If you’re an overseas investor (or expat) looking to buy an investment property in Australia, you need to avoid four crucial mistakes that could see a lender reject your loan application.
1. A unit/apartment in an oversupplied area
There is a current concern about the number of units/apartments being built in some Australian areas, especially near the central business districts of major capital cities like Sydney, Melbourne and Brisbane. The more accommodation that becomes available, the greater the risk of oversupply.
When there’s oversupply, two negative things can happen to property investors:
- It’s harder to attract tenants to rent your property. You may not be able to rent it out for extended periods or you might have to significantly reduce your rent. And if you’re relying on rental income for your loan repayments, you’ll be in a risky situation.
- The value of your investment property is likely to drop.
2. A unit/apartment that’s smaller than 50 square metres
When it comes to buying an investment property, size matters. Many lenders will view small units/apartments that are less than 50 square metres (excluding balconies and car spaces) as more risky investments. That’s because they can be harder to sell, and their market value can therefore sometimes drop.
Remember, when you take out a home or investment property loan, the lender wants themarket value of your property to be either stable or increasing, so that it will protect the debt they are owed.
3. A property that’s in a bad or risky location
There’s an old saying that the three most important things to consider when buying real estate are location, location and location. Although it’s a cliché, there’s a lot of truth in that statement.
Just like anywhere, some suburbs in Australia have better reputations than others in terms of factors like their level of crime and unemployment.
Investment properties in better areas will have more chance of attracting high quality tenants to generate rental income for you. They’ll also have more chance of increasing in value so that you get capital growth on your investment.
There’s also a risk of buying investment properties in regional Australian cities that are heavily dependent on one industry. For example, Australia recently experienced both a mining boom and a subsequent bust. The value of properties in many mining towns dropped significantly in value during the bust, with many mining workers leaving these towns after losing their jobs in the downturn.
4. Student or serviced units/apartments
Student or serviced units/apartments are also usually viewed as more risky investment property options by lenders. In the case of those complexes that are primarily rented by students, they can be affected by changes in government policy.
For example, you may find it more difficult to rent out a student unit/apartment if the government decides to reduce the number of overseas students that can study at Australian educational institutions, or changes visa conditions.
Serviced units/apartments can also be potentially unattractive to lenders. They are usually leased through a business that the bank doesn’t have any control over, resulting in reselling difficulty in the event of foreclosure.
How we can help
At FindAHomeLoan, providing mortgage broking services for investors looking to buy property in countries like Australia is one of our specialities. We can help you to avoid the type of mistakes we’ve explained.
Whether you’re looking for a new loan or to refinance, we can provide detailed advice and assistance to help you gain approval. We can also provide you with buying tips and information on mortgage lending restrictions in Australia.
Making one of these mistakes as an investor may leave you in a poor lending situation, or see your loan application declined, leaving you in the lurch. But with our experience, we’ll guide you in choosing the right property and getting the best mortgage available from Singapore or Australia.
We’ll take the time to understand your circumstances and provide the best advice.
Contact us now to find out how we can help you!