The Smartest Way to Purchase Your Investment Property

Why Concreters Make Solid Property Investors

As a concreter, you've built your career on creating strong foundations. Now it's time to apply that same principle to building wealth through property investment. Purchasing an investment property can be one of the most effective ways to achieve financial freedom and create passive income for your future.

Many concreters we work with have been surprised to discover their borrowing capacity extends beyond just their primary residence. Your skills in the trades industry often translate to strong, steady income that lenders value when assessing investment loan applications.

Understanding Investment Loan Options

When buying an investment property, you'll encounter different investment loan products than you might have used for your home. Investment property finance typically comes with specific features designed for property investors rather than owner-occupiers.

The main investment loan options include:

• Variable rate loans: Your interest rate moves up or down with market conditions, offering flexibility and often access to features like offset accounts
• Fixed rate loans: Lock in your investor interest rates for a set period (typically 1-5 years), providing certainty for calculating investment loan repayments
• Interest only loans: Pay only the interest for a period (usually 1-5 years), which can maximise tax deductions and improve cash flow
• Principal and interest loans: Pay both interest and principal, gradually building equity in your investment property

Each option has distinct investment loan features and investment loan benefits depending on your property investment strategy.

How Much Can You Borrow for an Investment Property?

Your investment loan amount depends on several factors. Lenders assess your rental income alongside your existing income when calculating how much you can borrow. However, they typically only count 80% of the potential rental income to account for vacancy rates and periods without tenants.

The loan to value ratio (LVR) is another crucial factor. Most lenders require at least a 10-20% investor deposit, meaning you can borrow up to 80-90% of the property's value. If your LVR exceeds 80%, you'll likely need to pay Lenders Mortgage Insurance (LMI), which protects the lender if you default on the loan.

Many concreters choose to leverage equity from their existing home to fund the investor deposit on their new rental property loan. This strategy, called equity release, allows you to access Investment Loan options from banks and lenders across Australia without needing to save a large cash deposit.

Investment Loan Interest Rates and Costs

Investment Loan Interest Rates are typically slightly higher than owner-occupier rates - usually between 0.10% to 0.50% more. However, the tax benefits of investment properties often offset this difference.

When comparing investment property rates, consider:

• The difference between variable interest rate and fixed interest rate products
• Available interest rate discounts or rate discount offers
• Annual fees and other ongoing costs
• Whether interest only investment loans suit your strategy
• Comparison rates that include most fees and charges

Remember, the lowest rate isn't always the most suitable option. The right investment loan products should align with your property investment strategy and financial goals.

Tax Benefits and Negative Gearing

One of the major investment loan benefits is the ability to claim various expenses against your taxable income. Many concreters successfully use negative gearing benefits to reduce their tax bill while building wealth through property.

Claimable expenses on investment properties include:

• Loan interest payments
• Property management fees
• Council rates and water charges
• Building insurance
• Repairs and maintenance
• Depreciation on fixtures and fittings
• Stamp duty (spread over several years)
• Body corporate fees for units or townhouses

Keep detailed records of all expenses to maximise tax deductions. Working with an accountant who understands property investment can help you optimise these benefits.

The Investment Loan Application Process

The investment loan application process involves several steps:

1. Assess your financial position: Review your income, expenses, existing debts, and available deposit
2. Research properties: Understand the areas you're interested in, including rental yields and vacancy rates
3. Get pre-approval: Knowing your borrowing capacity helps when making offers
4. Compare lenders: Different banks offer various investment loan features and investor interest rates
5. Submit your application: Provide income verification, tax returns, and property details
6. Property valuation: The lender assesses the property's worth
7. Final approval and settlement: Complete the purchase

As tradies, you might have unique income structures - especially if you're self-employed. We understand how to present your application to lenders in the way that showcases your true borrowing capacity.

Interest Only vs Principal and Interest

Choosing between interest only and principal and interest repayments is a key decision for property investors.

Interest only investment loans mean:

• Lower monthly repayments during the interest-only period
• Better cash flow if rental income doesn't fully cover costs
• Higher tax deductions as all payments are interest
• No equity building during the interest-only period

After the interest-only period (typically 1-5 years), the loan reverts to principal and interest unless you negotiate an extension or investment loan refinance.

Principal and interest loans mean:

• Higher monthly repayments from day one
• Building equity with every payment
• Lower overall interest costs over the life of the loan
• Greater long-term security

Many property investors start with interest only to improve cash flow, then switch to principal and interest later for portfolio growth and debt reduction.

Investment Loan Refinancing Options

As your property portfolio grows, investment loan refinancing can help you access better rates, release equity for additional purchases, or consolidate multiple rental property loans.

Reasons to consider an investment loan refinance:

• Your current investor interest rates are higher than market rates
• You want to leverage equity for another investment property
• Your financial situation has improved since your original application
• You need access to better investment loan features
• You're ready to move from interest only to principal and interest

Building Your Property Portfolio

Once you've successfully purchased your first investment property, you might consider expanding your property portfolio. Each property you add increases your potential for passive income and long-term wealth creation.

Strategic portfolio growth involves:

• Allowing equity to build in existing properties
• Using that equity as a deposit for subsequent purchases
• Diversifying across different property types and locations
• Maintaining sufficient cash flow to cover all properties
• Planning for vacancy rates and unexpected expenses

Many concreters find that their consistent income and hands-on understanding of property makes them well-suited to managing multiple investment properties.

Getting Started with Your Investment Journey

Purchasing an investment property represents a significant step towards financial freedom. With the right investment loan options and a solid property investment strategy, you can create lasting wealth while continuing to work in the concrete industry.

At Tradie Home Loans, we specialise in helping tradies like you access investment property finance that works. We understand the unique challenges concreters face when applying for property investor loans, and we know how to present your application to maximise your chances of approval.

Whether you're looking at buying your first investment property or adding to an existing portfolio, we can help you find the right investment loan products with competitive investor interest rates.

Call one of our team or book an appointment at a time that works for you. Let's discuss your property investment goals and find the investment loan features that align with your vision for building wealth through property.