As an Australian Defence Force member, you're in a unique position to build wealth through property investment. Whether you're stationed domestically or deployed overseas, buying an investment property can provide a solid foundation for your financial future. Let's explore how investment loans work and what you need to know about purchasing your first investment apartment.
Understanding Investment Property Loans
Investment loans differ from standard home loans in several key ways. When you're buying a rental property, lenders view this as a higher risk compared to owner-occupied properties. This means you'll typically face:
• Higher interest rates than standard home loans
• Different loan to value ratio (LVR) requirements
• More stringent application processes
• Additional fees and charges
The good news is that Defence members can access investment loan options from banks and lenders across Australia, often with specialised products designed for military personnel.
Choosing Your Investment Property Type
When considering your first investment property, you'll need to decide between different property types:
• Apartments: Often more affordable entry points with lower maintenance requirements
• Townhouses: Balance between apartment living and standalone dwellings
• Stand alone dwellings: Typically offer better capital growth potential but require higher initial investment
For Defence members just starting their investment property portfolio, apartments can offer an accessible entry point into the property market.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Defence Loans today.
Key Financial Considerations
Interest Rates and Loan Features
Investment loan interest rates are typically 0.3% to 0.6% higher than owner-occupied rates. You'll have the choice between:
• Variable interest rate: Fluctuates with market conditions
• Fixed interest rate: Locked rate for a set period
• Split loans: Combination of fixed and variable portions
Many lenders offer interest rate discounts for Defence members, so it's worth researching property investment loan features available to you.
Lenders Mortgage Insurance (LMI)
If your loan amount exceeds 80% of the property value, you'll likely need to pay LMI. Some lenders waive LMI for Defence members up to 90% or even 95% LVR, which can save thousands of dollars.
Additional Costs to Budget For
• Stamp duty (varies by state)
• Building and pest inspections
• Legal fees
• Property management fees
• Ongoing maintenance and repairs
Calculating Your Investment Strategy
Rental Yield Considerations
When you research property, focus on areas with strong rental demand. Calculate potential rental yield by dividing annual rental income by the property purchase price. Defence members often benefit from understanding local rental markets, especially in areas near military bases.
Negative Gearing Benefits
Negative gearing occurs when your property expenses exceed rental income. The loss can be offset against your other income, potentially reducing your tax liability. This property investment strategy can be particularly beneficial for Defence members in higher tax brackets.
The Application Process
Preparing Your Investment Loan Application
Lenders will assess your borrowing capacity based on:
• Your income and employment stability
• Existing debts and expenses
• Bank statements (typically 3-6 months)
• Deposit amount and source
• The investment property's potential rental income
Defence members often have stable employment, which lenders view favourably. However, deployments and postings can sometimes complicate the application process.
Streamlined Application Process for Defence Members
Many lenders offer streamlined processes for ADF personnel, recognising the unique nature of military service. This can include:
• Faster approval times
• Reduced documentation requirements
• Specialist Defence lending teams
Calculating Investment Loan Repayments
Before applying for an investment loan, use online calculators to estimate your repayments. Remember to factor in:
• Principal and interest payments
• Property management fees (typically 6-8% of rental income)
• Insurance and council rates
• Potential vacancy periods
Ensure you can service the loan even during periods when the property might be vacant.
Building Your Investment Portfolio
Once you've successfully purchased your first investment property, you can use the equity to expand your investment property portfolio. Many successful Defence member investors start with one apartment and gradually build their holdings over time.
Remember that property investment is a long-term strategy. Military careers often span decades, giving you time to build substantial wealth through property investment.
Getting Started
Investing in real estate requires careful planning and the right financial support. Working with a mortgage broker who understands the unique circumstances of Defence members can make the process smoother and help you access better loan terms.
Consider your deployment schedule, posting locations, and long-term military career plans when developing your property investment strategy. The right investment loan can set you up for financial security both during and after your military service.
Call one of our team or book an appointment at a time that works for you to discuss your investment loan options and start building your property portfolio today.
