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How to Buy a Second Property

20/7/2014

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You already own one property and now you want to purchase a second. How do you get started?

We have helped many clients with this scenario and this is what we tell them:

1. Choose a strategy

There are various ways to approach property investment so it is important to decide which one works for you. First ask yourself what you are trying to achieve: long term financial security? A little extra cash flow? Multi-million dollar portfolio?

Then decide how best to go about it: do you want to renovate and then sell for quick profit or would you prefer to buy and hold the property to achieve capital gain?

Going ahead without an investment strategy not only leads to confusion during the property search, but also opens you up to all kinds of unwanted risks like buying the wrong kind of property, paying too much or reduced investment return.

2. Assess your finances

Have a conversation with your mortgage broker. We’ll let you know what competitive loans are out there, what you can borrow, and which lenders are likely to maximise your loan capacity. Come to us before you even begin looking at properties because that way we can work together to put your investment strategy into action.

For some, the best funding option might be to unlock the equity of an existing property and combine this with savings. For others, it might involve debt consolidation and savings or even investing within a self-managed super fund.

The bottom line is that if you have a sound income then you’re in good shape to buy more than one property because each property you purchase adds income and equity, which aids further loan serviceability.

3. Research areas to invest

Choosing well means everything when it comes to making money from property. Too many investors make the mistake of buying a property based on an area they might know, rather than researching the market. Once you have decided on a definite strategy and sorted out your finances, you can compile a list of criteria that will help narrow down your property search.

4. Make debt work for you

Not all debt is bad. The best debts are investment loans used to buy assets like property - this kind of ‘good’ debt allows you to build a larger portfolio sooner, potentially earning more income and capital gains, paying off your borrowings from your enhanced returns.

Debts to avoid or to pay down quickly include car loans and credit cards — borrowings used purely to fund consumption or buy depreciating assets.

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Thumbs up for Investment

16/7/2014

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Investment loans dominate the market and the majority of investors use a mortgage broker, according to new research.

Investment property loans have grown by 37 per cent in the last four years, while owner occupied loans grew by 4 per cent in the same period, according to the Roy Morgan Research Consumer Single Source Survey.

In another survey, conducted by Property Investment Professionals of Australia, almost 70 per cent of 800 property investors say they have sought services from a mortgage broker.

So what is it that draws property investors to mortgage brokers? Undoubtedly one of the biggest selling points is that brokers can shop around to secure the best product and lender to suit the client. As a mortgage broker we invest our time in staying up to date with the latest products and we have a large panel of lenders from which we can compare loans.

Mortgage brokers have a wealth of knowledge and many investors don’t have as much time as they would like to devote to the financial dealings involved in a property purchase so it helps to know they can rely on a broker to step them through this process.

It is often reported by property investors that what sets brokers apart is a passion for their job and a willingness to go the extra mile for their clients. That certainly describes us to a tee!

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Interest Rate Bulletin July 2014  - Cash rate unchanged at 2.50%

1/7/2014

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Statement by Glenn Stevens, Governor: Monetary Policy DecisionAt its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth slowed a little earlier in the year but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined.

Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain low. Emerging market economies are once again receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates over the period ahead.

In Australia, recent data indicate somewhat firmer growth around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on stream; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.

There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably. If these and other domestic costs remain contained, inflation should remain consistent with the target over the next one to two years, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and for some borrowers have edged lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.



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