Financing Investment Properties -
Property Market Investments Clarified



Financing investment properties should form part of your financial education in your quest for saving-wise financial freedom.

financing investment properties


There are a number of investment options available should you wish to invest in the property market or investment in rental property.

Know your options, even if you are going to use the services of a financial broker.

You need to understand the basics about the different types of investment in property, and more importantly, which questions you should be asking when it comes to financing investment property.


FINANCING INVESTMENT PROPERTIES

Buying Property With The Intention To Rent

Aim to invest when the interest rates are relatively low and the market is positive.

You can invest your money in residential, commercial or industrial property (or a combination of all three).

When selecting the property that you would like to invest in, make sure you research thoroughly.

Location is a key element since certain areas are more easily financed by financial institutions as they are generally easier to rent.

Make sure you check the credentials of the developer if you are planning to buy investment property through a developer.

Advantages

The rental income that you get from your tenant pays (or partly pays) your monthly payment and you may also benefit from capital growth - depending on the property market.

Initially some of your losses and some of the cost incurred can be written off from tax.

Disadvantages

Your money may not be available immediately if you need it in an emergency (you will need to sell your investment property to get the money).

Questions that you should consider?

Will I be able to finance the property if interest rates go up?

Will I have money available to finance maintenance of the property?

Will I be able to keep the property rented long-term, while keeping in mind agent's fees or commission and legal costs/

Will it still be a good investment once I take into account the capital gains tax that I will need to pay on the capital growth of my investment?

Will it still be a good return on my investment once I have paid tax on the rent received?


Property Developments

Property is built, (residential, industrial or commercial), and the property is then resold upon completion for a profit or the aim is to derive a rental income from potential tenants.

Questions that you should consider?

Do I have a solid and fundamental understanding of the current and projected property markets?

Do I have insights into the construction process, potential delays, limitations, potential increases of building costs, legislation, property laws and labor laws?

Will I potentially lose renters and buyers when interest rates go up or during periods of recession?

Will I be able to weather a slower market and the likelihood of not selling or renting quickly?

Have you factored in costs when it comes to delays related to environmental reports, approval of plans and suppliers or contractors letting you down?


Collective Property Investments And Syndications

Pooled or collective property investments are when a group of investors come together for the purpose of financing investment properties and buying a group of properties.

Advantages

A poor investment in one property can be offset by a sound and balanced investment in other properties.

Property management companies deal with collecting rentals, sourcing tenants and routine maintenance.

You don't generally need significant capital to start investing in property.

Questions that you should consider?

Will my investment be registered as a collective investment scheme at a recognized financial board?

Will my property syndication investment be kept in a trust that is overseen by an independent party?

Will the portfolio manager's investments be regulated by the trust deed's investment parameters?

Will the underlying investments be listed on the stock exchange with day-to-day updates on the prices?

Will I (together with the other investors) receive the dividends and interest earned?

Will I only receive my capital investment from financing investment properties when I sell my purchased units?

Have I been given a breakdown all the mandatory costs including commission, projected capital gains tax and income tax (which needs to be paid yearly on the rent received and the interest accumulated?


Financing investment properties - a little knowledge goes a long way for peace of mind investing and money saving tips for frugal living.



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