As a periodontist with a stable income, you're well-positioned to invest in real estate and build wealth through property investment. However, choosing the right investment loan structure is crucial for maximising your returns and minimising your tax obligations.
Understanding Investment Loan Structures
When buying an investment property, the loan structure you choose can significantly impact your property investment strategy. Unlike owner-occupier loans, investment property loans are specifically designed for rental properties and come with different features and requirements.
The most common investment loan options include:
• Principal and Interest Loans: You repay both the loan amount and interest, building equity over time
• Interest-Only Loans: You pay only the interest for a set period, typically 1-10 years
• Line of Credit: Access funds up to an approved limit, paying interest only on amounts used
• Split Loans: Combine different loan types to optimise your borrowing strategy
Interest Rate Options for Investment Properties
Lenders across Australia offer both variable interest rate and fixed interest rate options for investment loans. Variable rates fluctuate with market conditions, whilst fixed rates provide certainty for a set period.
Many Finance & Mortgage Brokers can access Investment Loan options from banks and lenders across Australia, potentially securing interest rate discounts based on your borrowing capacity and the loan to value ratio (LVR).
Loan to Value Ratio Considerations
The LVR determines how much you can borrow against the property value. For investment properties:
• LVRs above 80% typically require lenders mortgage insurance (LMI)
• Lower LVRs may qualify for better interest rates
• Some lenders offer higher LVRs for medical professionals like periodontists
Property Types and Investment Strategies
Your investment loan structure should align with your chosen property type:
• Apartments: Often require lower deposits but may have higher strata fees
• Townhouses: Balance between affordability and capital growth potential
• Stand Alone Dwellings: Typically offer stronger capital growth and rental yield
When research property options, consider factors like rental demand, capital growth prospects, and ongoing maintenance costs.
Tax Benefits and Negative Gearing
Many periodontists utilise negative gearing as part of their property investment strategy. When your rental income is less than your loan repayments and property expenses, you can claim this loss against your other income, potentially reducing your tax liability.
Key deductible expenses include:
• Loan interest payments
• Property management fees
• Maintenance and repairs
• Depreciation on fixtures and fittings
• Council rates and insurance
The Application Process
Applying for an investment loan involves several steps:
- Assessment of borrowing capacity: Based on your income, expenses, and existing debts
- Property evaluation: Lenders assess the investment property's value and rental potential
- Documentation: Bank statements, tax returns, and employment verification
- Loan approval: Subject to property valuation and final conditions
A streamlined application process can help expedite your first investment property purchase or expansion of your existing investment property portfolio.
Calculating Investment Loan Repayments
When calculating investment loan repayments, consider:
• The Investment Loan Interest Rate
• Loan term and structure
• Expected rental income
• Additional costs like stamp duty, legal fees, and ongoing expenses
Building Your Investment Property Portfolio
Many successful property investors start with their first investment property and gradually build a portfolio. As a periodontist with strong earning capacity, you may be able to leverage existing properties to fund additional purchases, creating a cycle of wealth building through the property market.
Choosing the Right Structure
The optimal investment loan structure depends on your individual circumstances:
• Cash flow goals: Interest-only loans may improve cash flow initially
• Tax position: Higher income earners often benefit more from negative gearing
• Risk tolerance: Fixed rates provide certainty, whilst variable rates offer potential savings
• Investment timeline: Long-term investors may prefer principal and interest loans
Working with experienced professionals who understand the unique needs of medical practitioners ensures you select the most appropriate rental property loan structure for your situation. They can help you access a wider range of investment loan options and guide you through the entire process, from initial property research to final settlement.
Call one of our team or book an appointment at a time that works for you to discuss how we can help structure your investment loans for optimal returns.
