I want to squash the myth that you have to have money to make money, or be in some secret club of experts to profit from property investment.
I made over $150,000 from my property, with a small deposit, and minimal single income (at times I was actually earning nothing) so I know it can be done! It wasn’t a high priced property, I didn’t buy it as a mortgage or off market sale, it wasn’t my first house, so I didn’t get any government grants or concessions, but I was pretty strategic with what and how I bought the property. I thought I’d share with you my top tips to get a foot in the door of the property market, in hopes that it inspires you to make your dream of property ownership possible, especially for those who feel it may seem impossible.
First of all don’t be afraid to step out of your comfort zone and look further out of the cities and established areas to gain something that you can afford. My place was a little 2 bedroom cottage on 2 acres of land, a little further out of the main towns than I was used to, but I knew it had potential. I was on the lookout for a place for about a year before the right one came up, back before I was working in the industry.
Now you may already be in a financial position where you have a decent deposit saved up…and obviously this would be the ideal situation, however for me this wasn’t the case. I had just finished paying off a big debt I gained after the end of a relationship, and virtually had no deposit. I was lucky enough to have my parents go guarantor against my mortgage for me. Don’t be afraid to ask for help or to shop around for the best mortgage package for you. Some sellers are also in a position to offer a rent to own style sale so it doesn’t hurt to ask the question, or think outside the box.
You may also be eligible for first home owner or building grants, so please talk to your broker about this.
Rentvest of Rent rooms.
You don’t have to live in your first house. Right now with interest rates being so low, mortgage repayments can actually be cheaper than rent for a house, however, if you are currently renting a room in a house, and you love the lifestyle you have and the location you live, then there is nothing stopping you from buying where you can afford, and renting where you love to live. This way you get the best of both worlds. You get into the property market, but you have someone else renting the property and paying your mortgage. You can continue to rent which means your living costs won’t change that much.
If you definitely want to live in the house you buy then roomies might be the answer to helping keep costs down. Keep in mind though, for an owner occupied home, you will need to prove that you can service the loan repayments by yourself so this will only help you get ahead once you’re actually in the house, not help you get a loan.
I lived in my house long enough to satisfy tax breaks, and then moved out and rented the house which covered my mortgage repayments, rates, and repairs. I rented a cheaper place to live in myself and saved the difference to put back into the mortgage which helped build the equity up a bit quicker.
Release your Ego.
It’s highly likely your first home won’t be your dream home, so don’t get hung up on the idea of needing certain luxuries. To get a foot in the door you may not get the newest house on the best street, so don’t be afraid to buy a place that needs some TLC. If the property is structurally sound, and liveable, then changing the look and feel of a house, with paint, new floor coverings, new tiles here and there, and soft furnishings, landscaping etc, is relatively affordable, and will generally lift the value of the property. Before doing anything though, it pays to talk to an expert, to make sure you’re not going to overcapitalise.
If you’re serious about building a property portfolio, or getting ahead with property, then choosing the right first home is critical. Even if you don’t plan to rent it out, you never know what might happen down the track, so when you buy, look at it from an investment point of you. Check the rentability. Check the yield. Check the predicted growth and development for the area. Invest in a buyers agent right at the start to help you get the Best Buy. Then when you find your perfect place, work hard to build up your equity in the property. That way you have a solid foundation to propel from for future purchases.