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Things to Note About Rental Finance

 In Property Management

We sit down with Peter from Gomm Finance to rack his brain regarding what investors should do when considering purchasing an investment property. Tune in to our conversation here:

Kaylee: Hi, I’m with Peter from Gomm Finance and he’s with us today to speak to us a little bit about rental finance. Peter, what is it that investors should have prepared before meeting with a finance broker?

Peter: Ideally, I’d advise them to go and see a financial planner and an accountant, both to discuss some possible tax benefits, in whose name they should buy the property and potentially the type of loan structure the accountant might run require so we know how to put the deal together correctly for them. We’d also just want to confirm how much they’d like to spend, maybe what areas they’re looking at and their motivation for buying the property. Then information they need to bring to the interview. We need to confirm their income, we need to know how much they’ve got saved, details of any other commitments they might have, like credit cards, car loans, and also we need their most recent bank statements so we can confirm their living expenses.

Kaylee: Okay, great. What would be the main benefit of seeing a broker over going to one of your main banks?

Peter: Well, first of all, we represent about 40 odd different banks so there’s a wide choice there, which means we can get you a very good deal in terms of the pricing. By seeing a broker, we can tell you upfront straight away which banks you would qualify for rather than you going to your own bank and as a broker we would’ve known that your bank couldn’t help you, but we could have taken the banks B, C, D or E so that’s very important as well.

Kaylee: Okay. What would be your number one point or advice to give to someone going into the rental market from a finance point of view?

Peter: First of all, don’t stretch yourself, so don’t borrow too much whereby you’re overly reliant on the rental income because in the current market where vacancy rate’s still reasonably high, if you’re without a tenant for a period of time, we might put you in hardship. We certainly don’t want that. Try to make principal and interest payments as opposed to interest only payments because if you don’t, you’ll pay a higher interest rate and it’ll come back to bite you on the back side later on down the track. The other big thing I would suggest is, to put you in good stead to buy an investment property down the track, is to repay your owner occupied home loan as fast as possible, and thereby build up equity in your home, which will assist you to buy an investment property down the track.

Kaylee: Well, there you go. Some great information. I hope you found this interesting as I do. If you’d like any further information, drop us a comment or contact myself or Peter.

If you have any queries drop us a line at kaylee@thepropertyexchange.com.au, or call 08 6380 2200 we would love to hear from you.

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