While your personal situation; savings, credit, income, etc. play a part in a lender’s decision, there is another type of risk factor that banks concern themselves with; valuation risks.

Lenders rate each factor on a scale from one to five, then make their finance decision based on both your personal situation and  valuation details of the investment property you’re asking them to lend on.

1. Location

Is the property in a highly desired location? Is it close or far away from amenities?

Obviously the closer a property is to key amenities such as employment, transportation and education, the better the rating the suburb will receive.

2. Environmental

Properties in flooding and bush-fire zones will of course rate as a higher risk compared to properties in different suburbs.

In some cases, properties that are near power lines could pose some concern, however no consensus has been reached about their impact, so it may not even be a concern for your lender.

3. Improvements

Newer homes will typically rate better than older homes, however if a home shows sign of good maintenance and any improvements are finished to a good standard, it can still attain a good rating.

4. Land size

Issues such as zoning, title and access can impact the marketability of a property.

Lenders will want to ensure that each of these factors are satisfactory and that no outstanding problems can arise that will impact their investment.

5. Volatility

Lenders want to know whether or not a suburb could be subject to market volatility.

6. Market

Lenders will often ask valuers about what’s going on in the market and where it appears to be headed.

Bottom line, they want to know if they can expect a reduction in value in the next two to three years.

7. Local economic conditions

Locations where there are very few employers and/or where the employers are in a high turnover industry (e.g. mining) will rate as more of a risk than areas where there are a number of employers in a diverse range of industries.

8. Market sector

Where does your property lie in terms of saleability?

Lenders want to know that your investment property can be sold (and they can recoup their costs) in a reasonable amount of time should it become necessary.

How to avoid buying a high risk property

So if you’re trying to choose an investment property, how do you avoid buying one that lenders would consider a high risk?

Buy a property that:

• Is in a quiet location (avoid main roads)
• Appeals to the majority of the area demographic
• Is affordable for the majority of the area demographic to buy
• Has been well maintained
• Is close to amenities

While there are no guarantees, if you know what valuers look for you’ll be able to choose properties that will return lower risk ratings and that won’t get knocked back by lenders.

If you’re interested in investing in property, register to attend our next Property Investor Night.

We’re living in a consumer driven society…wouldn’t you agree?

We’ve gone from perhaps a dozen or so advertisements per day through older forms of advertisement such as billboards, radio and television to even more advertisements per day via our computers and smartphones.

We’re inundated with messages urging us to buy this, drink that, do this, do that…no wonder we’re so stressed out!

Imagine what would happen if you decided to do something counter-cultural to all of that noise…such as having a “buy nothing” year?

Think about it…extra money, simply by making different spending decisions!

What would you do with the extra money?

What if you put that money to use, building financial freedom rather than spending it on a flashy holiday or new car?

A “buy nothing” year is a great way to build up the deposit for your first…or next investment property.

What a buy nothing year can do for you

When you begin to reduce all extraneous consumer spending it can be tough, but after time you’ll find that it:

• Reduces your stress
• Forces you to evaluate what matters the most to you
• Helps you to focus on things that will make the biggest difference in your life

Savings tips

Start small, cutting out extraneous expenses such as haircuts, clothing, electronics, household items, eating out, etc.

Shift your thinking

Drop out of the consumer mindset and think about those relationships and possessions that mean the most to you. Does your spending reflect your beliefs? If not, think about how you can change that.

Cook more at home

Rather than spend money on pricey takeout or restaurant fare, cook meals at home.

Save even more by purchasing items in their most basic form instead of paying more for processed.

If you eat out a lot now, doing this one thing can save you potentially hundreds per month…money that you could be putting towards an investment property or adding to your savings buffers.

Reconcile your accounts monthly

Put together a spending plan then review it every month.

It’s important to know where the money is going so that you can scale back or revise your spending as you go.

Learn to DIY

If something breaks, rather than buy a replacement, learn how to fix it. There are a number of resources both on and offline to help you get the job done.

Delay big purchases

Instead of paying premium prices for new, big ticket items such as a new couch, try to make do with what you have or if you must, buy the item refurbished or discounted…or even borrow it.

It’s your choice

You decide how long you want to go without buying anything beyond the essentials and see just how much money you can save.

Whether you last an entire year or only a month…individuals who have tried this strategy have learned a lot about themselves and their relationship with money.

Even if you’ve decided not to do a “buy nothing” year, the simple act of being more mindful about your spending can help you save more money, faster.

Money you can then use to build a strong investment property portfolio for your financial future.

Is building your wealth your New Year resolution?

Register to attend our next Property Investor Night.
At these FREE events held all across the country we discuss where the growth markets are right now, and share ways you can navigate your way to financial freedom through investing in property.

Seats fill up fast, so book yours now!