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How to Save Money as a Property Investor

Lan Bell Lan Bell , 8/6/2018
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Investing in property is one of the most popular ways to invest in Australia. So it must be easy, right? Not quite. To earn a solid return on your investment, you need to put in time to research the property market and make smart choices with your money.

Let’s find out how you can choose the right investment property and save money along the way. Of course, before you can turn your dream investment into a reality… you need enough cash for a deposit.

Save, Save, Save

Saving up for a deposit may seem like an uphill battle. But these days you only need to save up a minimum of 5 percent to be approved for a loan. Ideally though, you should try to save at least 20 percent of the purchase price to avoid paying for Lenders Mortgage Insurance (LMI), as it only insures the bank if you default on your loan repayments.

To save up for a deposit you need to come up with a realistic savings goal, prepare a budget and stick to it.

Add up your monthly income and expenses then figure out how much disposable income you have left. Be prepared to cut out or strip down a few luxuries so you can reach your savings goal faster.After doing this, you should have a plan that allows you to put away some savings each month.

Home Loan Guarantor

Having trouble reaching the 20 percent deposit goal? As an investor you have the option to buy a home with help from a family guarantor – even if you plan to use the property for investment purposes.

How it works is a family member who has sufficient equity in their home can use it as a security guarantee for your loan. While this guarantee cannot be used to cover the entire loan amount, they can help close the gap and reduce the loan-to-value ratio to 80 percent or lower… so you avoid paying the dreaded LMI.

Choose the Right Property

Regardless of your savings goal, whether or not you strike gold on the property market depends on the investment itself.

While the myth of the wealthy property investor may lead to believe any investment is a profitable one, this is simply not true. The property market is extremely volatile and market values can fluctuate in and out of your favour instantly.

To choose the right investment property, follow these simple tips:

·         Invest in a Growth suburb–To get the biggest return on your investment you want to invest in a suburb that has a bright future. Is the local council investing in exciting development projects? Have properties that match your type and sale price been sold within the past 3-6 months? Does the suburb have a relatively low vacancy rate (do people actually want to live there)? If so, then you could have a growing, vibrant suburb set on your sights.

·         Renovate to Enhance Value… Not Impress – If you’re willing to renovate your first investment property, upgrade parts of the house that need it most and will add the most value to the way people live. Not everyone cares about having a fancy swimming pool and the running costs mean you will probablyburn more cash than you intend to. Go for tried-and-true renovations like new kitchens, bathrooms, heating and cooling appliances – and a fresh coat of paint is nice too.

 

·         Don’t Go for Dirt Cheap – Be wary of the lowest dollar value on the market. While you pay less upfront for a cheaper and older home, you might have to pay thousands of dollars in renovations and repairs before a potential buyer will even look at it. This may include renovating the kitchen or bathroom, upgrading the electrical wiring, and reinforcing the structural integrity of the building itself.

Seek Expert Advice

You probably know of the many online search tools you can use to research the property market by suburb. But did you know your local lender and mortgage broker may also have valuable data on your ideal suburb? From changing market values to demographics and purchasing history, there lies a wealth of hidden gems waiting to be discovered.

Don’t be afraid to reach out to your support network and learn everything you can about your chosen location. From there, you’ll be able to start approaching lenders, attending auctions and getting your documentation in order, and eventually – start your journey towards wealth and prosperity.