When assessing the strength of your finances and how far your assets, income and real cash savings can take you on the property climb, it’s good to know the extent to which you can stretch your capital. The next step is to work out: how do you create a strategy that works for you?
In the latest episode of Your Investment Property’s YIP Talk podcast, Michael Beresford, director of investment services at OpenCorp, sits down with host and magazine editor Sarah Megginson to discuss market trends, and how investors can best plan for an investment loan in the lead up to the new year.
“The number one thing that you need to do is understand your borrowing capacity and understand how you can maximise that … The practical tool and expertise that I would be using is a skilled mortgage broker and specifically a mortgage broker that understands lending for investment,” Beresford shares.
“Make sure that you’ve got your deposit in order and that that’s in place. If you tick that box, then it really comes back to the tried and true investment rule of understanding where it is that you want to be long term and what it is that you want to achieve.”
In addition to sharing a recommended amount of cash or equity that an investor should have in hand to increase their chances of entering into a quality performing investment, Beresford also reveals the ways in which investors can maximise their borrowing capacity over a shorter period of time.
For instance, you should organise your credit card limits and cancel any cards that are not being used, Beresford says.
“It doesn’t matter whether or not you have a zero balance on that card. If somebody has a spending problem, the bank sees that that could be debt by this afternoon,” he says.
“These are rough numbers, but generally for every $10,000 of credit card limit you have, it reduces your borrowing capacity by about 40k.”
Also on the agenda is managing your living expenses and getting on top of your cash flow. But Beresford says that this doesn’t have to see you shrinking down your meal portions or barring yourself from a holiday. It rather comes down to keeping your “expenditure to the essentials”.
Although the past year has dealt its share of dips and turns, Beresford encourages investors not to lose sight of the bigger picture.
“Australia has a robust property market due to ongoing demand, due to a lack of supply especially in the capital cities, and we’re creating jobs,” he says.
“There’s a whole range of opportunities that could be happening. They’ll always exist. Buy now, stay the part, and think long-term.”
For further tips on how you can maximise your borrowing capacity and plan for your investment goals, as well as hear Michael Beresford’s real estate insights for the year 2020, listen to the full episode on the YIP Talk podcast.
