Property finance

Now is one the best times to buy investment properties while interest rates are the lowest they have been n the last 60 years. When considering buying an investment property you should use an interest only finance, so you can keep more money in your pocket. One of the biggest mistake new property investors make is they think they need to pay down there mortgage as quick as possible, which is not the case as you need to keep your serviceability available. By using an interest only finance you can buy more properties quicker, as you use your equity from your first home to buy home number 2 and so on. If you use principle and interest finance then you will not be able to service investment property 2 without it coming out of your pocket. Using interest only finance means you can simply have the interest paid out by the house for you.

Remember property investing is a long term investment so there is no need to pay out your mortgage as fast as possible as you accumulate more properties you will soon learn that interest only finance is the way to go when buying an investment property.

There are also other types of finance such as capitalizing the interest, which is good to use in a booming market, but considering we are in a global financial crisis it would not be wise to use this type of finance and is mostly used by experienced developers.

Property development finance

Property development finance is not discussed much as a lot of developers like to keep this to themselves. There are several different property development finance packages that can be used. The most popular way is of course property development finance which usually is ran buy a group of private lenders offering finance for a good return on there money usually 15-20% and if you fail they will take your development site and keep all the profits so it is quite a risky business, At the moment as there is a global financial crisis and people loosing there jobs everywhere. This type of finance may have worked well during the commodity boom now however with everything slowing down this would not be a wise choice.

Other types of property development finance are projected profit loans used by smaller developers for things like a house and land package this type of finance is usually much easier to get if you can prove to your bank that your project will actually sell and make a 20% profit, as they will lend the money on the end result similar to a business loan you can get this type of finance just a little over the current mortgage rate which is great as interest rates are extremely low at the moment.

Development finance through a bank used to be quite easy to get, but now with the economic downturn they are much harder to come buy and a lot of banks want to see 50% presales before even taking your application seriously for development finance.

Motel finance

Motels can be a great investment if your going to run one yourself however a lot of financial intuitions do not like them and you will be hard pressed anyone who lends above 65% on a motel so to even start looking at this option you will need to either have a lot of cash or equity before applying for motel finance another downfall with motel finance is the interest rate is usually extremely high compared to a general commercial mortgaged interest rates.

There is one well known way around this is by using low doc finance and telling the lender you are buying the place as your residents this way you can get a residential mortgage interest rate however the motel can generally not have any more then 6 units in the building to be eligible for residential finance if you can buy a motel that makes a good income this way you will be laughing as your paying half the costs in interest then your competitors on their finance for your motel because you simply researched instead of jumping in feet first.

You will need to do a lot of research before picking the motel you want like checking out occupancy rates how long it has being profitable and if there is areason that the occupancy rates are a lot higher then last year this could be something is being constructed in town and a lot of workers are staying there this would be a bad choice because as soon as the work is finished so will the occupancy rate of your motel

So in conclusion does lots of research try for a 6-unit motel to get residential finance as opposed to specialized commercial interest rate, which will bring your overheads down dramatically.

Commercial Investment Finance

Buying a commercial property is a great way to increase your wealth and now is the best time to look at commercial properties while the interest rates are at an all time low. Commercial finance is quite easy to get approved for however you will need some cash to pay for value fees and we are not talking a few hundred bucks here like you would need for a house the bank will charge anywhere from $5000-$10,000

To have your commercial property valued and in most cases this is needed upfront some ways around this are to get an investor to lend you the money for a part share in the commercial property and sometimes a commercial lender may incorporate the cost of the valuer into the loan but this rarely happens with commercial finance the most common way to pay this fee is buy using equity in your own home to secure the value of the building and it is highly recommended that you get your own independent valuation as banks are very conservative especially in the global financial down turn we are currently in.
Use interest only finance, you should always use interest only finance whether investing in a commercial property or a residential property.
Using interest only finance simply means you have more serviceability and can most likely buy a bigger commercial property then using principle and interest finance or more then one small commercial property to spread your risks across several sectors.

Commercial finance

Commercial finance is often used by property investors to move into the next investment market considering commercial properties are regarded as one of the safest investment with long term leases and national tenants you can secure a great commercial property that will pay itself off and put extra money into your pocket while also growing in value every year. This is what long term commercial investors do and is known as compounding interest so after 10 years this may have gone up say 50% which is 5% PA growth which is quite achievable if you have done your due diligence.

Although this sounds all great on a face value commercial property has many different criteria’s for example if you wanted to buy a motel you would need to have up to 50% of the costs as these types of properties are known as specialised security and usually have an lvr of up to 60%. Where as a retail office space you can lend up to 85% of the value of the building this is why you see many investors buying retail offices and industrial complexes as these two commercial properties are far easier to get finance for service station in particular are very difficult to get finance on as they are also a specialised security property and you will need around 50% deposit to even consider this option although if you can find a way around this most service stations have very good long term leases with plenty of positive cash flow so in conclusion if your looking for commercial finance you should look into retail shops, Offices and industrial buildings.