All of the real estate experts talk about how the right property, at the right price, in the right location at the right time, is the magic formula to making good money from real estate investment, both in terms of rental income and capital growth.
What people never talk about is the financial structure behind the investment, which is actually, a key component to successful property investment. Why? Because everyone’s circumstances are different, and the way you manage your loan over the long term is can be the difference between solid success and mediocre success, and even failure.
It’s no good just getting a loan and hoping the rental income from your investment property will pay it – you need to factor in whether it’s a long-term investment (20 years) or a short-term investment, say 5 years. This will affect the loan you choose.
You need to consider all expenses – renovations, a forecast for repairs and maintenance and how to structure your loan to access money for this as need be, so you’re not dipping into your own pocket.
You also need to consider a loan that enables you to keep your investment completely quarantined from your personal expenses, so it’s clear at tax time, or if you need to sell.
You need to consider a range of economic and financial scenarios and protect yourself as best you can. You should also think about exit strategies – some investment loans have very high penalties if you break them early.
To make the most of property investment you need to think beyond the property itself, to the way you finance it, because this will help you make the most of your money, which is why you’re investing in the first place. To get the right financial structure in place for your investment property, talk to us.
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