Ahh property. The great Australian talking topic where addictions to checking www.realestate.com.au are growing by the minute!
But why then do most property investors never get past investment property #1? I suspect it’s because we don’t learn about investing (in any formal way) in our education and because the process of purchasing multiple investment properties isn’t made easy by the following myths that I’d like to dispel.
Myth 1. You need cash to put a deposit on your next property.
FALSE!
If you have equity in another property (your own home or an investment) you can potentially utilise this even if you don’t have surplus cash to put towards the property. In fact, if you still have debt against your home that cash is likely (after consultation with your accountant) best put against your own home not towards a future investment.
Side note: Learn what cross collateralisation means before following this strategy and discuss your requirements with a broker who understand why it’s important for you not to cross collateralise if you can avoid it.
Myth 2. If my bank says I can’t borrow to buy my next investment property then every other bank will feel the same.
FALSE!
Every bank has different risk protocols they put around working out your borrowing capacity or “servicing”. Some still strip rent back to 60% of what’s earned, some 80%. Some will pretend the interest rate you’re paying is 2% higher some 5%! Your borrowing capacity will be chalk and cheese between lenders and you don’t know your lender is the final say until you’ve sought other advice.
Myth 3. Return is everything / Capital growth is everything
FALSE!
Each property will show a mixture of yield (return) and capital growth. The exact mix of that for you is going to differ depending on your stage of life (are you accumulating debt or paying it down) – the best thing you can do is have a property savvy accountant
Myth 4. We’re in the middle of a pandemic – the banks aren’t lending
FALSE!
Yes, there are some extra hurdles to jump through, but we’ve had nearly 6 record months of lending mid pandemic. The banks are open for business you just need to be able to explain how / if Covid has impacted you and put together a nice strong case for the lending.
Myth 5. I don’t have time to find another property
Maybe true – BUT….
What if you used a buyer’s agent to find your next property? Check with your accountant as the fees you pay for a buyer’s agent may be tax deductible and your broker may be able to borrow for them.
Kirsty Dunphey, director and mortgage broker – Up Loans www.uploans.com.au
Top 100 MPA 2019 Mortgage Broker, former Australian Telstra Young Business Woman of the Year, passionate Tasmanian and tea drinker.
Kirsty is a credit representative (CR No. 465864) of BLSSA Pty Ltd (Australian Credit License No. 391237)