As a carpenter, you've got the skills to build homes for others – but what about building your own property investment portfolio? Many tradies are turning to investment properties as a way to secure their financial future, and with good reason. The rental yield from buying an investment property can provide ongoing income while you continue working in the trades.
However, getting investment loan approval isn't always straightforward, especially when you're self-employed or work on varying contracts. Let's walk through what you need to know about the application process and how to position yourself for success.
Understanding Investment Loan Options
When you're looking to invest in real estate, you'll have access to investment loan options from banks and lenders across Australia. Each lender has different criteria and features, which is why working with a mortgage broker who understands the trades industry can make a significant difference.
Investment property loans differ from home loans in several key ways:
• Higher interest rates compared to owner-occupier loans
• Different loan to value ratio (LVR) requirements
• Stricter lending criteria
• Potential for lenders mortgage insurance (LMI) depending on your deposit
Most lenders will allow you to borrow up to 80% of the property value without LMI, though some may go higher with additional insurance costs.
Preparing Your Investment Loan Application
Your borrowing capacity will depend on several factors, and as a carpenter, you'll need to present your income in the right way. Lenders want to see consistent income, which can be challenging when you're working on different projects or have seasonal variations.
Key documents you'll need for your investment loan application include:
• Two years of tax returns and notices of assessment
• Recent bank statements (usually three months)
• Profit and loss statements if you're running your own carpentry business
• Contracts or letters from employers showing ongoing work
• Details of your current assets and liabilities
Choosing Your Investment Property Type
The property market offers various options for your first investment property, each with different rental yields and growth potential:
Apartments: Often require lower initial investment and can be located in high-demand rental areas near employment centres.
Townhouses: Provide a middle ground between apartments and standalone dwellings, often appealing to families seeking rental properties.
Standalone dwellings: Typically offer stronger capital growth potential and appeal to a broader tenant market.
When you research property, consider factors like proximity to transport, schools, and employment hubs. These elements directly impact rental demand and your ability to maintain consistent tenants.
Interest Rate Considerations
Investment loan interest rates can be either variable or fixed, and understanding the difference is crucial for calculating investment loan repayments.
Variable interest rates fluctuate with market conditions, meaning your repayments can change over time. Fixed interest rates remain constant for a set period, providing certainty in your budgeting. Many investors choose a combination of both to balance stability with flexibility.
Some lenders offer interest rate discounts for investment loans when you have multiple products with them or meet certain criteria. Your mortgage broker can help identify these opportunities during the application process.
Understanding the Financial Structure
Buying a rental property involves several costs beyond the loan amount:
• Stamp duty (varies by state)
• Legal and conveyancing fees
• Building and pest inspections
• Ongoing property management costs
• Insurance and maintenance
Many carpenters find negative gearing beneficial, where the property's expenses exceed its rental income, creating a tax deduction. However, this should be part of a broader property investment strategy, not the primary reason for purchasing.
Streamlined Application Process for Tradies
At Tradie Home Loans, we understand the unique challenges carpenters face when applying for investment loans. Traditional lenders often don't understand the trades industry's income patterns or the skills that make you a valuable borrower.
Our streamlined application process focuses on:
• Understanding your trade-specific income patterns
• Accessing specialist lenders who work with tradies
• Presenting your application in the strongest possible way
• Identifying property investment loan features that suit your situation
Building Your Property Investment Portfolio
Your first investment property is just the beginning. Many successful carpenter-investors use the equity from their initial purchase to fund additional properties over time. This strategy can accelerate wealth building, though it requires careful planning and ongoing monitoring of the property market.
Consider your long-term goals: Are you looking for immediate rental income, long-term capital growth, or a combination of both? Your property investment strategy should align with your career plans and financial objectives.
Whether you're considering a unit, townhouse, or standalone dwelling, the key is starting with solid foundations – just like any building project you'd undertake as a carpenter.
Securing investment loan approval as a carpenter requires preparation, the right documentation, and often, specialist knowledge of how lenders view trade-based income. With the right approach and support, you can build a property portfolio that provides financial security alongside your carpentry career.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan options and start building your property investment future.
