Investing in property on a low income
How to invest on a low income
While most of us do not earn a six-figure income that doesn't mean we can't invest in property. Those who earn a relatively low income will require to think outside the box in order to start a portfolio. Here are some tips to help you get started.
Find an investor-friendly lender
The challenge for low-income earners is the time taken to save for a sizable deposit. Some lenders require a higher deposit for an investor than is required for an owner-occupier, so seek out a lender and loan that is investor friendly. In any case, most lenders would require having at least 10% of the property’s purchase price as a deposit. Like owner-occupied loans, if your LVR exceeds 80% of the property value you will pay lenders’ mortgage insurance (LMI).
Increasing your chances
Your lower income on an application can be offset by proving yourself a low risk borrower. Having genuine savings will not only highlight to lenders your ability to consistently meet financial payments and live within your means, it is also an opportunity to increase your buying power.
This will also work when lowering any existing debts, by keeping your credit card limits to a minimum it will increase your borrowing capacity. Try to pay off any personal or car loans as a $10,000 personal loan can reduce your borrowing capacity by upwards of $50,000.
Seek out different strategies
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, owning half is better them not owing a property at all.
Think outside the square
When it comes to choosing the property, don’t just look at the area where you are living in or nearby as chances are it is out of your reach. Properties on the outer suburbs and even regional areas have proven to be a good entry point for investors while still a high rental yield.
Finding the right loan for you
Recent research suggests that as many as 60% of applicants who are rejected by the major four banks would be eligible for a loan through a specialist lender. Specialist or non-conforming loans do carry higher interest as a rule, to account for the higher perceived risk the lender is taking. A good finance broker will see this type of loan as a stepping-stone to a prime loan, and help their client prove themselves so that they can switch to a prime loan after a year or so.
Property investment may not be as straightforward to low-income earners, but in most cases is accessible, provided the right properties and finance products are sought out. Give us a call at Certified Lending on 0433 590 621 and let us guide you through the process.
"Disclaimer: Your full financial situation would need to be reviewed prior to acceptance of any offer or product"