As a bricklayer, you understand the value of solid foundations - both in construction and in building your financial future. Investment loans offer tradies like yourself the opportunity to invest in real estate and create additional income streams through property investment.
What Are Investment Loans?
An investment loan is specifically designed for buying an investment property that you'll rent out to tenants. Unlike home loans for owner-occupiers, these rental property loans typically come with higher interest rates and different lending criteria. However, they also offer unique tax benefits through negative gearing and other property investment strategies.
When you're buying a rental property, lenders will assess:
• Your borrowing capacity based on current income and expenses
• The property's rental yield potential
• Your loan to value ratio (LVR)
• Your overall investment property portfolio goals
Choosing Your Investment Property Type
The property market offers various options for your first investment property:
Stand Alone Dwelling
Often provides higher rental yields and capital growth potential, particularly in established suburbs with good infrastructure.
Town House
Offers a balance between affordability and rental appeal, with lower maintenance compared to houses.
Apartment
Typically requires lower initial investment and may offer consistent rental demand in urban areas.
Property Investment Analysis Fundamentals
Before applying for an investment loan, thorough property investment analysis is crucial. This involves evaluating multiple factors that will impact your investment's success.
Research Property Markets
Look at suburb growth trends, employment rates, and planned infrastructure developments. Areas with strong trade work often indicate growing communities.
Calculate Rental Yield
Divide annual rental income by the property's purchase price. A higher yield means stronger cash flow to help with loan repayments.
Consider All Costs
Factor in stamp duty, lenders mortgage insurance (LMI) if your LVR exceeds 80%, ongoing maintenance, and property management fees.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Tradie Home Loans today.
Investment Loan Options and Features
You can access investment loan options from banks and lenders across Australia, each offering different property investment loan features:
Interest Rate Options
• Variable interest rate: Fluctuates with market conditions
• Fixed interest rate: Locked rate for a set period
• Split loans: Combination of fixed and variable portions
Loan Amount Considerations
Most lenders will finance up to 80% of the property value without LMI, though some offer higher ratios with insurance. Your loan amount will depend on your income, existing debts, and the property's value.
The Application Process
The investment loan application process requires more documentation than standard home loans. You'll need:
• Recent bank statements showing savings history
• Payslips and tax returns demonstrating stable income
• Details of any existing investment property portfolio
• Property information including rental appraisals
Many lenders now offer a streamlined application process for investment loans, reducing paperwork and approval timeframes.
Interest Rate Discounts and Negotiation
As an established tradesperson with steady income, you may qualify for interest rate discounts. Factors that can improve your negotiating position include:
• Strong employment history in the building industry
• Substantial deposit (lower LVR)
• Existing banking relationships
• Professional property investment strategy
Calculating Investment Loan Repayments
When calculating investment loan repayments, remember that rental income will offset much of your costs. Many investors structure their loans as interest-only during the initial years to maximise cash flow and tax benefits through negative gearing.
Your investment loan interest rate will typically be 0.3% to 0.7% higher than owner-occupier rates, but this cost is generally tax-deductible against rental income.
Tax Implications and Negative Gearing
Negative gearing occurs when your property expenses exceed rental income. This loss can be offset against your regular wage income, potentially reducing your tax liability. Common deductible expenses include:
• Loan interest payments
• Property management fees
• Maintenance and repairs
• Depreciation on fixtures and fittings
Building your wealth through property investment requires careful planning and the right financing structure. Investment loans provide the foundation for creating passive income and long-term capital growth.
Ready to explore your investment loan options? Call one of our team or book an appointment at a time that works for you.
