Earning maximum return on investment is the primary objective, no matter what your investment strategy. Structuring your finance correctly is critical to investor success.
Investing in Residential Real Estate
Low interest rates, share market volatility and a need to ‘touch and feel’ an investment are key factors which drive investors into the relative security of residential property. Additionally, today’s steady population growth, lack of available land for development and shortage of rental accommodation in most capital cities offers an attractive opportunity for those wishing to start or grow a residential property portfolio.
Unlike your family home, the costs associated with an investment property loan such as interest, maintenance or repairs, rates and depreciation may be tax deductible. Of course, any rental income will generally increase your taxable income.
Investment loans can be either as basic as your standard home loan or a little more complex to help with tax minimisation, gearing and repayment management. Loan features such as redraw, offset and the ability to make additional repayments are also available.
Investing in Commercial Property
Purchasing commercial real estate can provide portfolio diversificaiton, create tax benefits and build wealth. However, like any major investment decision, research is the key to minimising risk.
In contrast to residential property investment, income tends to be higher for commercial landlords as many of your general maintenance and repair costs are the responsibility of the tenant. Commercial property leases also tend to offer more security than residential ones due to longer term rental agreements with much stronger covenants.
You will however require a larger initial deposit to fund a commercial property investment. Most lenders offer a maximum Loan to Valuation Ratio (LVR) of 70%, which means you would need to a minimum deposit of 30% of the purchase price plus costs.
At Green Finance Group we have dedicated Commercial Property & Development Finance Specialists headed by Daniel Green. Daniel has a wealth of knowledge with regards buying, selling, developing and financing commercial, industrial, retail and large scale residential property in all major Australian markets. In addition to souring you a better deal on your finance he can also provide you with insights into current commercial investment opportunities – the pros and cons.
Investing in Shares
Australians have one of the highest levels of share ownership in the world on a per capita basis either directly or through managed funds or superannuation.
Shares are typically much more ‘liquid’ than assets such as property which means you can usually quickly turn your shares into cash if required.
Before investing in shares you will need to consider your requirements with regards
- Level of risk
- Approach – active trader or long-term buy-and-hold
- Income options – dividends or capital growth
Dependent on your investment strategy you can choose from a variety of investment loan options including:
- variable rate loan
- fixed rate loan
- combination – variable and fixed rate
- principal and interest loan
- interest-only loan
Features will also vary but could include fee-free additional repayments or an offset facility.
Investment Loan Structure is Critical
How your investment opportunity is positioned with the bank or lender will go a long way to determining your loan terms and conditions, including your level of discount.
Naturally offering additional security (such as your own home) for the loan can be a way of securing a lower rate loan but it isn’t the only way, nor is it always the better option. Your Green Finance Group Finance Consultant will be in the best position to provide guidance on how best to structure your investment finance. The key is to manage risk versus return.
As with any investment decision we recommend you also talk to your accountant and/or financial planner for an appropriate analysis of your specific financial position.
No matter what your investment strategy, we have a Finance Consultant with the experience to thoroughly assess your lending requirements and find you a great deal on your investment finance. Give us a call direct on 07 3899 2866 or fill out your details below and we’ll be in contact shortly.