Investing on a Small Budget; Can It Be Done?

couple working on their finances

So, you want to start building a property investment portfolio, but you’re unsure if you have the means to do so. The truth is, you don’t need to be a millionaire to become one, but sometimes, you do need to think outside the proverbial box.

Many people make the mistake of putting off the decision to invest, hoping to save a larger deposit. Whilst the theory behind this is good, often property prices increase within this time, and as a result, you find yourself back where you started, like a mouse on a running wheel.

So, how can you break this cycle?

Don’t be afraid to start small

Generally, it’s unrealistic to imagine your first investment will be a large family home in an inner-city suburb. A more viable option may be to set your sights on a small apartment that gets you onto the property ladder. This means, in theory, your deposit will need to be less, as will the amount you need to pay to bridge the gap between the loan repayment and the rental income. Consider something close to popular amenities; a University or TAFE that will attract students is a wonderful option. Many suburbs along the Eastern corridor are seeing an increase in the number of urban apartment developments being constructed; Box Hill, Mitcham and Bayswater being amongst them.

It’s not all about location

Whilst the inner city is a popular choice for investors and renters, that’s not to say there’s no place for investors in the outer suburbs where often property is cheaper, land sizes are bigger, and, in some cases, you can build a brand-new home – that you can depreciate – for the same price as buying an established property. Although outer suburbs may experience a slower growth rate than their inner-city neighbours, they’re a good option if you’re planning to maintain the property over a substantial period of time.

Sometimes two heads are better than one

Another way to start building your portfolio sooner is to invest with somebody else; perhaps a sibling, family member or friend. Again, this means the deposit amount will be less, as will the monthly outgoings. Before making this decision, it’s good to check you’re both on the same page about what, and where, you’d like to buy, and how long you’re intending to hold on to the property. And no matter how much you love or trust the person you’re investing with, have a solid agreement drawn up by a professional, outlining terms and agreements of the partnership. Without this, DO NOT PASS GO!

Invest in a future development

Buying off the plan is another option for those looking to get into property investment. Typically, you only require a 10% deposit to buy an off the plan property, and this secures the purchase price, whilst allowing you more time to save money and gather your remaining finance, whilst the home’s being built. If there’s a reasonable time between signing the contract and settlement, it’s possible the property may have already increased in value; an instant win for you! If you’ve pinpointed an area of interest, liaise with local Real Estate Agents, as they may know of upcoming projects; many are in close contact with developers on a regular basis.

Points to note with financing your property

The value of having a trusted mortgage broker, bank manager or financial planner who understands the intricacies of buying and borrowing cannot be underestimated. They can provide information on topics such as interest-only loans, lender mortgage insurance and properties that banks may be hesitant to lend money for, as well as making sure you get the most competitive deal.

As with any big-ticket investment, it’s imperative that you do your research and understand exactly what you’re committing to. Where necessary, engage the help of professionals who will be glad to provide advice and guidance.

You may be surprised at how little you need to make the start you’ve been dreaming of, so stop hesitating and take the first steps now – what have you got to lose?

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