In today's turbulent economic markets, we want the quick fix and we want the results as soon as possible, however investment earnings take time. Time should also be taken in finding the best investment loan to meet your needs.
1. Discuss your investment plan with your financial planner and accountant. Can you afford an investment loan?
a. Honestly discuss your current financial situation - come prepared with loan balances for all loans including car loans, personal loans and all credit cards; bank balances; pay slips; and any existing budgets. If you are unable to afford an investment loan at this point, consider strategies to pay off your current debts by reducing your expenses and possibly increasing your income. Your Financial Planner or Accountant should be able to assist you with putting together a budget.
b. Discuss the risks involved for investing in shares and/or property. Determine which types of investments you and your partner (if you have one) feel meet with your risk profile. A risk profile is an assessment of how you would feel in certain circumstances such as a reduction in the value of your property or shares. A risk profile should be completed independently be each investor. Your Financial Planner should be able to assist with this. If you don't understand what is being said, ask questions.
c. Work out how much money you can contribute per month to your investment from your budget calculations. These payments may be in the form of a margin call (if you borrow money to purchase shares) or property maintenance.
2. Use a trusted investment loan broker to find you the best loan option for you.
a. Use a broker whom will be honest with government authorities, because any "mistakes" made on your loan application will be authorised by yourself and you will have to answer any questions about your investment loan.
b. Be realistic about how much you can afford to borrow and follow your budget, do not deviate from your budget at this point.
3. Discuss different types of investment loans
a. Use a loan broker that has access to different lenders and different types of investment loans to be sure that your investment loan meets with your needs. If you don't understand anything, ask questions.
b. Don't sign anything that you don't understand. If you don't speak English, ensure that you have someone at all the meetings with specialist advisers to translate for you.
c. Seek pre-approval for your loan before you purchase your investments.
4. Having discussed which types of investments you are interested in, research those that meet your needs. You may want to discuss this with your financial planner as they will have some knowledge about the investments that you are attracted to.
a. After you have worked out which investments you would like, confirm your purchases with your Financial Planner and advise him or her of your pre-approval loan number so that the paperwork may be completed.
b. Your financial planner will contact you when the transactions have been completed. You may also have online access to your investment purchases and accounts to see how your investments are tracking.
c. However, be aware that your purchases are for the long term and variations in share prices will happen continuously. Property values are more stable but may still be subject to market fluctuations. All this would have been discussed with you by your Financial Planner when talking about your risk profile.
5. Review your loan every few years to ensure that it is meeting your expectations and that your investment is making capital gains in the long term.
6. ALWAYS, ALWAYS, ALWAYS have a buffer amount in your loan. Ideally 10-20% available equity after you have refinanced for more investing to cover unforeseen expenses, miscalculations, under valuations and market corrections
7. Sit back and relax. Try not to review your investment portfolio too often. Remember, positive investment returns take time. Stay in contact with your professional advisors and let them know if you have any changes in circumstances that affect your income or ability to earn an income.
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