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Home and Property

4 signs you're ready for an investment property.

2 minutes read
Home and Property

Purchasing a rental property is one way Australians can consolidate their savings into a single high-value asset that can generate a consistent return. However, the decision to buy an investment property should not be taken lightly. You need to be disciplined and have a thorough understanding of how the process works.

So, how can Aussies decide whether or not they're ready for a rental property? There's no one-size-fits-all approach, but if you meet the following four criteria, you may be in a strong position to make the investment.

  1. Investing in property aligns with your lifestyle.

    Before investing in a property, it's important to ensure that it aligns with your lifestyle and that you can manage everything that comes with owning an investment property. Are you happy to take on the responsibility of finding tenants and maintaining a property? Alternatively, can you afford a property manager to do this for you?

    You should also consider whether an investment property suits your future circumstances. For example, in today's market, many parents see purchasing property as being beneficial to them and an opportunity for their children.
  2. You have cash or equity.

    There's no point considering an investment in property if you don't have the finances to support the purchase. While for some buyers, this may mean using their savings to pay a deposit, other options are available if you already own most or all of your home outright. The amount of your home that you own is known as 'equity', and it can be put towards a deposit on an investment property. For example, if your home is worth $500,000 and you still have $200,000 to pay off, your equity is $300,000.

    Alternatively, if you have savings to spare and have been planning to buy an investment property with that nest egg, you're in a similarly strong position. Whether you plan on using cash or equity, finding an investment property loan that offers competitive interest rates to pay off the mortgage as soon as possible is vital.

    Property investment comes with a serious level of commitment and will typically involve years of repayments. Considering the current cost of living crisis, you need to be confident that you can continue to meet your repayments. If you're unsure, waiting until you're confident in your financial stability is a good idea.
  3. You're actively looking for a property.

    Once you've worked out whether or not you can afford a property, the next question you should ask yourself is whether you're actively pursuing this type of investment. If you already have high-performing savings accounts or plan on using your money in other ways, it may be better to hold off until you're ready for a rental property.

    Have you been looking at investment properties throughout Australia? To make wise investment choices, it's essential to understand that several markets in the country have outperformed other areas, often at more affordable prices. If you're considering other locations that may provide higher rental yields, that's a great indicator that you're committed to doing the research needed to invest in property.
  4. You're (close to) retiring.

    One of the most common reasons that Australians decide to invest in property is that they're coming to the end of their working lives. This is often a challenging transition, and if you're not prepared with a plan to maintain an appropriate level of income, it can be an incredibly stressful time. The clear benefit of property for retirees is that the investment produces a stable income per month, which assists in a comfortable retirement.

    Of course, it's important to get started ahead of time, to ensure a smooth transition when you do retire. Accordingly, if you plan on stopping work sometime within the next five to ten years, it's well worth thinking about the benefits of a rental property.

Ready to speak to your bank?

If you meet all of the criteria that we've explored in this article, you'll still need to speak to your bank to secure an investment property loan that suits your needs. That's where Beyond Bank can help. Get in touch with our lending team to find out more.

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