Acquiring funding for investment properties has certainly gotten a little harder in recent years. Banks are continuing to become stricter and stricter as time goes on when assessing a borrowers’ capacity to repay a loan, and it’s no surprise that this is mainly in response to healthy house price growth in some of our country’s biggest property markets. This attempt to further protect the country's financial system has seen many investors have to hit the brakes with their portfolio plans, when in actual fact there are ways to adhere to the Bank Managers needs while still increasing your positively geared portfolio.
Serviceability assessment standards (what banks use to determine a borrower’s worthiness of receiving a loan) have certainly become more stringent in recent times as lending policies are continually altered, monitored and enforced.
As part of these standards several banks are now viewing fluctuating sources of income such as overtime, bonuses, commissions, investment dividends and rental income less favourably when assessing borrower income, whilst increasing their expectations regarding living expenses in line with increasing incomes.
With ‘serviceability’ being one of the key criteria to successfully securing loans, unfortunately many investors greatly disadvantage themselves by purchasing investment properties that feature hundreds of dollars of negative cash flow each week.
Banks view this as a major negative, which adds further weight to a scale that is increasingly being tilted against the investor.
At this current stage of the Sydney and Melbourne property markets, an average investment property purchased today will quite often immediately ‘pull up the handbrake’ to any further investment lending for a number of years for most investors…but this doesn't need to be the case.
Smart property investors are now strategically targeting high yielding properties nationally; often producing more than double the returns that the Sydney or Melbourne property markets offer. Many less experienced investors would be surprised to know that these properties do not come at the cost of low capital growth with many of the markets currently offering strong ‘cash flow positive' properties also featuring recognition from leading national analysts as being some of the most likely markets to also enjoy the strongest capital growth over the next few years.
SPOTLIGHT - PORT MACQUARIE
Great Capital Growth
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