YOUR GUIDE TO PROPERTY SUCCESS FOR MORE INFORMATION VISIT INVESTORSCHOICE.COM.AU

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1 YOUR GUIDE TO PROPERTY SUCCESS 1

2 50% of Australians use mortgage brokers *. Why not work with Australia s number one? VOTED AUSTRALIA S MORTGAGE BROKER OF THE YEAR. *According to Mortgage & Finance Association of Australia March Qtr Report 2

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4 CREATING WEALTH THROUGH PROPERTY IS A PROCESS As investors ourselves, we understand that purchasing a property is a process. Deciding on a process that best suits you can be a daunting one. However, successful property investors always begin the process by planning out their own property investment strategy. So, regardless of whether you are buying a home or an investment, locating the right property in the right area is one of the most important first steps you can make on your journey to property success. Your house is more than a home We know that many Australians have created wealth through property. In fact over 90% of Australian homeowners own a property worth more than the purchase price. However, this is often the result of long term capital growth, not planning. In other words, they got lucky. What many don t realise is that their home has the ability to create substantial wealth. At Investors Choice Mortgages we consider your home to be a part of your property investment portfolio - the investment tools, resources and strategies we provide can equally apply to buying an investment property or a family home. The tools and knowledge to get you started Wealth through property investment can, and should, be a strategic process. We ve spent thousands of hours finding out what works (and what doesn t) so you don t have to. Throughout this booklet you will find tried and tested strategies along with resources and information to help you on your way to true property success. 4

5 A PROPERTY PORTFOLIO CAN MAKE YOU A MILLIONAIRE Many think that investment properties are reserved for the already wealthy. Let s bust that myth. ($Millions) $0.5 $1.0 $1.5 $2.0 $2.5 YEAR 1 Buy 1st Property YEAR 3 Renovate YEAR 5 Buy 2nd Property YEAR 15 $1 Million in equity $1M According to the Australian Taxation Office there are currently 1,764,294 property investors in Australia. Of those, over 73% earn less than $80,000 a year. No matter where you sit on the pay scale, investing in property is possible. And the fact is, with two investment properties and one renovation the average Australian family can put $1 million in the bank in 15 years (or in even less time). We help you reach your investment goals But this doesn t just happen by itself. The key is knowing where to buy, what to buy and having the finance available to execute this strategy. We don t sell property. But because we know the importance of location, we have created resources that our clients can use to find their ideal investment property, while we do what we do best finding the lending solution that best suits your situation. LOAN EQUITY Investing in property is an exciting journey and we re here to help you with as little, or as much, as you want along the way. 5

6 STRATEGY THAT BUILDS WEALTH Jane Slack-Smith, Director at Investors Choice Mortgages, wrote the top-selling book Your Property Success with Renovation: 2 properties + 1 renovation = $1 million in the bank. In it, she introduces her simple three prong buying strategy that ensures three different ways in which you can make money from purchasing property. I spent 25 years thinking about investing in property. Finally I found The Trid3nt Strategy, it gave me the confidence I needed to know I was investing in a way that allowed me to make money whilst protecting my nest egg. Having made money on my first purchase using this strategy I am already on to property #2! - RUSSELL BERNT 6

7 THIS IS THE TRID3NT STRATEGY, A LOW RISK, THREE STEP INVESTMENT STRATEGY THAT OFFERS THREE WAYS TO INCREASE THE EQUITY OF YOUR PROPERTY. BUYING BELOW THE MARKET ADD VALUE AND CREATE EQUITY BUYING IN AN AREA WITH GOOD FUTURE CAPITAL GROWTH The strength of the Trid3nt Strategy s lays in it s ability to always provide options. Even if you get one of the steps wrong, you have two other options to fall back on. It s like having a Plan A, B and C to make money with your property. In order to achieve your financial goals, you require both capital growth (to create equity that allows you to continue buying and, in years to come, exit your portfolio) and cash flow (to assist with payments while you re in the holding and portfolio growth stage). The Trid3nt Strategy is the cornerstone of this philosophy and using it ensures you can achieve both. We also support our clients by providing online courses and resources to assist them in every purchase so they have the tools to assist them in finding the property that will get them to their goals. 7

8 YOUR INVESTMENT PROPERTY JOURNEY ASK YOURSELF WHAT YOU WANT TO ACHIEVE. What s the passive income you want to achieve from your portfolio? What s your timeframe? How many properties will you need to achieve this? Once you ve used our tools to answer these questions you can start looking into which Property Investment Strategy (PIS) will get you there. LET S GET YOU FINANCED. Once you ve settled on a plan, Investors Choice Mortgages can help match your situation to the different lending choices on the market, creating a tailored strategy to get you well on the way to where you want to be. SETTLE ON AN AREA. There are three main criteria you should meet before you go looking for property. First, you need to lay down your PIS. Second, you need to know your borrowing capacity. Third, and equally important, you must know the criteria for the area you wish to buy in. How have prices changed in recent years? What s the demographic like? 8

