5 investment property tips

5 rules for a successful investment property portfolio

Whether you're looking into property investment and don't know where to start, or looking to expand your existing portfolio, these expert tips could help you reach your financial goals sooner.

Any successful property investor will tell you that that a strategic investment is the best investment. It should contain a solid structure, yet must be flexible to any risks that are imposed. Your investment loan needs to match your financial situation as it affects your returns and cash flow.

Chrish Samuel, Senior Finance Consultant from Finstar Financial reveals what he thinks are the five characteristics that each loan portfolio should have.

As an investor it is important to have both the present and the future in mind when making decisions.

Like all things in life, having a good plan for your loan portfolio will help you to think about long term goals when making decisions, allowing for flexibility of investments while keeping a check on the risks and tax implications of your actions.

Chrish Samuel

Creating a strategy is not easy, first you need to define your goals and know your limits. Then you need to figure out how much the banks will lend you as well as how much cash you have available to fund your investments. Consider these tips when formulating your plan of attack.

Chrish Samuel's five characteristics of an ideal loan portfolio

Title
  • 1. No cross collateralisation/ securitisation

Essentially this means making sure that no lender has more than one of your properties securitised for any one loan. If a loan is cross collateralised it binds the investor to a particular lender which could potentially limit the investor's ability to access any existing equity within their property. Furthermore, problems which may arise as a result of cross collateralisation include; when more than one property is securitised for a loan and you happen to default on the loan, the lender can freeze both properties to recoup their losses.

When refinancing, problems may arise especially if one of the securitised properties increases in value and the other decreases balancing each other out, essentially cancelling any equity which may have been available on one property had it been on its own. Preventing cross collateralisation is imperative for investors who have multiple properties featured in their portfolio. Whilst many investors shy away from having individual loans for each property, this actually works to simplify any future refinances saving significant amounts of money in the long run.

  • 2. Risk management

The most ideal loan structure would separate a person's own home from their lending portfolio.
This is a simple way to protect a core asset should any investments go pear shaped.

  • 3. Reporting

To ensure that as an investor you fulfil all mandatory taxation requirements, it is suggested that you should separate non tax deductible and tax deductible expenses within your loan portfolio. One way to do this would be to separate your home loan into both a principal and interest loan whereas, your investment loan may only consist of interest-only repayments.

Note: Interest-only loans are commonly used to finance investment properties as they allow investors to maximise their cash flow across their portfolio. Interest-only loans do not limit the investor to making interest-only payments on the property unless the loan is fixed rate.

  • 4. Utilising different lenders

Having multiple lenders looking after your investments has both positive and negative consequences. The positive consequences include, should your relationship with one lender on an investment cease it will not have a major impact on your portfolio, which could be the case if all investments were held under the same lender. However, by not having a significant portion of your investment with one lender it reduces your ability to bargain for rates with the lender and therefore, you may not be getting the best deal on your investment loan.

  • 5. Maintaining an LVR lower than 80%

It is advisable that all investors strive to ensure that all their loans have a loan to property value ratio (LVR) lower than 80% this is to ensure that the investor saves on lenders mortgage insurance.

Since there is no one ideal property or strategy, every year you need to plan, change and adapt. According to Mr. Samuel, be aware of the financial returns from each of your properties and remember that the goal and returns will create your criteria for what is the perfect plan. 'By following the five simple principles listed above when it comes to structuring investment loan portfolio's it will ensure that you make sound decisions,' he says. 'These can protect your current and future investment interests whilst allowing you to get the most out of every transaction.'

Compare the latest investor mortgage rates

Rates last updated September 22nd, 2018
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
3.79%
3.82%
$0
$0 p.a.
80%
A variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.93%
3.94%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. For a limited time you can earn double Velocity Frequent Flyer Points.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.98%
3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.56%
$0
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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Marc Terrano

Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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2 Responses

  1. Default Gravatar
    JennyJanuary 20, 2017

    If a property investor has an average LVR of 65% across his portfolio of 16 properties, worth total $4.5 millions. Does this mean he/she has paid over 20% deposit for all of the properties? How should I interpret this statement?

    • finder Customer Care
      MayJanuary 20, 2017Staff

      Hi Jenny,

      Thank you for your question and for contacting finder.com.au we are a financial comparison website and general information service we are not mortgage specialists so can only offer general advice.

      If you have 65% LVR for all your properties, that means that you have paid 35% of the deposit. Basically, the formula to work out the LVR is: the property price divided by the size of the deposit or equity in the home loan. You can find more information about the ‘loan-to-value ratio’ (LVR) on this page.

      Cheers,
      May

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