banking Your House A guide to buying an investment property

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1 banking Your House A guide to buying an investment property

2 Your House A guide to buying an investment property Investing in real estate was once a difficult and stressful market to enter into and at times, it still is. At Bendigo Bank, we ve seen property investment become more attainable to a wider demographic of the population. You don t need to be rich, retired or part of the building trade to invest in real estate. Your House A guide to buying an investment property is an informative tool designed to help you make informed decisions when investing in property. And of course, our qualified lenders are available to discuss your plans and answer any question you may have about the process. Happy house hunting 2

3 Borrow with Bendigo Bank and benefit the community you live in When you choose to be a Bendigo Bank customer, you not only make a decision that benefits you, you make one that also benefits your community. That s because with every savings or investment account, every home or personal loan, and every product or service we offer, part of our profits go back into the community to support local projects, groups and organisations. It s not a new thing, it s simply who we are and what we believe in. And it s a simple equation. We believe that Bendigo Bank can only be successful if our customers and our communities are successful first. It means that as a customer you not only benefit from a great range of competitive products and the friendly service we re so well known for, you also get a sense of satisfaction knowing your banking is contributing to your local community. 3

4 Why invest in property? In simple terms, you invest money with the hope that you will receive a return in the future that s greater than your initial investment. Investing in real estate follows the same formula. However, there are other benefits to property investment that make this investment option so appealing. Here are a few key benefits: The potential for capital growth Property is a type of asset that is likely to gain value over time. While there may be peaks and troughs in the property cycle, the Australian property market is generally considered one of the least volatile investment options. Based on past performance of the Australian property market, you can generally expect the value of your property to grow and provide a strong return on your initial investment over the long-term. Ongoing supplementary income Investment property is usually purchased with the intention of renting out the premises to tenants. By doing so, you receive ongoing income on a regular basis in the form of rent. This can be used to contribute to (or even fully cover) the loan repayments and maintenance costs on your investment property. Hands on involvement Unlike many other investment types (such as shares, superannuation and managed funds) where the most you see of your investment is some numbers on a page, an investment in property means you have something tangible to show for the money you ve invested. An added bonus is that you can renovate, decorate and personalise the property to suit you. These changes can add further value to your property, meaning your potential return at sale, and the amount you can charge in rent, increases too. Tax benefits Providing you have the right investment structures in place, you may be able to save a considerable amount of tax on your personal income. Before deciding to buy, speak to your accountant to see what impact an investment property could have on your tax position. 14

5 What to consider when taking out an investment loan with Bendigo Bank Loan options The following two investment loan options are some examples of what Bendigo Bank can offer you. Bendigo Investment Loan The Residential Investment Loan offers flexibility and can be tailored to suit your needs. It can also be used if you want to add an extension or improve your existing investment property through renovation. Bendigo Home Equity Loan With a Bendigo Home Equity Loan you can borrow against the value of your existing home to go towards the purchase of an investment property. Plus, you ll be consolidating your banking, making it easier to manage your finances. For more details on what home loans we have available, ask your lender for a copy of the Bendigo Bank home loan matrix Your Loan. Repayment options With any loan, you incur interest based on the balance of the principal (which is generally calculated daily). The amount you pay and the frequency of your repayments can have a significant impact on the length of your loan and the total amount of interest paid. Check out Bendigo Bank s online calculators located at to test out a variety of repayment scenarios. Protection options Bendigo Landlords Insurance At Bendigo Bank we know how important it is to protect your investment property against loss caused by theft, malicious damage, fire and other unexpected events, including loss of rent. Bendigo Landlords Insurance has you covered. Talk to your lender to find out more. Bendigo Loansure Consider protecting your loan repayments should the unexpected happen. Bendigo Loansure covers the following: Life Sickness and Accident (Disablement) Involuntary Unemployment Cash Assist (Trauma Cover) Planning options Bendigo Financial Planning With any changes to your financial situation, it may be worth sitting down with one of our qualified financial planners to discuss cost effective strategies and options for your financial futures. 5

6 Other things to consider There are a number of things you should consider in order to maximise your financial return: Do your research Research the existing rental market in the area you re looking at and compare similar properties that are being advertised. This will give you an indication of what you might expect to receive in rental income for your property. While this is no guarantee of the amount of rent you may receive, it will help you determine if your desired location is a financially viable option. Maintenance In order to continue receiving the rental income you desire, your investment property will require regular maintenance and upkeep to ensure it is in the best possible condition. Improvements/renovations If you are considering spending extra money on your investment property to improve it, make sure you compare the costs involved with the expected increase in property value. You don t want to spend extra time and money on the property if it s not going to equate to a significant increase in the property value or the expected rental income. Plan for the long-term Investing in property requires patience. Situations where property values drastically rise within a short period of time are few and far between. To fully benefit from your investment, expect to be committed for at least several years. And when the time comes to sell your property, don t rush the sale. If you want the property sold quickly, you may not be maximising your potential profit. Seek legal advice As with most property purchases, it is recommended that you engage a solicitor or legal representative to assist with the legal requirements associated with the purchase of a property. Private or Agency Lease? Depending upon your experience in managing tenants in a rental property, you may prefer to employ a Property Manager to manage the leasing of your property on your behalf. Be aware however, that you will need to factor their fees into your expected costs. Part of a Body Corporate? If your investment property is part of a body corporate strata plan, it is important that you know the body corporate manager. They will be able to tell you the fees involved and what these costs relate to (eg gardening and external maintenance). 6

7 Inspecting prospective properties Scope out the Neighbourhood If you have a particular idea of who you d like your tenants to be (students, young couples, families etc), make sure the area has the facilities and demographic to suit that lifestyle. Simplicity is the key While the 150 year old cottage may look amazing, the maintenance and upkeep involved in making sure everything is up to standard can be more work than it s worth. The bottom line in property investment is how much return you can make when taking into consideration the costs involved. Go through it with a fine tooth comb When buying your own home you might let little things slide because you ll be able to fix them once you move in. Tenants, however, will expect the property to be in tip top condition before they move in. This means anything you need to fix prior to a tenant moving in to the property will cost you not only for the repairs but could also be costing you rent. Follow the demand A higher demand for rental properties in any particular area will generally lead to opportunities to receive more in rent than in areas with a high saturation of rental properties available. Look carefully at what is already available near your prospective purchases. If there are a lot of options available, you may not get the rental amount you want. 7

8 Investing in property can be a profitable and rewarding investment option. As well as the financial benefits in rental income and capital gains, investing in a property gives you something tangible that you can call yours unlike many other investment options. At Bendigo Bank you ll find a comprehensive range of investment loan options, as well as all the advice you need when considering the option of property investment. For more information on Bendigo Bank investment loans visit your nearest Bendigo Bank branch. T 1300 BENDIGO ( ) W Bendigo Home Loans are subject to terms and conditions. Fees and charges apply. Bendigo Bank s lending criteria applies. This booklet contains general information only. We encourage you to seek professional advice when buying an investment property. You should also read the terms and conditions available from any Bendigo Bank branch or online at before making any decisions. Bendigo and Adelaide Bank Limited, The Bendigo Centre, Bendigo VIC 3550, ABN AFSL/Australian Credit Licence BEN50MB256 (S40266) (04/12)