9 YOUR GOAL ACHIEVED FIND THE PROPERTY THAT S RIGHT FOR YOU This stage involves diligent research using various tools and resources to narrow the search down to 3-5 potential suburbs. Get to know these areas intimately. The next step is to get down to street level, determining exactly where the current demand for renting is highest. INVEST FOR THE FUTURE The key to successful and ongoing property investment is knowing your PIS and investing in properties with good capital growth. Properties that give a good rental yield and a healthy cash-flow to keep you going will see your portfolio growing year after year. 9

10 BASIC MORTGAGE TERMS It s important that you understand the basic key terms of your mortgage. Knowing the language of loans will assist you throughout the purchasing process. Principal Principal is the amount of money you borrow from the lender when you take out a loan. Interest Interest is the fee the lender charges you for the use of their money. The interest charged on your loan depends on the amount of money you borrow, the interest rate, and the term of the loan. Interest only loans must be repaid monthly. Term Term is the agreed period you have to repay your loan. This is usually 25 or 30 years. Repayments Over the term of the loan, you make repayments on a regular basis, weekly, fortnightly or monthly. These repayments generally cover the interest charge and a portion of the principal. However, you can select a period of paying back only the interest (usually 5 years). After this period the loan reverts back to both an interest and principal repayment. You can also have an interest only loan against a home. Offset account This is a savings account that is linked to your loan. The balance of your transaction account is used to offset against your outstanding loan balance, reducing the interest payable on that loan. Offset accounts are only available against standard variable loans, not fixed loans or lines of credit. The cashflow advantage is usually greater on interest only loans. Redraw facility If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money. These are common on home loans. However, an offset account can provide the same financial benefit but more flexibility. 10

11 Loan to value ratio (LVR) This term is used to describe the relationship between the value of the property and the loan being taken out against that property. Typically a lender will want you to contribute a 20% deposit and they will provide 80% of the value of the property to complete the purchase. If you have less than a 20% deposit they require you to take out a Lenders Mortgage Insurance, which often has stricter lending policies. I.e. a $400,000 loan against a $500,000 property has a LVR of / = 80%. Lenders mortgage insurance (LMI) This is a one-off fee that lenders charge you to protect them in case you default on the loan. This is typically charged if you have a deposit that represents less than 20% of the value of the property. This is often the only additional cost that lenders will allow you to put on top of the loan and not pay out of your pocket. Rental yield This is a formula most investors consider when looking at a property investment. Yield represents the annual rent paid as a percentage of the value of the property, i.e. a property worth $500,000 renting for $500 pw has a yield of 500x52/500000x100= 5.2%. 11

12 THE DIFFERENT LOAN TYPES There are different loan types and often you will have multiple loan types at any one time. Each type of loan has a number of specific features that makes it suitable for different financial structures, so it is important that you understand the different options. Variable rate mortgages This is the most common type of loan. Repayments change based on the Reserve Bank of Australia s cash rate. Over 20 years the average variable rate is approx. 7.5% p.a. Fixed-rate mortgages With a fixed-rate loan, you know exactly how much you ll pay each week, fortnight or month. This payment is based on an agreed interest rate that is then fixed for a set period of the loan. This is usually 3 or 5 years but could be up to 15 years. Breaking this fixed term contract with the lender could incur large fees. If you are considering selling your property then fixing may not be for you. There is no offset account against a fixed loan. Split home loan (fixed & variable) You can choose to have part of your loan at a fixed interest rate and the other part at variable rate. You decide the proportions of this split yourself. If rates change, the interest will change on the variable part of your loan, but the fixed portion repayment will stay the same. Line of credit Working like a credit card, a line of credit is approved for a lending limit that you can withdraw when you need it. When you do draw out a portion of the credit you only pay interest on the drawn amount. This is a finance strategy that investors use to access equity from one property to use for a deposit, or cost of purchasing another. This way, properties remain stand alone and aren t linked to each other, a common structure that can inhibit the growth of a property portfolio. This is called cross-collaterisation. Self Managed Super Fund (SMSF) Loans These are loans specifically designed for those buying within their SMSF s. These are relatively new on the lending market and only a few lenders offer them. They are usually at a higher interest rate and attract higher set-up costs. 12

