During recent talks with several current tenants of mine and also during a fact finding mission, it has become very apparent that our tenants are ready to buy an investment property, and are desperate to get out of the renting cycle.
Unfortunately, many tenants simply lack the confidence or know-how to move forward on their dreams of owning a property. With rising rental prices and rental housing shortages it makes sense to help tenants get into their own property sooner.
In my humble opinion, it’s really a matter of education and awareness that needs to be provided to tenants to help them in their quest to buy a home. Often, tenants are either coming to their own conclusions or listening to people who are really not qualified to give advice and they pigeon hole themselves prematurely, which also is battering their confidence to move forward.
Most tenants are in fact unaware of the options available in the marketplace or how to even go about getting a home loan, or if in fact they are even eligible for a loan.
According to several mortgage brokers and lending institutions that I have spoken to, tenants may not know what lenders will take into account when looking at their options to buy property.
Family equity home loans assist borrowers with no deposit. A direct family member such as parents allow the lender to take a mortgage over their property to support the new home loan and at the same time avoid paying mortgage insurance, which can quite often be more than $10,000. The loan would be reviewed approximately every six months to see if enough equity has been built up via loan reduction and any increase in property value to release the parents' property in the short term, which is always the aim of the borrowers anyway.
Lenders, when assessing loan applications, take into consideration not only application incomes but rental history as well to establish the client's ability to repay the mortgage. A good rental history and reference from their rental manager is very helpful too.
If the option of family assist via property mortgage is not available, lenders will consider unconditional gifts of money towards the deposit or costs.
Never say never. There are always options worth exploring, with many lenders in the market today.
So your buyers may in fact be on your front door step, especially if you have a rent roll. It’s worth considering marketing to your tenants and opening their eyes up to possibilities. At least encourage tenants to have that conversation with a mortgage broker who can give them the right advice to help them move forward with their plans and get them out of the renting cycle.
About Loretta Morgan
Loretta Morgan has over 17 years' experience in the property industry, ranging from managing residential real estate to major commercial and industrial portfolios for private and institutional investors.
Loretta was a finalist in the 2011 REIQ Awards for Excellence - Commercial Property Manager of the Year category and also a finalist in the 2013 REIQ Awards for Excellence - Residential Property Manager of the Year. This year, Loretta was a finalist in the Sunshine Coast Business Women's Network - Young Business Woman of the Year, regional finalist in the Australian Institute of Management Excellence Awards and finalist in the Sunshine Coast Business Awards.
Loretta is also a member of the REIQ, Young Industry Professionals Advisory Panel.