Finance advice
Warren Littlefair

11 things to consider when applying for an investment loan

By Warren Littlefair

If you're about to apply for a loan for your next investment property, make sure you know what you're in for.

Blogger: Warren Littlefair, general manager, Peard Finance

The start of the 2014/2015 financial year has seen strong activity for investors in the PerthPerth, TAS Perth, WA property market driven by low interest rates and competitive house prices. A number of banks, for example, have now dropped their five-year fixed interest rate for investors to below five per cent.
 
However, securing an investment loan can be very different from taking out a home loan for an owner-occupier property. In particular, investors need to take into account the following points:
 
* Study your choices: There are a large number of institutions that offer tailored home loan packages for investors covering fixed-rate and interest-only loans. There are several hundred home loan options to choose from and securing an interest rate reduction of just 0.25 per cent on an average investment loan can result in thousands of dollars in savings over the life of the loan.
 
* Financial documents: Make sure that you have a comprehensive list of all financial documents to support your loan application.
 
* Speak to your tax advisor about the most effective tax entity: To purchase your investment properties through ie. family trust, individual or company structures – especially if purchasing cash flow positive property.
 
* Interest rate rises: Take into account any future interest rate rises or falls. While fixed rates are generally favoured by investors, in the current climate of falling interest rates it may not be the most suitable strategy.
 
* The costs: Don’t always select the home loan with the lowest advertised interest rate. Application and monthly management fees, for example, can considerably add to the overall cost of a loan that might be advertised at a very low interest rate.  Look at the comparison rate which takes into account these costs.
 
* Check the fine print: Low introductory home loans, eg. may have high break costs or might revert to a high interest rate making this kind of home loan a more expensive option.
 
* Ownership period: Determine how long you plan to hold the property. If it is for a short period of time, then a home loan that offers very flexible conditions might be an attractive option.
 
* Debt reduction: Select a loan option that allows you the ability to quickly reduce your debt commitments if required, eg. through the use of ‘offset’ accounts, a borrower may significantly reduce the term of the home loan and save thousands of dollars.
 
* Mortgage insurance: Make sure that you consider ‘surprise’ costs when applying for the loan, ie. mortgage insurance.
 
* New debt: Do not take on any additional financial burdens during the loan application process, ie. buying a new car on credit. New debt could complicate the home loan application.
 
* Settlement: Allow enough time for finance approval and settlement. Generally you should allow at least three weeks for finance approval and four weeks for settlement.

 

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About the Blogger

Warren Littlefair

Warren Littlefair

Peard Finance is the finance division of the Peard Real Estate Group which is s now the largest independent non franchise real estate group in Western Australia with an annual turnover of nearly $1.4 billion. Peard Finance is a premium provider of lending solutions who have a qualified professional team of Authorised Credit Representatives (ACR) dealing with over 30 different banks and provides this service throughout Western Australia. The division is  headed by Warren Littlefair who has a wealth of experience in the financial services sector and has has held senior roles in the banking and broking sector in Australia. Warren has also held a board position with Industry body SEQUAL.

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  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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AREAS MENTIONED:

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How a move to Hong Kong impacted Julia’s Australian property goals
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
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The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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