How much do I need to start investing in property?
Investing in sound residential property has long been regarded as a one of the best ways to build wealth and financial freedom.
What’s best is that you don’t need to be wealthy to get started. With a clear goal in mind and some sacrifices, you can be on your way to securing your financial future in no time.
How much money do I need to start investing in property?
Luckily, you don’t need a huge amount of upfront cash to get onto the property ladder however you will need a regular income to ensure you can show serviceability with the banks to lend you money for your purchase. Usually you should budget between 10% - 20% of the property purchase for a deposit which can be in the form of upfront cash or perhaps equity from an existing property you own.
Lenders' Mortgage Insurance (LMI) is often needed when borrowing over 80 per cent of the cost of the property. LMI is an insurance premium usually placed on top of your loan as added security for the banks when you don’t have a full 20% deposit. This one off cost however is seen by many as simply a cost of doing business and ensures you can get into a property purchase before the prices of the property increase out of reach.
It is important to remember that there are government charges in the form of stamp duty, levies, registration fees amongst others which should also be accounted for when assessing a property purchase.
How do I start investing in my first property?
Planning is crucial for any investment journey to be successful long term. Before starting your search online or attending open homes, we recommend sitting down with a pen & paper and write out your goals and a timeline for achieving them. This can then serve as a blueprint for future investing that you can refer to throughout your journey. There are many property investment strategies out there so it is also a good idea to start getting educated. Read books, research online, watch YouTube clips and reach out to others who have done it all before. You may even reach out to a property investment focussed buyers agency to gather further advice on the best ways to go about achieving your goals. Before long you will have a sound idea on a strategy that best resonates with you and your goals.
Next you will need to look at finance. Using a mortgage broker is a great way of assessing how much you can afford to borrow given your current circumstances. A mortgage broker is a great resource as they have a multitude of lenders all with different policies so can best point you in the direction to best suit you. Best yet, they are a free service to you as they are paid by the banks when your loan settles. Pre-approval is a good idea as it gives you the ability to act as soon as you find the right property.
Seeking advice from your accountant about how best to structure your purchase is also recommended to ensure you are making the most out of the taxation deductions available to you.
What are some of the things I need to consider?
Property investment is a long term wealth accumulation strategy. It is therefore no doubt going to come with challenges and circumstances that you will need to attend to. Maintenance is one of the most common items that is often overlooked when investing in property. The reality is, things will break, need repairing or replacing. Another such item is interest rates which are out of anyone’s control. Depending on the time in the interest rate cycle, they can go up or come down. It is therefore crucial to ensure you always have a buffer in place to cover any unexpected costs or additional funds you need to contribute to the mortgage repayments should the rent not meet the mortgage payments.
Other costs to factor into your budget include purchase stamp duty, legal fees and conveyancing costs. And don’t forget ongoing costs such as insurance fees, council rates and strata levies if applicable. A property manager will look after your investment, including maintenance and any repairs. While this is an added cost, it makes being a landlord a whole lot easier.
What makes a good investment property?
We’ve heard it time and time again 'location, location, location'. This is just as true for investment properties as it is for those looking for a home to live in. There are a variety of factors that you need to consider for a suburb to invest in. You should be looking at areas where people will want to live with easy access to infrastructure such as public transport, schools, universities, shopping centres, cafes etc. It is also important to look at a number of data sets such as vacancy rates, increases in population, future planned infrastructure, amongst other factors which will all dictate whether an area is good for investment. Asset selection is also ever so important in today’s economy. No longer is it just buy a property and hold it for the long term especially if your goal is to build out a larger portfolio of investment properties.
Investor focussed buyers agencies such as Emerson Property Group are a great resource to tap into to get the best guidance when it comes to careful and considered property investment selection. If you’re ready to take action and start designing a better life, reach out to the team today for an obligation free discovery call.