How to prepare for buying an investment property

Investor borrowing activity is at near-record levels, proving just how popular property investing is as a wealth-building strategy in many places around the country.

Anyone who wants to buy their first investment property in 2025 should aim to make themselves as creditworthy as possible.

When lenders review a home loan application, the key questions they ask themselves are how likely the borrower would be to make all their mortgage repayments – month after month, year after year – and at what point their finances would become too stretched. That will determine whether they’d be willing to approve the application and how much they’d be willing to lend.

There are several steps potential investors can take to make themselves more creditworthy:

• Increase their savings rate. This can be done by increasing their income and/or reducing their spending.
• Become a more consistent saver. As far as lenders are concerned, a regular saver is more likely to be the kind of person who would be able to make regular mortgage repayments than an erratic saver.
• Pay off existing debts. The less money someone needs to devote to servicing car loans, personal loans and credit cards, the more they’ll be able to devote to servicing a mortgage.

Loan size, deposit and more

As potential investors are getting their finances in order, they should think about how much of a mortgage they’d be able to afford. (This home loan repayment calculator can provide a ballpark figure; to get an exact figure, contact me.) Once someone has a rough idea of the maximum they could borrow, they’ll have a rough idea of their maximum purchase price.

That, in turn, will influence their choice of property and location. For example, someone with a larger budget might be able to buy a house in a capital city location; whereas someone with a smaller budget might have to buy a more affordable property (such as an apartment or townhouse) or choose a more affordable location (such as a regional community).

Investors should conduct their research and due diligence before making any decisions. If they are purchasing interstate, they may also consider appointing a buyer’s agent to do the on-site property inspections.

Finally, potential investors should think about how they’re going to fund their deposit. Someone who already owns an owner-occupied home might be able to use some of their equity to cover the deposit. I can explain how it works and the costs involved.

Someone who doesn’t own a property will probably have to use cash to fund their deposit. That said, there are some ways around needing a 20% deposit or paying lenders mortgage insurance – for example some lenders may waive this for people in certain professions such as in the healthcare industry. Again, I’d be happy to explain in further detail.