- August 4, 2017
- Posted by: Aman Singh
- Category: Economics
Do you have to be a millionaire to have your own investment property portfolio? The answer to that is a resounding “no”! Even with average income, Aussie investors have built an enviable property portfolio. While some cash is essential to get started, there are many ways to get a foot in and prosper in the property market even with an average income.
#1 Interest Only Repayments
Interest only home loans mean that you have to pay interest on the loan for a certain period without paying down any of the principal loan amount. Chosen specifically for those buying an investment property, interest only loans reduce the chances of loan repayments. Rental return on investment property then comes handy when it is time to pay the mortgage, leaving less of a burden on your financially and a greater ability to service the loan.
#2 Cash In On Equity
If the property market is an area you have some interests in, and you own a home, equity may be used not as a deposit, but as a guarantee. Using the home’s equity, one may be able to borrow more than eighty percent of the investment property value without paying the LMI. This can save you a lot of money. To calculate the home equity, you need to calculate the property value less 20% and deduct debt owed on it.
#3 Use a Guarantor
If friends or close family members are in a position to offer a helping hand, they can act as guarantor for purchasing an investment property that can create an investment property portfolio earlier. Guarantors use equity in their property as extra security for a section of the investment property loan amount. This can avoid LMI if the 20% deposit is not saved. Guarantors need to only secure a portion of the whole investment property loan.
#4 Consider Purchasing the Plan
Only a 10 percent deposit is needed to purchase an off plan property. The rest is only due when the property has been built, a couple of years down the road. This will enable you to arrange finances in order to save more cash. A smaller home loan is needed to finance investment property. Buying off the plan also increases eligibility for a government grant.
#5 Capitalize on Costs
When purchasing an investment property, if more than eighty percent of the property value is borrowed, then LMI needs to be paid. This can add up to thousands of dollars based on loan size. Lenders may let you capitalise LMI. This means it does not have to be paid as a separate lump sum. LMI is incorporated into the overall loan amount. This lowers costs upfront and increases monthly repayments. Ensure you can afford the repayments.
#6 Purchase An Investment Property In A Group
A family member or close friend eager to enter the property market and create an investment property portfolio with you. Opting for halves or thirds with a person means you only have to pay your share of the deposit. Owning a percentage gives you the leverage to make an investment without spending all your savings.
Wealth creation possibilities while building a property portfolio are unlimited. Get more returns than a regular superannuation fund. The Housing Industry of Australia has reported that 24m Aussies now are in the market for the property. Around 1.8m or 7.65 percent of the population owned an investment property in 2014. Triple the properties your own and you can increase your income from rent enough. But for this, you need to start with your first investment property.
#7 Don’t Let The Money Factor Hold You Back
Equity comes in different sizes and shapes. Choose to spend money wisely and you will get great returns from even the small amounts. On small budgets, you can net massive profits by renovating and adding value to the property (Westpac Australia 2014). So, even if you have an average income to start with, making renovations to your home will only improve its rental and market value. This can ensure that you meet the mortgage costs and built an impressive property portfolio.
Choosing to become a property investor can prove beneficial in the long run. This is why Australians with average incomes have prospered with the real estate boom. Controlling your assets and building a property portfolio means understanding when money is made.
Take control of assets and create a property portfolio. Being investment-ready means being alert about the market potential, rather than just looking at things on the surface. Be aware of the underlying risks that come with property investment and invest wisely.
This is how Aussie investors have cashed in on the housing boom with middle-level incomes. So, choose wisely and you could be leading an investment portfolio worth millions. Don’t let lack of money hold you back. Start with a modest investment and work your way up for great benefits.