13 HOW TO CALCULATE HOW MUCH YOU CAN BORROW The basic factors that lenders take into consideration when determining your borrowing limit are: Income Credit history - Income from employment Your credit history is a record of all your previous - Family allowances credit enquiries and the amount of each enquiry. - Any rental property income This is very carefully considered by lenders. - Other sources of income, e.g. dividends, bonuses, Number of dependants commissions Some lenders will include family benefit Part A and Employment Part B for children typically up to the age of Are you in full-time work? Loan requirements - How long have you been with your employer? - Loan term. - Are you self-employed? - Loan to value ratio. - Are you a contractor? - Loan repayment type, i.e. fixed, interest only or Current repayments and salary deductions principal and interest. - Do you have existing mortgages? Interest rate - Do you make car loan or personal loan repayments? Lenders factor in a buffer on top of the interest rate - How much rent do you pay? of the day. This is usually 1.5% 2% p.a. - Have you got a HECS/HELP debt? Living Expenses - Do you make additional superannuation Lenders will request a statement of your monthly contributions? living expenses. These are all the costs not listed Credit card limits above, i.e. food, utilities, insurance, school fees, Lenders look at your total limit, not your balance. phone etc. 13

14 HOW TO INCREASE YOUR BORROWING CAPACITY Borrowing capacity is calculated by looking at your existing income, your potential rental income (if buying an investment property) and your current expenses. Regardless of whether you re an experienced investor or just entering the market, it pays to do a little work beforehand to ensure you meet your lender s criteria and maximise your chance of a successful outcome. Here are some things to consider: Reduce your credit card limit As a rule of thumb, every $5,000 credit limit (not balance) will decrease the amount you can borrow by $20,000. Get a copy of your credit history, and resolve any blemishes if you can A marked credit history will severely limit your borrowing options. Visit to request a copy of your credit file. Get rid of non-bank credit cards This includes department store cards, personal loans, hire purchase or any debt that reduces your disposable income. NB: This may impact the amount you have available to put towards your deposit, so make sure you weigh up the advantages of a reduced deposit vs. reducing your bad debt. If you re renting, make sure the lease is in the name of all tenants, not just yours Otherwise a lender may consider you as liable for the whole rent payment which will impact your expenses. When looking at your borrowing capacity, use your base salary (not your total package including superannuation) Banks won t normally take bonuses and overtime into account as regular income, unless a consistent amount over two years can be proven. For couples and families where only one partner works full-time, it is important to remember that every additional $1 of annual income will allow you to borrow more Even part-time employment, government family allowance etc. can increase your borrowing capacity, but you will have to provide at least three pay slips or three months of income proof. For those with less than 20% deposit, lenders may require proof of more than six months employment. Employment service If you re thinking of changing jobs and planning on buying a property within the next 6-12 months, consider that lenders like to see stable employment and usually want you to have served your probation term before they will lend you. 14

15 THE PROPERTY PLUS CALCULATOR At Investors Choice Mortgages we provide a range of resources and tools to make it easy for you to start your investment journey. One of our most popular resources is the Property Plus Calculator. It offers a guide to your borrowing capacity and then uses this data to tell you the suburbs you can afford to buy in and finds you properties for sale in that area right now. It also provides you with information to start your suburb analysis including median property values and past capital growth figures. This is the perfect tool for doing competitive analysis and identifying the next hot spot. On The Market See properties on the market See properties on the market See properties on the market See properties on the market See properties on the market See properties on the market See properties on the market 15

16 COSTS TO CONSIDER WHEN BUYING When taking out a mortgage, you are required to make repayments. However there are other associated fees and expenses that you need to consider. Some of these costs include: Loan application fees Most lenders charge a home loan application fee. This can range from lender to lender, and covers legal contracts, property title checks and credit checks. Sometimes a lender s annual package fee covers many of these charges. Annual fees are approximately $400 per annum. Other mortgage related fees and costs Property valuation - A third party, often chosen by the lender, needs to determine the value of the property. This is often included in the annual package fee or application fee. Mortgage registration - Your Mortgage Deed needs to be registered with the government. Mortgage stamp duty - The government charges stamp duty to register your mortgage. Lenders mortgage insurance - If you don t have 20% of the purchase price of the property, the lender will require you take out lenders mortgage insurance to cover the risk that you might default on your repayments. The cost of this insurance varies depending on the loan to value ratio and the loan amount. This is often the only cost that can be put on top of the loan. Property fees and costs Building and pest inspection fees - It s wise to have your property inspected for any structural problems or pests (e.g. termites). This can cost $300-$700 each. Stamp duty - Governments charge stamp duty to transfer the ownership of a property. Registration of transfer fee - The new owner of the property needs to be registered at the Land Titles Office. Legal fees - You generally need to pay a solicitor or conveyancer to handle the transfer of ownership of the property on your behalf. These fees can range from $800 - $2000. Building insurance This is a condition of settlement lenders require you to have. It protects their investment and they are listed on the policy. 16

