subject: Purchase Income Property Through An Investment Loan [print this page] Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan.
Additional repayments This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans.
Repayment holiday allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature.
Parental leave allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads?
Capital growth has historically increased steadily during the past 20 years.
Check out any potential growth plans including housing density increases or planned roads for increased traffic flow.
When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older.
Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
by: David Nalin
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