Has the Property Market Made a Comeback?
Over the past decade, one of the most glamorous forms of global investments has surprisingly been brick and mortar. When compared to how volatile the stock market has been from 2000 to 2016, excellent returns have been delivered by property, while providing investors with value that is more tangible than what is delivered by stocks.
For long periods of time throughout the 1980s and 1990s, some lustre and a lot of enthusiasm were lost by investors for Australian property, particularly when its growth performance was compared with technology shares. However, whenever there were declines in the stock market, investors would move into the safe haven of property, returning commercial and residential property to favor due to it being a tangible asset. Investment property loan portfolios take into account the loan (investment finance) sourcing for the property that is held by these portfolios.
How can Anyone get into the Property Market?
Some people argue that over the long term property has been a smart and reliable investment. However, for smaller investors, there hasn’t always been smart financing available for strategic property portfolios and investments. Second mortgages and secured loans have become the main ways to finance new property portfolio investments. There is a lot of subjectivity involved in investing in and buying property. However, smart investments are acquired through doing thorough research into the kind of property, demand for the property, its location, and the asset’s calculated return. The source of finance is just as important.
What are Smart Investment Property Loans?
A smart investment property loan will take into account the key points that were raised previously, but also consider both the long term and short term financing costs, beyond just what the interest rate charges are currently. When the cost of finance (COF) is considered by investors, the up-front costs of buying properties for the portfolio need to be considered along with making sure that the portfolio has sufficient equity within it in order to absorb any repayment challenges caused by negative property price changes, rises in interest rates, unplanned maintenance and occupancy gaps.
The investment strategy could be the most important factor. If the investment’s loan period is for two years, then you need to have a two year plan. After the two years are over you can review and make changes to your strategy if necessary. If there is a ten-year loan period for the investment, then make a ten-year plan. This can be reviewed at the midway point of 5 years. Making a plan is the key to becoming successful. If cost models and strategy is laid out, and you set realistic goals from the start, then you can manage expectations of returns effectively.
Hiring a mortgage broker who is savvy about investment property is a good idea for first time investors. They will be very knowledgeable about investment finance. They can also help you with assessing investment properties that you are considering buying. They can perform an analysis of the investment property to see whether or not it is a good fit financially for you.