real estate with the intention of earning rental income or capital gains, rather than for personal use. Here are some key features and considerations:
1. Purpose: Unlike owner-occupier loans, which are for buying a home to live in, investment property loans are used to acquire properties that you plan to rent out or sell for a profit.
2. Interest Rates: Investment property loans generally have higher interest rates compared to owner-occupier loans. This reflects the higher risk associated with rental properties and investment in real estate.
3. Loan-to-Value Ratio (LVR): Lenders typically require a lower LVR for investment properties. This means you might need a larger deposit—often around 20% or more of the property’s value.
4. Tax Benefits: In Australia, investment property owners can often claim tax deductions on expenses related to the property, such as interest on the loan, maintenance costs, and property management fees. This can make investment property loans more attractive for investors.
5. Repayment Options: Investment loans offer different repayment options, including principal and interest (where you pay off both the loan amount and the interest) or interest-only (where you only pay the interest for a certain period).
6. Property Type: Lenders may have specific criteria regarding the type and location of the property you can buy with an investment loan. For example, they may prefer properties in certain areas or types (e.g., residential vs. commercial).
7. Financial Assessment: Lenders will assess your financial situation, including your income, existing debts, and investment strategy. They’ll also consider the potential rental income of the property when determining how much they’re willing to lend.
8. Fees and Charges: There may be additional fees associated with investment property loans, such as application fees, valuation fees, and ongoing account-keeping fees.
If you’re considering an investment property loan, it’s a good idea to consult with a mortgage broker or financial advisor to help you navigate the options and find a loan that suits your investment goals.
Contact
1A / 14 Smith Street, Moolooalba, QLD 4557
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