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A beginner’s guide to property investment

Often people new to investing might think buying an investment home is just like buying one to live in. But it’s quite different.

Investing in a property is when you buy a home with the goal of earning passive income through rent. Or selling it off once it’s increased in capital growth. Or both – it’s up to you and your investment goals.

While it can feel overwhelming working out how to begin building your property portfolio, we're here to break down the jargon and help you get started.

What are the benefits of property investment?

Buying an investment property is a clever way to begin your investment journey. It also comes with some great benefits.

  • Investors can earn rental income: By renting out your investment property, you can earn a passive income that can help cover the costs that are involved with running and managing the property.
  • There are tax benefits for property investors: The cost of running and managing your property can be offset by your income, which means you can pay less tax. And you can also claim tax if your property is negatively geared.
  • You can build wealth over time: Capital growth is when your property’s value increases over time. By buying an investment property with good growth potential, you watch the value grow over the years, then sell the home at a later point – usually at a higher price than when you initially bought it.

How to buy your investment property

Investor home loans

Taking out an investment home loan can help you buy an investment property. The difference between this loan and your standard one is that investment loans have a higher interest rate. This is because property investment can be a risky venture. It’s a physical asset that can be vulnerable to the elements, or a tenant might miss rent. But with the right strategy and plan of attack, you can reduce risk and be prepared.

Before applying for a loan, it’s important to understand your borrowing power. This can help lenders work out how much to loan you and how financially committed you are to repaying them. You also need to have a deposit of at least 20 per cent of the property price to avoid paying Lenders Mortgage Insurance (LMI).

Usable equity

For new investors who already own a car or home, you can tap into your existing equity to help buy an investment property. Equity is the difference between the value of your big purchase (your car or home) and the amount you still need to pay back for it. With every repayment you make on your loan, the more equity you’ll have to help you buy an investment property.

Cash gifts

A member of your family might give you a cash gift for your investment property deposit. Most lenders will ask for a gift letter – evidence that explains where the money came from and how it’ll be used. But even though you got help from your family, you still need to show the lender you can pay back your home loan.

Where should you buy an investment property?

When it comes to the location of your investment property, there are a few things you’ll need to think about.

  • Your budget: Try to buy an investment home within your budget. This means you’ll have enough funds to cover any upfront costs you’ll encounter, and you can be sure to meet future repayments.
  • Local essentials: Consider how close your property is to public amenities, as your home’s proximity to these spaces can influence the tenants you get.
  • Growth potential: Use market data and trends to work out if your area has good growth potential. For example, is there a big shopping centre development in progress? Or new public transport coming?

What type of property should you invest in?

  • Apartments: This property type tends to be one of the cheaper investment options. They can have fewer managerial responsibilities and lower maintenance costs too, as these are covered by body corporate fees.
  • House: Investing in a standalone house can have a higher long-term capital growth and appreciation. You can also increase your home’s value with a renovation, such as adding a brand-new stovetop to the kitchen.
  • Land: Investing in land doesn’t need much involvement from you at all. You can hold onto the land and wait for a spike in value before selling it. Or you can subdivide the land and sell it as multiple blocks.

What else should you think about?

The features of your property can appeal to certain renters and impact how much you can charge. For example, a house with a large backyard might appeal to a family. Or a single-bedroom apartment might interest someone who just moved out of home.

Consider these features when deciding what property to buy – it can help your investment home go a long way:

  • The number of bedrooms and bathrooms
  • Backyard and outdoor space
  • Garage and any external lock-up facilities
  • Single, double or triple storeys
  • Maintenance of property
  • Age of property
  • Strata fees and body corporate

How can investors manage their property?

Property investment is more than buying a property – you or a real estate agent will need to manage it too. How will you promote the property? Where will you find tenants? You’ll also need to think about rent collection, getting property reports and managing complaints.

Taking out landlord insurance is something you might consider too. It can protect your investment property from certain scenarios, like missed rent. Most insurance policies have add-ons for more complex situations, like a flood or fire.

Managing your investment loan is part of managing your investment property. How can you be clever about repayments? Can you set up automated payments? Or can you make the most of your bank’s app? For example, The Boost feature is a great way to help you pay off your home loan faster through everyday purchases.

Learn about property investing 

Start your property investment journey with these articles:

How much deposit is needed for an investment property?

Looking to invest in property? Learn the deposit requirements for investment properties and how to prepare for this important expense.

Read more
A guide to home equity

Wondering what home equity is, or how to access it? This guide explains it’s definition and explain how you can find further capital for other investments.

Read more
What is negative gearing?

Learn about negative gearing and its financial impact with Great Southern Bank's blog. Discover how it works and how it can benefit you.

Read more
HOME LOANS
Invest the clever way
  • Competitive discounted variable rate
  • $0 monthly or annual fees
  • Unlimited extra repayments
  • Redraw at any time for free4
  • Interest-only option available5

Explore investment home loans

Basic Variable Investor Loan
Discounted rates from
6.34
%
p.a.
Comparison rate^
6.40
%
p.a.
Find out more
Investor, principal & interest, LVR 70% or less. Includes discount on new and additional lending. Minimum loan amount applies.1,2,3
Connect with a Home Loan Specialist
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Speak to one of our Home Loan Specialists via live online chat.

Fill out our online enquiry form and one of our Home Loan Specialists will get back to you to start the process.

Mon - Fri: 9:30am - 4:00pm (AEDT)

Important Information

Rates current as at 20 August 2024 and subject to change.

Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence 238317. Lending criteria, limits, conditions and fees apply. Applications are subject to credit approval.

This is general information and does not take into account your objectives, financial situation or needs. Consider the appropriateness of the information, including the Terms and Conditions (T&Cs)  booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.

^Comparison rate accurate for $150,000 secured loan over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

1 Discounts off the Basic Variable Reference Rate are available to (a) new home loans with a minimum application amount of $100,000; or (b) switching or restructuring of the home loan you already have with us when it includes new borrowing of at least $10,000; and the application is unconditionally approved on or after 20 August 2024. Published interest rates are inclusive of any discounts off the respective Reference Rates. Interest rates and discounts vary based on the loan purpose (owner occupier or investor), repayment type (principal and interest, interest only, construction) and Loan to Value Ratio (LVR). Maximum LVR applies and includes Lenders' Mortgage Insurance and Great Southern Bank loan setup fees where applicable.

2 Great Southern Bank may withdraw or amend this offer at any time without notice. A change in your loan purpose, your repayment type or your loan product will permanently end your entitlement to the discount.

3 LVR means ‘Loan to Value Ratio’. It is the amount of your loan divided by the valuation of your property, calculated as a percentage. For example, if you apply for a loan of $400,000, which will be secured by a property valued at $500,000, your LVR is 80%. We calculate your LVR at the time we approve your loan and your discount won’t change because of changes to the LVR during the life of your loan.

4 A $200 minimum withdrawal amount applies for redraws conducted in-branch.

5 For Interest Only loans, a maximum interest only period of 36 months applies for owner occupier loans and 60 months for investment loans. For Fixed Rate loans, the interest only period must align with the fixed rate period. On expiry of the Fixed Rate interest only period, loans will revert to the Basic Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry. On expiry of the Basic Variable interest only period, loans will revert to the Basic Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry, less any discount set out in the loan contract. On expiry of the Offset Variable interest only period, loans will revert to the Offset Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry, less any discount set out in the loan contract. Comparison rate for Interest Only loan is based on interest only payments for the fixed term and principal & interest payments for the balance of the term.

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Pre-approval means that a lender has agreed to lend you an amount of money in-principle, but the loan hasn't been proceeded to full or final approval.

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