17 Landlords insurance This is a must for any investor. This insurance protects your rental property from damage, loss of rent and more. Depreciation Schedule Again, this is a must for all investors. The Depreciation Schedule is a report that tells your accountant how much depreciation you can claim on your property (your accountant cannot do this). The cost is typically $500-$800. Buyers Agent This is a real estate agent working for you, with your specific buying criteria in mind. They usually charge a flat fee based on your property price (typically $8,000- $15,000) and for this fee they will find a property for you and negotiate on your behalf. Ongoing Fees Real estate agent management fees This is the fee charged to find tenants and manage your property. The price of leasing your property is usually 1-2 week s rent. The price for continuous management is typically 5-8% of the rent charge per annum. Council rates - Your local council charges rates to cover garbage collection and a host of other services. Body corporate fees - If you buy an apartment, body corporate fees are charged and some fees can be significant. Make sure you check planned works and the sinking and administration fund balance if there is significant works planned as this could require a special levy to be paid by all owners. Maintenance costs - Don t forget to make provisions for regular maintenance. Utility costs - In some states landlords are also required to pay for water charges. Remember that costs for your investment property can be claimed. Speak to your accountant who will look at the costs associated with your investment property and claim these against the income it generates. ICM clients receive discounts on many of these services. Visit on our website for more information. 17

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19 WHAT MAKES US NUMBER ONE Our service is what sets us apart Choice is our middle name We re accredited with many of Australia s leading banks and lenders so that every client gains access to over 30 lenders and hundreds of products. Comprehensive education and resources Become confident, knowledgeable and in control of your financial destiny with our range of tools and resources to help you with your property purchase. Experienced, professional and proficient We are serious about providing you with investment education and a variety of helpful resources. Our brokers have completed extensive training and qualification processes* and it shows in everything we do. Convenience at every turn We go out of our way to find the most appropriate loan suited to your needs considering not just your current needs, but also for your future lending and portfolio building plans. We pride ourselves on our attentiveness and responsiveness. 100% integrity We are committed to acting with complete transparency and integrity. Any commissions and payments we may receive are disclosed so you know that our recommendations are always made in your best interest, not ours. Our red carpet service We go the extra mile for first time homebuyers and investors with a concierge service designed to make your mortgage application a breeze. Our concierge service walks you through the entire process as we clearly explain the different stages and products available. Because we hold your hand every step of the way, your first experience will be seamless and easy. Plus, with education and resources designed to boost your knowledge, your purchase will become the true cornerstone of your future wealth. *We are members of the MFAA and COSL and hold an Australian Credit Licence #

20 OUR STORY At Investors Choice Mortgages we do things differently. We not only look at your current finance needs but also your long term goals including the property investing strategy you are using to achieve those goals. Since winning Australia s Mortgage Broker of the year we reviewed some of our most successful clients those who were well on their way to achieving their goals. Those with a structure, clear vision and the tools to quickly assess whether a property fitted into their strategy were the most successful. So we designed a service that doesn t just organise the finance to support these goals, our service educates and provides resources that help our clients realise their goals. We don t sell properties. We don t recommend properties. And we don t have any alliance with developers. Our success comes from providing online self-paced education, access to webinars with property experts and discounts from service providers as well as property and suburb reports - all invaluable tools to assist you in finding the home or investment property to suit your requirements. After all, our goal is to help you find the right property at the right price with the right loan. Jane Slack-Smith is passionate about property investment. Alongside Mortgage Broking, Jane teaches lowrisk property investing strategies to first timers and experienced investors alike. Her detailed techniques show others how they can take action and see the path they need to tread to get their family to the place they want to be. It is her objective to give people the confidence to act as she shares with them resources to achieve their goals. Whether you re considering a new home to live in, or creating an investment property portfolio of your own, Jane and Investors Choice Mortgages will assist you in getting the finance to suit your circumstances and objectives. 20

21 WHICH SERVICE IS BEST FOR YOU? At Investors Choice Mortgages we understand that you not only need the right loan to suit your needs, you also need the right property to achieve your goals and build your wealth. We ve developed a range of tools and resources to help our clients become the most successful property buyers they can be. SELECT YOUR MORTGAGE PACKAGE 21

