You’ve thought about it, people have talked to you about it, and it’s all over the media – you’ve decided that 2017 is going to be the year that you buy an investment property. Unless you’re sitting on buckets of cash, chances are you’ve got a bit of work to do. But where do you start? Read our tips to buy that investment property sooner.
Understand what you’re aiming for
Rather than blindly getting the money together and seeing if it’s enough, put some serious thought to what you’re aiming for. Begin by considering your investment strategy, price and location. Are you looking to buy a place you move into in the future, or do you just want to find a solid investment that’s going to give you long-term returns? Are you looking for a modest one bedroom apartment close to the city, or do you want a large block with water views? Are you buying in Sydney or Hobart? The options are endless, however what you decide upon is going to dictate how big a hill you need to climb.
See if there are any shortcuts
You may not have to save for the entire deposit. Many first time investors are getting mum and dad to help out by either borrowing funds, being gifted money, or tapping into the equity of either the family home or a family member’s investment property to fund some or all of the deposit. If you’re fortunate enough to be in this position, you can pass ‘GO’ and collect your $200. Other shortcuts might be buying something off the plan and getting a stamp duty concession saving you $15,000 – $35,000.
Set a goal
To set a goal, you need to understand it. Can you borrow 90 per cent of the value of the property? That means you’ll need to have 10 per cent plus costs. If you’re after that one bedroom apartment near the city, you could be up for $500,000 (depending on what state you’re in). That means $50,000 plus costs, so your goal could be up to around $75,000.
Make a plan
Sometimes you’ve just got to put in the hard work. If you’ve already got $30,000, you’ll need to save another $45,000. Consider ways you can do two things – spend less money and earn more money. Cut costs in areas that you don’t derive value from. Look for either a promotion or additional income streams. If you can increase your net savings this way, you’ll be able to save the money you need earlier. For example, if you can save $2,500 per month, then you’ll achieve your goal in 16 months.
Get there faster
If you know that you’re going to reach your goal in 16 months, it may be possible to speed things up a little bit. Once you’ve got your 10 per cent deposit together and are starting to save the costs, you might be able to buy something under construction. You’ve locked in your price, but you can save the rest of the funds while it’s built.
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