Is it worth getting into property when you only have a small deposit?

We all know how powerful property is as an asset class but given how expensive it is, it’s not always easy to capitalise on when you’re just getting started.

I’m often asked how I would invest if I only had a small amount of money to put down for a deposit and fortunately, there are some things you can do.

If you’re looking to buy on the East Coast with a small deposit and particularly in a place like Sydney, you can often find that your options are limited. However, if you’re a first home buyer, you have the ability to take advantage of many of the government incentives which can really make things a lot easier.

First-home buyers can capitalise on stamp duty exemptions and can also use some of the government-back programs to get a home loan without the need to pay Lender’s Mortgage Insurance (LMI). These two things alone will save you tens of thousands of dollars.

The catch is that you cannot use these programs to purchase an investment property and it will have to be as a home to live in for at least 12 months. That means that they will also have to be close enough for you to commute to work while also being affordable depending on how much you’re able to borrow.

Assuming you’re borrowing capacity isn’t that high, you are probably looking at buying an apartment or a small townhouse. Ideally, you can afford something in a good location that has plenty of amenities and is in itself a desirable type of property. For me, that would look like an apartment or townhouse with no strata costs, parking and in a desirable area that owner-occupiers would be happy to live in.

The other thing you can also do is rent out the spare room in the property while you’re living there which will give you a cash flow boost and help you start saving so you can expand your portfolio in the future. In the early days, it’s critical that you keep saving as much as you can, so you’re not only building equity but also have additional money to funnel into your next purchase.

After 12 months, you can look to rent the property, and potentially rentvest if that will help your ability to borrow more so you can keep on investing.

The other critical part of the equation is to continue to look at ways that you can increase your income. Whether that is through, getting a better job, starting a side business that has the potential to grow into something larger, or upskilling so you can command a higher wage, it’s important that you always look at ways you can continue to grow your income.

We know that property is not just about buying the right asset, it’s also about being able to finance the purchase. By putting time into yourself and growing as a person and finding ways to upskill, you can then leverage that even further by putting more of that income into future property purchases.

Growing a property portfolio is not something that you need to do in a short space of time – it’s a marathon, not a sprint.

But you can’t get to your goals if you never actually start the race. My first property was a small apartment in a good suburb and over time, I did everything I just spoke about and found ways to increase my income and improve myself as a person in life and in business.

You can get there, but you need to make a plan and get started today. Don’t let a small deposit hold you back.

If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.


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