According to Bailey, it’s possible that banks believe that individuals are most likely to prioritise the stability of their primary residences over any other financial commitments. Add to this that most mainstream retail lenders don’t usually take the proposed rental into consideration for first-time property investors. Even existing investors need to show that they have a strong track record. In both cases, the banks, will at best, often cap the proposed rental income at 70%.
Bailey suggests three ways to overcome these challenges.
- Ensure that the bond application is supported by copies of existing signed lease agreements and bank statements that prove consistent rental income from the property in question.
- Seek out a bank which has more of an entrepreneurial view on property finance, rather than a one-size-fits-all approach.
- Once a bank is willing to grant finance, an investor may consider registering a bigger bond than the initial property amount. The benefit of this is that as the property grows in value, the investor is able to refinance the property.
Budding investors who are willing to persevere and find creative solutions to financing their first investment property will find that each step in the right direction is likely to open new doors to grow a property investment portfolio, concludes Bailey.
You might find this to be an interesting read: How to Finance an Investment Property