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Your guide to property investment

Investing in Australian real estate has often brought good capital growth combined with a steady income from tenants.

It sounds like a great opportunity, but how do you actually get started with investing in property? This guide will help you understand what you need to do.

Build your property investment strategy

The first thing you need to do is work out your property investment strategy. Getting clear on why you're investing and what you want to get out of it makes it easier to choose the right strategy for you.

Popular investment strategies include negative gearing, positive gearing (cash flow), and renovating. We'll talk more about these later.

There are short, medium and long term strategies. Some strategies require minimal effort from you and others will have you actively involved with the property.

Calculate your available equity and upfront costs

If you already own a home, you could use the value of your existing property (its "equity") as a deposit for your investment property loan. Find out how to calculate your usable equity to see how much you have available for the deposit. 

You'll also need to factor in other upfront costs, including: 

  • Stamp duty (use our stamp duty calculator as an indication)
    (Various governments throughout Australia have indicated their intent to reduce the impact of stamp duty on home owners. You should seek your own financial and taxation advice in respect of any proposed investment or purchase.)
  • Loan set up costs
  • Fees for conveyancing and inspections
  • Building insurance

Building insurance and conveyancing costs are determined by external parties (i.e. legal representative and the insurance company) and therefore pricing may vary.

Find out how much you can borrow

We may consider lending up to 80% for an investment property. However, this can vary depending on the loan amount, the property you're buying or refinancing, the location of your property and lending criteria and policies. Talk with one of our home loan managers today to understand how much you may be able to borrow.

Know what to look for in an investment property

It's important to remember you're not buying your own home, where you will live, eat, sleep and entertain. This can make it easier, because you can leave your emotions out of it, and just focus on sound financial choices.

Consider what you can afford, the rent you're expecting to charge and what capital growth the property is likely to have. Remember: you're buying an asset. You want one that makes financial sense and gives you the best chance of building wealth for your future. Here are some of the things to consider:

  • Type of property
    Do you want a stand-alone house, unit or holiday rental? While units are easier to maintain than houses, there are additional responsibilities to consider. These buildings typically have committees who oversee driveways, foyers and garden maintenance, so consider how much involvement you want in your investment property.
  • Location

    One of the most crucial things to consider when buying an investment property is location. Become intimately familiar with where you plan to invest, and consider:

    1. Local infrastructure, including proximity to

    2. Schools, shops and transport

    3. Distance to parks and beaches

    4. Population growth

    5. Rental vacancy rates 

Research your loan options

We offer a range of loans for property investors. When choosing a loan for your investment property, it's important to consider the loan's features, the rate and the terms and conditions.

Investment property loans can offer the option to pay interest only for up to 5 years at HSBC. This means that during the interest only period, you are not required to pay down your loan. Once your interest only period expires, minimum monthly repayments consisting of principal and interest would be required until the loan is paid out.

Make a plan for managing your property

Unless you have the time and expertise to self-manage your investment property, you might want to consider appointing a property manager.

Property managers are responsible for:

  • Sourcing and screening tenants
  • Managing maintenance and repairs
  • Collecting rent and following up late payments
  • Engaging with tenants on your behalf

Choosing the right property manager is vital to the ongoing success of your investment property, so do your research and be selective about who you will appoint. Consider referrals and recommendations, fees, and communication during the research process. 

A good property manager will communicate clearly and frequently, making your property investment experience relatively stress-free. 

Planning to invest?

Want to know how we can help finance your investment property? Whether you need assistance in understanding equity requirements, borrowing capacity or repayments, we're here to help! Talk to a friendly home loan manager today on 1300 694 722.

Keep reading to find out how to use your existing home's equity to finance your property investment.

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Next steps

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Important information

This article is intended to provide general information of an educational nature only. This information should not be relied upon as personal financial product advice as it does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of the information to your own circumstances and seek independent legal and financial advice prior to making any investment choice. There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity. 

 

Disclaimer: Credit provided by HSBC Bank Australia ABN 48 006 434 162. AFSL/Australia Credit Licence 232595. Home Loan Terms (PDF), Personal Banking Booklet (PDF), Fees and Charges (PDF), and lending criteria apply. This article does not take into account your personal or financial situation. Please consider a relevant Product Disclosure Statement, available at hsbc.com.au or by calling 1300 308 008 before making a decision about this product.