Investing in Property

01.

Cross-securitisation

If your leveraging equity in an existing property to purchase an another property, never cross-secure the two securities with the two debts, even if this means paying double the application fees. This is to avoid the bank having control over what you want to do with your properties and keeping that power in your own hands. If ever you want to sell one of your properties, as it has appreciated in value, the other security and it's debt can limit your earnings.  

02.

P&I vs IO

Principal & Interest vs Interest Only repayments. Both having their own advantages, its important to figure out whats more suitable for your circumstance. P&I repayments go towards paying off your home loan as well as an interest portion, whereas with IO repayments, you only pay interest on the loan and your loan amount doesn't reduce. IO monthly repayments are generally lower than P&I repayments which can help in the interim to improve your monthly cashflow.

03.

Positive vs Negative Gearing

A positively geared investment property is when the income earned from the property is more than the total cost of holding the property which can include mortgage costs, maintenance, depreciation etc. On the flip side, negative gearing is when your at a loss as the costs outweighs any earnings from your property. Depending on your financial position, you can benefit from either of these two types of properties though we recommend you speak to an accountant to understand what suits you.