Finance and the property market

There is an undeniable link between finance and the property market. When credit is flowing, and buyers are able to access loans at reasonable interest rates, real estate is the beneficiary.

Improved borrowing conditions allow homebuyers and investor to increase their limits, which broadens their options and, invariable, helps drive up prices.

Conversely, if lending is too restricted – either funds are scarce or getting a loan approval is tough – then the property market consolidates.

Staying abreast of the ever-changing sands that are banking and finance provides valuable information for property owners and buyers about the direction of the property market and their ability to ride out any challenges.

You see, in large part, property investment is a game of finance. Access to funds determines what and when you buy, so it’s critical to understand the world of lending.

And here’s an interesting thought – the financial landscape in 2021 offers an excellent opportunity for investors looking to optimise their lending and build a property portfolio that will deliver impressive future rewards.

 

Five ways to optimise your borrowing

Here are some moves you can make to ensure you’re optimising your investment borrowing in 2021.

1. Know your property values

Staying abreast of your property values will help you make better decisions around when and how much to borrow.

A realistic understanding of your property’s value will provide a heads up on the loan-to-value ratio you’ll likely face and, potentially, how large a loan you’ll qualify for.

A bonus tip here – if you are about to have your properties valued by the bank, look at easy ways to ensure they’re seen in the best possible light by the valuer. Half-finished upgrades or unattended maintenance could have an impact. Get those jobs completed before the inspection date.

2. Maximising rental returns

Work with your property manager to make sure your rents are regularly reviewed to market. Sometime in the process of retaining long-term tenants, a property owner will allow the rent to progressively slip lower than market. While keeping a secure tenant is important, don’t discount your financial position by allowing the income to drift too low. Regular ‘health-checks’ of your rental return in conjunction with your property manager’s advice can improve your income position. This might be just the thing to get your loan approval over the line.

3. Get your finances in order early

Can you do without the streaming TV services and five-night-a-week takeout dinners? A full and frank assessment of your household budget will help reconcile your cashflow to maximise your available funds each month.

Once you have a budget you will need to stick with it and establish a spending pattern the lender can rely upon. A six-month runaway of staying to your budget demonstrates your commitment to making the necessary changes needed to service a loan.

4. Select the right assets

Asset selection is always important for investment performance, but choosing the right property is key to making finance work as well.

Select a holding that matches your needs in terms of cashflow and capital growth. If you buy a great high-growth property, but can’t afford the repayments, it will do you little good once the bank begins foreclosure proceedings.