As a plasterer, you've built your career creating smooth finishes and quality work. Now you're thinking about building wealth through property investment. The rental market presents solid opportunities for tradies like yourself, but understanding investment loan options and rental market analysis is crucial before you dive in.
Understanding Investment Property Loans
When buying an investment property, you'll need a different type of loan compared to your home mortgage. Investment property loans typically come with higher interest rates and different lending criteria. Most lenders require a minimum 20% deposit to avoid lenders mortgage insurance (LMI), though some investment loan options allow lower deposits with LMI included.
Your borrowing capacity for an investment loan depends on several factors:
• Your current income and expenses
• Existing debts and commitments
• The expected rental income from the property
• Your credit history and employment stability
Banks and lenders across Australia offer various investment loan products, each with different features and benefits. Some focus on variable interest rates, while others provide fixed interest rate options for budget certainty.
Rental Market Analysis Basics
Before applying for an investment loan, research property markets thoroughly. Look at rental yields in different areas - this shows the annual rental income as a percentage of the property's value. A good rental yield varies by location, but generally:
• Capital cities: 3-5% for houses, 4-6% for apartments
• Regional areas: 5-8% depending on local demand
Consider these property types for investment:
• Stand alone dwelling: Often appeals to families, potentially longer tenancies
• Town house: Balance between land and maintenance responsibilities
• Apartment: Lower maintenance, but consider body corporate fees
When you research property, examine local employment opportunities, population growth, and infrastructure development. Areas with strong job markets often maintain steady rental demand.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Tradie Home Loans today.
Investment Loan Features and Options
Investment loans come with specific features designed for property investors. Many lenders offer interest rate discounts for larger loan amounts or when you have multiple properties in your investment property portfolio.
Key loan features to consider:
• Interest-only repayments: Lower monthly payments, maximising cash flow
• Offset accounts: Reduce interest charges on your loan balance
• Redraw facilities: Access to extra repayments when needed
• Professional package discounts: Reduced rates and waived fees
Your loan to value ratio (LVR) significantly impacts your loan terms. A lower LVR typically means lower interest rates and more favourable conditions. For your first investment property, maintaining an LVR of 80% or less helps avoid LMI costs.
The Application Process
Applying for an investment loan requires more documentation than standard home loans. Lenders want to see your capacity to service the debt even without rental income. The streamlined application process typically involves:
- Financial documentation: Recent bank statements, tax returns, payslips
- Property details: Contract of sale, rental appraisal, building inspection
- Investment strategy: Your plans for the property and portfolio growth
The investment loan application process can take 4-6 weeks, depending on the lender and complexity of your situation. Having all documentation ready speeds up approval times.
Calculating Investment Loan Repayments and Costs
Calculating investment loan repayments involves more than just the principal and interest. Factor in these ongoing costs:
• Council rates and water charges
• Property management fees (typically 6-8% of rental income)
• Insurance premiums
• Maintenance and repairs
• Stamp duty (varies by state)
Your Investment Loan Interest Rate affects your repayments and tax deductions. Higher rates mean higher repayments but also larger tax deductions if your property is negatively geared.
Negative gearing occurs when your property expenses exceed rental income. This loss can offset other taxable income, reducing your overall tax liability. However, ensure you can afford the ongoing cash flow requirements.
Building Your Property Investment Strategy
Successful property investment requires a clear strategy. Consider whether you're investing for:
• Capital growth: Focusing on areas likely to increase in value
• Cash flow: Prioritising rental yield and positive cash flow
• Portfolio diversification: Spreading risk across different property types and locations
As a plasterer, you might have insights into areas experiencing renovation activity or new development, which could indicate growing demand.
Many tradies start with one investment property and gradually expand their property portfolio. This approach allows you to learn and refine your strategy while building equity.
Working with Lenders and Brokers
Accessing investment loan options from banks and lenders across Australia can be overwhelming. Different lenders have varying criteria, rates, and features. Some specialise in investment loans for tradies, understanding the unique income patterns and challenges faced by trade professionals.
A mortgage broker experienced with investment properties can help you:
• Compare loan products from multiple lenders
• Understand which lenders suit your situation
• Streamline the application process
• Negotiate better terms and rates
Property investment can provide long-term wealth building opportunities for plasterers willing to research markets and understand the lending landscape. With the right investment property loan features and a solid property investment strategy, you can build a portfolio that works alongside your trade income.
Call one of our team or book an appointment at a time that works for you to discuss your investment property goals and find the right loan solution for your situation.
