Low Income Property Investment
So, you think property investment or ownership seems impossible for you on your salary. It may feel that, way but maybe all it takes is some creative thinking and a good Bear Loan Broker. Here are some tips that could see you well on your way to holding those keys in your hand.
Yes, you can get that loan
There is research to suggest that up to 60% of rejected loan applicants from major banks, would be approved via a specialist lender. You may not tick all the mainstream boxes; maybe you’re a casual worker or perhaps you’re self-employed. Just because you’re not the cookie-cutter applicant, doesn’t mean that you’re not capable of covering the repayments. Specialist or non-conforming loans do carry higher interest from the higher perceived risk, however a good broker can see these as stepping-stone loans. They prove a client can maintain their loan and so after a year or, so it would be possible to switch to a prime loan with lower interest.
You’ll need to save at least 10% deposit to secure a property without being stung with LMI, (lenders mortgage insurance). Saving for your deposit takes discipline, imagination and control over your finances. Achieving your deposit means lowered risk and growth in your borrowing power. Some lenders require a higher deposit for an investment property, however, as mentioned, not all loans and brokers are alike and there are investor-friendly options out there. You could also consider living in the property, as an owner-occupier for a period before converting it into an investment. There are so many ways you can save money or gain extra income, you just need to do your homework and figure out what works for you. Having genuine savings will highlight to lenders your ability to consistently meet repayments and live within your means. If you’re not a fan of budgets or spreadsheets, here couple of apps that could help ease your budget and savings:
Prove you’re a financial ninja!
Maybe debt is holding you back? If you can lower your existing debt, you can prove yourself a lower risk to lenders and improve your borrowing capacity at the same time. Who wants to have a negative debt tying them down, when you can have a positive investment in a home! Credit cards can feel like a massive drain on your ability to get back in control – because they are. It’s imperative that you reduce any limits, as the limits will be used to calculate your borrowing, not your balance. Try consolidating your credit card debts and paying them off. Prioritise paying off any personal or car loans too. Removing the weight of negative debt can be one of the most empowering things you can do.
Choose with your head
Your heart may be telling you to buy your dream home straight-out but if you want to get ahead, do the maths and listen to your head. Steer clear of any negatively geared properties, unless you’re earning a higher income to off-set this against, it won’t work for you. The goal is to earn money, to build yourself up, so remember the importance of “profit over property”. Regional areas could be a great access point into the market, look for good amenities, schools transport links, including preferably being within 3km of a train station. There may be less capital-growth, but rental yields may end up being higher.
If you need help with finding an investment property and don’t have the time or the understanding of the market then you can speak to Ben Weeding at Buyside, these guys are an end-to-end buying service that takes care of everything - from research to sourcing tenants. Just let him know that you spoke to me and he will look after you.
Seek out different strategies
For those who don’t have other non-deductible debt they want to pay down first, adopting a principle and interest payment is the obvious choice. Interest-only loans are only suitable in specific circumstances when strong exit plans are in place, while principle and interest payments reduce debt, freeing up borrowing capacity and allowing the borrower to leverage equity.
Investing with a close friend or relative is another way to enter the market for those who earn a low income. As long as agreements are in place, including who is responsible for the mortgage and what happens if one owner defaults, how the property will be used, in what circumstances it may be sold, and how maintenance will be paid for, co-ownership is preferable to not owning a property at all.
Property investment may not be as straightforward to low-income earners, but in most cases it can be accessible, provided the right properties and finance products are sought out. For more information and help please give us a call.
This information is not to be relied upon without speaking to your finance broker, tax agent and financial adviser.
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