So you're looking to buy your first (or next) rental property?
You might be feeling some FOMO that the major banks have decided to take matters into their own hands and pull back the Loan to Value Ratio requirements for rental properties - broadly these are now sitting at a 40% deposit across the board, and I've had several emails from investors who feel they've been shortchanged by the short 4-6 month window where they could buy rentals with 20% deposit.
But - there is one slightly less well-known way you could buy a rental property - by building one, or even buying a property which is currently being built (which means you're not dealing with the build process itself).
Builds are still exempt from the LVR rules at most banks and because the Government wants more houses built, they are likely to stay exempt from any LVR restrictions for some time yet.
If you've never considered a build before, it's something that many investors are now turning to, for a few reasons;
- Most builds are only requiring 20% deposit at main banks - which means if you have built up some equity in your existing property or current portfolio, you may be eligible to borrow where you may not otherwise be able to - check out our online tool to see if you could borrow for a new property
- New properties commonly have a 10 year Master Build Guarantee and being new, are very low maintenance. This means you'll be unlikely to need to account for maintenance in your budget heading forward and there are no surprises like an old hot water cylinder bursting!
- The new Healthy Homes regulations - new builds provide an easy solution for landlords to ensure that they are compliant. All new builds should meet the new legislation and most builders and developers are now having properties inspected by professionals to tick that off.
- People fall over themselves to live in a brand new home - with all the comforts of modern living. This means most new builds are easy to tenant, have less vacancies and usually command a slightly more premium rent.
- No renovations to deal with for a lengthy amount of time - which many investors need to factor into the purchase of an existing home and then need to manage and fund in a tighter credit environment.
The downsides of building new is that there can sometimes be a delay between the start and end of the build and most new builds are townhouses or apartment type living (which needs to fit with your goals and portfolio mix). They can also be slightly more expensive than their existing home counterparts.
If you're interested in building a new rental, get in touch with us. We're also build funding experts, have our own rentals and develop properties, and can talk you through the process.
Your next rental property might be closer than you think!