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Investing in Property and Looking for an Investment Loan
Why invest and why take out an investment loan?
People’s needs for investment are as varied as the investment vehicles themselves. Some want to own their home outright, pay the kids’ university fees, or take world trips; while others want to start their own business or retire on a comfortable income.
The reality for most of us is that we won’t be able to afford these things on our salary alone (unless you’re fortunate enough to be the CEO of a major corporation). The key to successful investment is to leverage, that is, to use an investment loan to improve your capacity and increase your return.
Why invest in property?
Investing in property is the safest way to invest, but we also believe in a diversified portfolio to minimise risk. Similarly, Australians have trusted investment property as their favoured investment vehicle for generations – and with good reason.
We recognise the cycles, the incredible advantage that appropriate leverage (making capital gains from borrowed funds) offers, the benefits of rent return and taxation relief in servicing those borrowings, and the significant growth achievable over time. It is not unusual for ordinary investors to accumulate four or more properties over 10 years – and the financial flexibility and cash flow outcomes can be exceptional, giving you piece of mind.
Property allows you to leverage. With only $20 000 cash invested (plus around $10 000 upfront costs) it is possible to invest in a $200,000 property, making your earning potential greater.
Can you afford to invest in property?
The question should really be, “can you afford NOT to invest”, whether it be in investment property or some other form of investment? While everyone should be investing to give them more options in life, property investment may not be suited to everyone. Most people on a standard wage can service an investment loan. After all, the investment loan interest is first met by any rental income you generate. As a general rule there will only be a small shortfall on the interest on your investment loan. Traditionally the investment loan shortfall, as well as other costs relating to your investment property would be met by your personal income. Many investors however include a capitalising line of credit in their investment loan package so that they can draw on this to meet any shortfall costs as opposed to paying same from their personal income. Instead, they use as much of their personal income as possible, not to pay any shortfall interest on the investment loan but to make additional repayments to their home loan. This way their home loan is paid off much more quickly.
With your investment loan you should also remember that negative gearing does deliver some relief to servicing your investment loan on the way through. While most investors will wait until the end of the financial year to claim their tax deductible shortfall you can in effect claim the investment loan shortfall on a monthly basis. Check out the ATO website on deductibility of interest on investment loans.
What history can tell you about property
History shows us that all property whether it be investment or owner occupied doubles in value every 7 to 12 years. Each property market is cyclic, that is, it goes through times of fast growth followed by little or no growth. When one market eg Sydney is in strong growth, other markets eg Brisbane will be in a little or no growth phase. The markets are referred to as being counter cyclic – when one is doing well, another is doing not so well.
This means for example that when the Sydney’s growth slows, Melbourne’s picks up followed by Brisbane. This is the reason we emphasise the importance of investment property as a mid to long term investment. The key however is to identify the markets with the highest probability of short to medium growth and lowest probability of downside risk. This enables you to build equity faster and therefore add to your investment property portfolio.
It also means that there are always new opportunities for investment property as there are always markets somewhere which are experiencing their growth phase. Choosing investment properties in growth markets assists in developing well-balanced, diversified portfolios.
Property in the future
In the past all property was good investment property, and a lot of people did very well out of it. While those days are gone, there are still exceptional opportunities for investors who understand the current market influences such how our population is changing, how family size is changing, how types of employment are changing, and how the economy is changing and what influences it.
So why wait? Research property – buy with your head not your heart – be an informed purchaser and most importantly make sure your investment loan is also working for you.
Posted in Best Loan Now, Borrow Cash NSW, Borrow Cash in ACT category, Borrow Cash in NT category, Borrow Cash in QLD category, Borrow Cash in SA category, Borrow Cash in VIC category, Borrow Cash in WA category, Investing, Loans, Mortgage, Other - Business Finance, Personal Finance, Secured Loans, Small Business | 
Tags: Generations, Investment Property, Piece Of Mind, Property Investment, World Trips | 
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Asking your friend for a loan is the surest way to make him disappear. All you need to do is say that you need a loan and your friend will be smoke before you know it. Watching them disappear could actually become a kind of pastime for you if you have trouble with your finances.
There are times when a small amount of cash can actually go a long way to making your life easier and more satisfying. You might have to make a bill payment or you might have to make some other small payment to your grocer for essential articles that you have bought or it could be as simple as cash for petrol. Whatever it is it needs to be paid out in cash and you have to be smart enough to know what to do.
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What is a Personal Loan?
A personal loan is money you borrow from a lender for your own private use. The lending institution can be a bank, investment broker, or private lending company. You can apply for such a loan in your home town or on the internet. Personal loans can be used for a variety of needs including a vacation, vehicle repairs, education, medical expenses, home repairs or remodeling, legal bills, and debt consolidation.
