Investors are always asking how much money they need to buy a property, but there’s no one-size-fits-all with real estate.
The most significant consideration for most first-time investors is how big their deposit should be.
While many experts suggest property buyers save for 20 per cent of the price of a house, it is possible to enter the market with as little as a 5 per cent deposit, Zoran Solano, senior buyers agent from Brisbane-based Hot Property Specialists said.
But an investor would also need enough to cover purchase costs, such as a building and pest inspection and conveyancing fees, and stamp duty. Depending on the property, this could be a hefty sum.
But other industry experts argue a larger deposit is a necessity, including Perth-based LMW Property Advisory director Ben Lamers.
“We do not recommend going below 20 per cent as a deposit because paying mortgage insurance only insures the bank, not you,” he said.
A lower deposit also leaves investors at the mercy of any price falls, as it could mean the property would be in ‘negative equity’ – where you owe the bank more than the property is worth.
For those with funds, it makes sense to buy a good investment property sooner rather than later.
But for those waiting to save more, it’s worth considering whether it’s better to buy in a strong-growth area. If you’re “scraping” to get into property investing however, it might be worth rethinking.
Good cashflow is also a vital ingredient if you are going to support a quality investment property.