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Bank With Investment Goals In Mind

As a property investor, you need to be clear on your goals and set up your banking arrangements to suit, Jeremy Stapleton writes.

By: Jeremy Stapleton

31 August 2016

With interest rates at historic lows and lenders trumpeting their low-rate offers, property investors can easily get caught up in the clamour and jump at getting finance at a great rate. But securing the lowest interest rate now may not be in your best interests in the long run.

We often see investors whose goal is to grow their property portfolio, but find themselves locked into a long-term fixed-interest agreement with a lender who is not prepared to finance their additional property purchases. Should they want to work with another, more supportive lender so that they can take advantage of current market opportunities, they are forced to pay hefty early repayment charges.

Alternatively, they may have to put their portfolio growth plans on hold until their fixed-term agreement comes to an end and they are free to move.

By that time, unfortunately, the market opportunity they were hoping to turn to their advantage may have come and gone. This frustrating situation can be avoided if you choose a lender who commits to supporting your property investment goals right from the start. In addition, be careful of exposing yourself to a product, interest rate or structure that does not fit with your investment strategy.

Of course, all of this presupposes that you are clear in your own mind what your property investment strategy is – why you’re investing in property and what you want out of it. Knowing your goals will guide your decisions and choice of products and structures you use to realise them.

Even if your investment strategy is clear, now is a good time to re-evaluate it, to take into consideration the Reserve Bank’s new loan-to-value ratio changes taking effect in October.

Cashflow Or Capital Gain

Most property investors have one of two overarching goals: cashflow or capital gain. From this starting point, you have varying strategies you can employ.

These can include:

➤ Buy and hold/sell

➤ Buy, renovate and hold/sell

➤ Buy, subdivide and hold/sell

➤ Buy, build (e.g. minor dwelling) and hold/sell.

Each of these strategies will have products and structures which specifically suit them. You need to be open about your goals with the team of professionals who facilitate your property investments, such as your accountant, solicitor, investment adviser and lender.

With everyone on board with your plans, you have the assurance that your financial and legal arrangements will be set up to support your goals. Working with the right people and products, you’ll be able to move quickly and decisively, and progress more efficiently towards achieving your property investment goals.

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