Smart ways to purchase a new investment property

Understanding Investment Loans for FIFO Fixed Plant Operators

As a FIFO Fixed Plant Operator, you're in a strong position to build wealth through property investment. Your regular income and structured work patterns make you an attractive borrower for investment property finance, even if you're not based in the mining hubs full-time.

An investment loan is specifically designed for buying an investment property - one you'll rent out rather than live in yourself. While similar to owner-occupier mortgages for FIFO workers, investment loan products come with different investment loan features and typically different investor interest rates.

The loan amount you can access depends on several factors, including your income, existing debts, the property's value, and importantly for FIFO workers, how lenders view your employment type. Working with a broker who understands the FIFO industry means you can access investment loan options from banks and lenders across Australia who recognise the stability of your role.

Key Investment Loan Features to Consider

When you're buying an investment property, understanding your investment loan options helps you make informed decisions:

Interest Rate Options:

• Variable rate - fluctuates with market conditions, offering flexibility and often including offset account features
• Fixed rate - locks in your investment loan interest rate for a set period, providing certainty for budgeting
• Split loans - combining both variable and fixed interest rate portions

Repayment Structures:

• Interest only - you only pay the interest charges, keeping repayments lower and potentially maximising tax deductions
• Principal and interest - you pay down the loan amount while covering interest, building equity faster

Many FIFO property investors choose interest only investment loans initially to maximise cash flow and tax benefits. This strategy works particularly well when you need rental income to service the loan and want to claim maximum tax deductions on the interest charges.

Investment Loan Benefits for FIFO Workers

Property investment offers several advantages for FIFO Fixed Plant Operators looking to build wealth:

Tax Benefits:

• Claim interest charges as claimable expenses
• Deduct property management fees, body corporate fees, insurance, and maintenance
• Negative gearing benefits when expenses exceed rental income
• Depreciation allowances on building and fixtures
• Stamp duty may be tax deductible in some circumstances

Wealth Building:

• Generate passive income through rent
• Capital growth potential over time
• Portfolio growth opportunities
• Leverage equity from existing properties
• Steps towards financial freedom

Understanding Loan to Value Ratio and Deposits

The loan to value ratio (LVR) is crucial for your investment loan application. Most lenders require a minimum 10-20% investor deposit for investment properties, though some may require more depending on your circumstances.

If your LVR exceeds 80%, you'll typically need to pay Lenders Mortgage Insurance (LMI). However, some FIFO workers may qualify for LMI waivers through specific lenders who understand your industry.

You might also leverage equity from your existing home to cover the investor deposit and associated costs. Equity release loans can be a powerful tool for expanding your property portfolio without needing to save a separate cash deposit.

Calculating Investment Loan Repayments

When calculating investment loan repayments, consider:

1. The loan amount - how much you need to borrow
2. Interest rate - investor interest rates are typically higher than owner-occupier rates
3. Loan term - usually 25-30 years
4. Repayment type - interest only or principal and interest
5. Rental income - most lenders will assess 80% of expected rent (accounting for vacancy rate)
6. Your existing commitments - including your primary residence mortgage

Lenders assess your investor borrowing capacity differently than owner-occupier loans. They'll consider your rental income alongside your FIFO income but typically only count 80% of the rental income to account for potential vacancies and maintenance costs.

Property Investment Strategy Considerations

Developing a solid property investment strategy involves more than just finding a property:

Location Research:

• Areas with strong rental demand
• Proximity to employment hubs
• Infrastructure development
• Historical capital growth
• Average vacancy rate in the area

Financial Planning:

• Can you service the loan during vacancies?
• Have you factored in all claimable expenses?
• What's your plan for rate discount negotiations?
• How does this fit with your overall wealth building goals?

Property Type:

• Houses typically offer better capital growth
• Units often provide stronger rental yields
• Consider body corporate fees for apartments
• New properties offer depreciation benefits

Investment Loan Application Process

The investment loan application process typically involves:

1. Pre-approval - establishing your borrowing capacity and investor deposit requirements
2. Property search - finding the right investment property
3. Formal application - submitting full documentation
4. Property valuation - lender assesses the property value
5. Approval and settlement - finalising the purchase

As a FIFO Fixed Plant Operator, you'll need to provide:

• Recent payslips showing your full earnings including allowances
• Employment contract or letter
• Bank statements
• Tax returns (if you have other income sources)
• Details of existing debts and assets
• Rental appraisal for the intended property

Investment Loan Refinance Options

Once you've built equity in your investment property, investment loan refinancing can help you:

• Secure better investment property rates
• Access equity release for further investments
• Switch between interest only and principal and interest
• Move from fixed to variable interest rate (or vice versa)
• Consolidate multiple property investor loans

Regular reviews of your rental property loan ensure you're getting competitive investor interest rates and that your loan structure still suits your property investment strategy.

Maximising Your Investment Success

To make the most of your property investment loan:

Maximise Tax Deductions:

• Keep detailed records of all claimable expenses
• Engage a tax accountant familiar with property investment
• Consider depreciation schedules
• Understand negative gearing benefits

Manage Cash Flow:

• Build a buffer for unexpected expenses
• Plan for periods when the property might be vacant
• Consider interest only investment loans initially
• Factor in body corporate fees and insurance

Build Portfolio Growth:

• Use equity from appreciating properties
• Develop a long-term property investment strategy
• Consider diversifying across locations
• Balance cash flow properties with capital growth investments

As a FIFO Fixed Plant Operator, your reliable income puts you in an excellent position for building wealth property investments. Understanding the various investment loan features, investment loan benefits, and tax advantages helps you make informed decisions that align with your financial goals.

Whether you're buying your first investment property or looking to expand an existing portfolio, having the right investment loan products and structure is crucial for long-term success and achieving financial freedom.

Ready to explore your investment loan options? Call one of our team or book an appointment at a time that works for you. We specialise in helping FIFO workers access investment property finance tailored to your unique circumstances.