The great Australian dream is home ownership and from there growing a profitable property portfolio. However, some may say with most Australians finding it harder to get into the property market, does this mean the dream of a profitable property portfolio is harder to achieve also?Fortunately, there are still numerous ways for achieving our goals and dreams.1) Don’t be disheartened
Don’t let talks of tightened lending criteria or dooming talks surrounding the financial industry deter you from entering the market or advancing your property portfolio.This isn’t the first time the Australian finance industry has seen tightening surrounding lending policy or increased talks over dooming financial potential and nor will it be the last.You need to adapt to the ever-changing market through the use of financial specialists in your corner such as mortgage brokers, buyer advocates, investment strategists whose job is to navigate and work with you to achieve your goals/ dreams.2) Rent Investing
We hear that affordability to get into the property market for first home buyers is becoming increasingly more difficult and most first home buyers are finding themselves buying their first home in suburbs on the outer skirts of metropolitan areas due to costs and savings available. Sounds all very gloomy but does it need to be?A concept that has been in play in the financial industry for a while however with our current financial climate is now more predominant is Rent Investing.Renting where we want to live and close to work andinvesting in locations that have growth.
First Home Buyers are finding by rent-investing they are building growth in property whilst either renting where they work or remaining at home with family, enabling them to use equity in the properties at a later stage to buy their dream home to live in. It becomes a great steppingstone to buying your dream home.Most rent investors find it’s a good balance between life and finances and allows them not to miss out on the property market during this time of decreasing interest rates and assessment rates and demand.3) Reduce DebtThe most important key to improve your investment borrowing capacity is to minimise any debt. Any debt you carry impacts the end result of you achieving your goal/ dream.
Credit Cards:You may have 2 or 3 (or more) credit cards in your wallet of all shapes and colours and you may use them for different purposes and the limits may vary from $5,000 to $20,000 and the debt against these may not be anywhere near the limit. To a lender your credit cards are maxed out, they use the limit in calculating your ability to repay.o If you have never been in debt to the limit, reduce the actual limit to what you need and use.o Do you really need all the credit cards with all the colours and shapes in your wallet? If you don’t really use them get rid of them to achieve your goalso Would consolidating the credit cards into one easy payment be more beneficial to you?Discretionary Living Expenses:Lenders understand we have necessary living expenses to cope with in our day to day lives, such as utility bills, insurances, groceries, transportation costs (petrol or MiKi card), phone and internet costs, medical costs etc and they normally have a standard for these costs as they are considered non-negotiables.In our ever-changing lives lenders not only look at our necessary cost of living but our discretionary living expenses such as Uber Eats/ Menulog, Pay TV, gym memberships, takeaway expenses, pub visits and alike.Take a good look at your expenditure and consider what is really important to you and what “nice to haves” are you willing to sacrifice to obtain your goal of growing your property profitability?Repayments:Lenders when assessing borrowing capacity will work with ongoing repayments in their calculations and often will buffer these working within matrix’s set our under regulation. These can be towards car loans, personal loans and mortgages.
Reviewing your financial position by completing a full financial health check is the best way in reducing repayments. It be as simple as debt consolidating your loans or working with your current lender on gaining a lower interest rate.Working as a team with a mortgage broker who understands what regulations are inplay at any given time is a great navigational tool in dealing with reducing debt.4) Positive or NegativeWhen looking at purchasing an investment property this becomes a great debate…
=> Positively gearing your investment property means all costs associated such as mortgage repayment and up-keeping of property is covered by investment property income.
=> Negatively gearing your investment property means there is a shortfall between all associated costs and the investment income being received. You may be able to claim this loss through your tax.
Many Australians will opt for negatively geared property to take advantage of tax deductions, however, don’t let this be your single guided factor when looking at growing your profitable portfolio. Long-term capital gain that adds to your personal wealth is your ultimate goal/ dream.
Regardless of choice it is beneficial to always speak to your accountant or financial planner to check on your own personal situation and whether your choice is right for you and work with a mortgage broker on what loans structure can work with the advise given by your accountant/ financial planner.5) Be Clear on your goalsSpend time working out what you want from your investment portfolio and ultimately your lifestyle goals both medium and long-term. Are you wanting a short-term quick cash flow? Or do you understand property is a long-term growth opportunity.Many investors will often dive into the property portfolio market without a strategy. However, we find those that may be considered late bloomers and fewer years to support cash flow and know the end game will not waste time, money or opportunities. By having a strategy, they can plan an action plan correctly towards their goal.It is critical to work towards YOUR circumstances and lifestyle goals. You’re your investment portfolio strategy to suit YOUR goals and not someone else’s by hearing what they are doing.6) Do your numbersThe best starting point is to complete a financial health check. It is great that you work through a strategy, but it is important to understand where you are currently and what you can do to get from A to B.Reviewing your current financial position by looking at your earnings, equity available (whether that be in savings or home equity), how many more years you expect to work, whether you are looking at positive or negative geared property and estimated annual living costs.Doing this alone may be overwhelming and it may be worth working with a mortgage broker or financial planner who can represent a number of options based on your current situation.Whether you decide to seek advise or manage solo, your numbers are essential to making the right decision for your circumstances.To get in touch with our friendly and knowledgeable finance team, enter your details below and we will get in touch with you.