Ready To Buy: 3 Things Investment Property Buyers Can Do To Get Ready
Buying your first investment property can feel like stepping into the unknown—but it’s not your first rodeo. Most investors have already been through the process of buying a home before. So while buying your first house might have felt like stumbling around in the dark, buying your first rental property is more like walking through a dimly lit room—you can see the shapes, but you still want a torch.
The good news is, with investment properties, you generally need a decent deposit or equity buffer, which can make things feel a bit more secure than borrowing 90% for your first home. If you’re serious about investing in property, here are a few smart steps you can take today to get ready.
Start by talking to an investment-savvy accountant. The rules around Look Through Companies (LTCs) have changed a lot over the past few years. Back in the day, LTCs were the go-to structure—especially helpful for passing losses through to your personal tax return. But things are different now. Whether an LTC is still right for you depends on your long-term goals and how you expect the property to perform.
A good accountant will ask a few simple questions about your situation—Are you relying on losses for cashflow? Would moving the property into an LTC trigger a capital gains tax issue under the bright-line rule?—and they’ll help you figure out whether an LTC makes sense or not. The key is not guessing. Get clear advice early so you don’t end up restructuring things later on.
Next, you’ll want to get your head around the numbers. Investment property is a numbers game, and your comfort with risk is a big part of how much you should borrow. Don’t just focus on how big the mortgage is—focus on the income it generates. It’s common to feel daunted by a new $500,000 mortgage when the rent only adds $30,000 to your annual income. But remember: with more debt comes more income potential, and the bank already stress-tests your mortgage affordability using an interest rate of around 6-8%, even if current rates are lower.
Still nervous? Try a spreadsheet. Seriously. Play with the numbers. What if your tenant leaves and the place sits vacant for three months? (Pro tip: a lot of investors borrow an extra $20,000 as a buffer and keep it untouched in an offset account.) What happens if interest rates climb to 7%? Can you still manage the payments? Running a few "what ifs" now will give you more confidence when you’re ready to make an offer.
Last but not least, talk to a mortgage adviser and find out exactly what your borrowing limits are. You don’t want to spend weeks browsing $800,000 properties if you can only afford $600,000. A broker can help you figure out whether your limitations are around income, equity, or something else like your credit score. And if you’re close to your limit, they can often suggest small tweaks that make a big difference.
Bonus tip—if you’re about to add more debt to your life, it’s also time to review your insurance. Life and health cover becomes even more important when you’ve got extra financial responsibilities. We don’t offer insurance ourselves, but we work alongside great advisers who do. The best ones will take the time to understand your situation, compare multiple policies, and recommend the cover that fits you best.
In summary:
If you're planning to buy an investment property, today’s a great day to:
Speak with an accountant and find out what ownership structure is best for you
Start running the numbers to understand your risk profile
Talk to a mortgage broker and get clear on your borrowing power
And remember, you don’t need to do it all alone.
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