22 PACKAGE SERVICES GOLD MEMBER Lending assessment Lender & product recommendation Borrowing capacity and budget audit Short term goals, lender and product matching Total value of additional resources & bonuses $1992 FOR $495 ONLY Please note: This price is per mortgage transaction. INCLUDED ADDITIONAL RESOURCES AND BONUSES Goal setting recording Your Property Success Online Starter Courses Choose your own focus: - First Home Buyer - Home Buyer - Investor 5 Residex Reports 22 TALK TO US TODAY 18OO O Exclusive Access to Investors Choice Members Page, which includes: - The Investors Kit - checklists and videos - Bonus resources - Reports - local monthly government area Residex reports - Quarterly State Residex reports - Make Your Home Your Gold Mine online video series

23 PACKAGE SERVICES DIAMOND MEMBER Lifetime lending assessment Lender & product recommendation Borrowing capacity, budget audit & long term goal assessment Short term goals, lender and product matching INCLUDED ADDITIONAL RESOURCES AND BONUSES Total value of additional resources & bonuses $5568+ FOR $995 ONLY Please note: This price is a once off fee for lifetime lending. Your Property Success System - a self-paced online course providing a step-by-step plan to assist any property investor to achieve their goals. 5 online courses, each with 6 modules: - The Foundations - Knowing Your Numbers - Locating a Property - Signing to Settlement - After You Buy 4 x DVD s of live seminar recordings: - Goal Setting - Property Investing - Locating the Property by Doing the Research - Renovating for Reward and Accessing Equity TALK TO US TODAY 18OO O Access to Gold members resources plus more - Access to bi-monthly teleseminars - Gain access to property interviews with investing experts, learn property investing techniques. - Discounts with Professional Buyers Agents - Property & Suburb Residex Reports - Unlimited lifetime loan applications - Discounts from Quantity Surveyors - Annual Property Report - Monthly group Q&A calls And remember, if we can t assist you with a loan right now, we re more than happy to make a plan, together with you, and lay out a path that you can follow to reach your goals. 23

24 WHAT OUR CUSTOMERS SAY When you are making one of the biggest financial decisions of your life Investors Choice Mortgages are ethical and honest and their knowledgeable approach puts you at ease. I have been a client of ICM for almost 10 years now, with 4 mortgages written through them. Over time I have come to learn that we have received the best deals and the most knowledgeable advice through the use of their services. Their ongoing communication with us helps us to understand the state of the market and geography of activity so we can assess when we might be ready to apply for our next mortgage. JO-ANNE, QLD We spent several months looking for a property. Investors Choice was with us every step of the way. Service is excellent. Friendly, knowledgeable and responsive. BREED & KERRY, VIC I have been a property investor for 8 years now and have built a great team around me. The weak link in my team has always been the mortgage broker. I worked with many brokers and had very poor results until Investors Choice Mortgages. I know I can trust and rely upon them when it comes to financing my purchases. MARCO, NSW The team at Investors Choice have helped me grow my portfolio rapidly in the last few years. They are not just about chasing interest rates on behalf of their clients. Jane will discuss with you and tailor a specific financing plan that will help you reach your investment goals. I found her proficiency refreshing and her advice supportive and encouraging. CHRIS, VIC 24

25 WHAT OUR CUSTOMERS SAY Investors Choice helped enormously with our complex financial situation. They worked hard to get pre- approval of funds so we could sign a 30-day contract with confidence. Their tools and resources allowed us to buy our first and subsequent investment properties with confidence. DARREN, QLD We are so appreciative of the seamless service received from the ICM team. The turnaround time for all of our queries was instantaneous. All information provided was with our best interests in mind, which in our situation meant fewer commissions to ICM - this is what really stands out in my mind. No one wants to be cheated! DEBORAH, NSW This was our second time trying out a broker the first was a disaster. But Investors Choice Mortgages has now converted us to using a broker, as it is much more efficient having experienced brokers who personalise your situation, rather than being a number at the bank. Jane was great in helping us achieve the loan structure we wanted. IRENE & CHRISTOPHER, VIC Disclaimer: The information, statements and opinions expressed in this document are only intended as a guide to some of the important considerations when looking at borrowing capacity. Although we believe that the statements are correct, you should seek independent advice regarding your own specific situation. Neither the publisher nor any people or organisations involved in the preparation of this material give any guarantees about its content or accept any liability for any loss, damage or other consequences that may arise as a result of any person acting on or using the information and opinions contained in this guide. 25

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27 A U S T R A L I A S # 1 MOR T G A G E B R OK E R TALK TO US TODAY ABOUT APPLYING FOR YOUR LOAN 18OO O W: investorschoice.com.au E: askus@investorschoice.com.au P: F: M: PO Box 622, Carlton South, Victoria, 3053