Financial tips for property investors!
Property investment is well known to be an excellent and relatively secure form of wealth creation, accessible to people of any income who have the initiative to plan their investment strategy and tackle it one step at a time. One of the keys to successful property investment is your financial strategy. With the right financial strategy, you can make your first investment property work for you, building the equity you need to expand your investment into more properties. The following tips can help you establish your property investment strategy.
Start with a plan
You cannot achieve your goals unless you set goals in the first place. There are many paths to property investment success and many ways to define success. You need to set your own definition for success and work out how you wish to achieve it. Create a business plan outlining your strategy to grow your portfolio, setting out your targets and goals and your financial plan.
Consolidate your personal debt
Lenders will take your personal loans and credit card use into consideration when calculating how much you can borrow. By minimising and simplifying your personal debt, you can increase your borrowing capacity. Avoid using credit cards, and consolidate any personal debts so you come across as a better risk for lenders.
Use multiple lenders
While you might favour the convenience of using the same lender for every property in your portfolio, it actually makes sound financial sense to diversify. When you use one lender, your entire portfolio is assessed as one debt, rather than each property being assessed individually. This reduces the perceived value of your portfolio, and restricts your access to equity, which you need to expand your investments.
When you cross-collateralise – provide a lender with security over more than one property – the lender has a great deal of control over your portfolio, which can be problematic if you want to sell a particularly profitable property or if you are struggling financially and need to rearrange your finances.
Working with different lenders gives you the flexibility to choose the right loan strategy for each individual property, and gives you direct access to equity when you want it.
Set up a line of credit
The ultimate purpose of any investment plan is to reduce your financial worries by building your financial security. As life can be unpredictable, it helps to set up a line of credit as a cash reserve. If something goes wrong – such as job loss, illness or a downturn in the market - this financial buffer can help you maintain your investments and your lifestyle until the situation improves.
Use a mortgage broker
The loan you choose for each property will have a deep impact on the relative success of your investment. You want the interest rate and loan features to make the most of each property, yet choosing the right loan to achieve your goals can be challenging. A mortgage broker can give you the expert advice you need to make the most of your property investment. When you have multiple lenders for your portfolio, your mortgage broker is your go-between, streamlining communications by liaising between you and the lenders. The broker also has access to special offers and discounts, that would not be available to you directly.
For more information about how you can make the most of your property investment portfolio, speak to a mortgage broker or financial advisor.
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