The average personal loan maximum is $15,000. The amount you are eligible for will depend on the lending institutions guidelines for such loans, your income, and your overall credit rating. A personal loan is often confused with a line of credit. The major difference between the two is that a personal loan is a lump sum amount of money issued to you by the lender. A line of credit is similar, but you have access to funds up to your credit line that you can access all at once or just what you need, when you need it.
Personal loans can be either secured or unsecured. Secured loans mean you will offer the lender some type of collateral that they can claim in the event you don’t repay the loan. This can be a vehicle, land, or other asset you own. Unsecured personal loans mean there is no collateral. The interest rates for unsecured loans are higher because there is a greater risk of non-payment.
The terms of a personal loan are generally one to five years. The terms of your loan will depend on the lender and the amount of money you borrow. It is important that you understand the loan terms prior to accepting the funds. While a longer loan term will result in lower payments, you will end up paying more for the loan over the life of it due to the amount of interest. Keeping that in mind, only borrow the amount you need for your specific purpose and pay it back as quickly as you can. Make sure the set monthly payment is something within your reach on a regular basis so you are not likely to default on the loan.
The most common use of a personal loan is to consolidate other debts. This is a great way to have one monthly payment and reduce your monthly expenses. However, this scenario only works if you are willing to set a budget and life within the boundaries of it. Too often, a person who gets a personal loan to consolidate their debt racks up huge debt again quickly. Then they not only have that debt to pay again, but now they have a personal loan payment to meet each month as well. It is wise to enroll in a debt management course if you feel you may be at risk to continue the cycle of accumulating more debt. These can be taken for free at many non-profit credit counseling centers around the Nation.
Personal loans are a great way to access the money you need quickly. The application process is simple. You will generally need to verify employment, income, and residence. The lender will pull a credit check. You will likely still qualify for a personal loan if you have bad credit or no established credit. However, be prepared to pay a higher interest rate and have some type of collateral to offer.
Being a Co-signer on a Personal Loan
Being a co-signer on a personal loan for a friend or family member is a very generous offer as it will likely mean the difference between them being able to qualify for such a loan and not being eligible. However, the decision of being a co-signer for a personal loan should not be made lighter. It is the responsibility of potential co-signers to educate themselves about how this situation affects them, especially with regard to their responsibility to the loan should the borrower default.
Most co-signers don’t realise that this loan is going to show up on their credit report. Keep in mind that this might affect your ability to get your own loan down the road as the personal loan you co-signed on with by used to calculate your debt to income ratio. It can also affect the interest rate you get your own loans at. If you feel it is a good idea to co-sign a personal loan for a friend or family member, do so with the understanding that after a set amount of making on time payments the borrower will attempt to redo the loan under their own name only. The more money you co-sign for, the longer you can expect to be a part of that loan.
Since the loan can both positively and negatively impact the credit rating of the co-signer it is important to set the loan up so that they co-signer can access the account information. This will allow you to find out what has been paid on the loan and what is still owed. Make sure the lender will inform you of any late payments or non-payment issues with the borrower as soon as they happen. Too often co-signers aren’t aware there was an issue with the loan until it has already impacted their credit.
While co-signing a loan for a friend or family member can help them, be aware of how it will affect not only your credit but your relationship as well. Nothing can sour relationships faster than money issues. It is important for a co-signer to look at the circumstances that lead to the individual needing one in the first place. If it comes down to simple money mismanagement, then you aren’t doing them or yourself any favors. However, it is the result of circumstances they had no control over you may want to consider it.
To minimise your risk as a co-signer, don’t make it habit of offering to do so for friends and family. The word will spread like wildfire with more requests heading your direction. If you don’t feel your own credit and finances can’t hold up if the borrower doesn’t repay the loan, then do not co-sign for a personal loan. It can be difficult to say no, but it is important you are able to.
You might consider having the borrower provide your with verification that payments are being made including regular statements or cancelled checks. To further reduce your risk as a co-signer insist the borrower purchases personal loan insurance that can cover loan payments for a particular amount of time due to unemployment, illness, or death.
Co-signing a personal loan for someone is more than giving your signature. You are putting your financial history and worthiness on the line for that person. It is important that you carefully review the borrowers need for the money as well as their spending patterns. If they owe other people money or continually live beyond their means, walk away with a clear conscious. There are times that being a co-signer on a personal loan is the right thing to do. Only you can make that decision. If you decide to go forward with it make sure you can afford the cost of any missed payments and that the lender is going to keep you informed on the payment status on the personal loan.