There are opportunities for low income earners to get involved in property investment – it just takes a little creativity and research.
Banks have loosened their lending criteria making it easier for those on lower incomes to enter the property market.
During the GFC, it was difficult to borrow more than 90% of a property’s value, which made it harder for people with little deposit to get into the market. But in the last six months a number of lenders have started to offer funding for up to 95% LVR.
Smartline Personal Mortgage Advisers managing director Chris Acret says this opens the door for people on lower incomes.
“Plenty of people with a minimal income have gone down this path by thinking ‘outside the square’ as to how they can make it happen.
“See if you have family and friends who might like to invest with you, or maybe your parents are prepared to act as guarantor to get you started – there are options.”
Smartline is recommending potential property investors to look for low-priced properties that offer high rental returns.
“This will probably mean looking to the outlying suburbs of the major capital cities and to regional areas, such as mining towns. You should probably be looking at properties that are priced at $250,000 or less.”
According to Smartline, with interest rates at 7% potential investors should be looking for yields of 8-9%. Ideally, property investors would be able to rent a $250,000 property for $380/week.
Acret advises low income earners to consider these points:
Avoid negative gearing: Low income earners will be less able to fund shortfalls, so look for opportunities that are positively geared or at least neutrally geared.
Depreciation: this could put your investment into the negatively-geared territory
Tax adjustment: Apply to the ATO for a tax adjustment at the beginning of each financial year
Do your homework: Your Investment Property (www.yourinvestmentpropertymag.com.au) regularly provides readers with up-to-date information in the nation’s property hot spots, as does RP Data
Interest-only loans: Repayments will be about 25% on this type of loan, compared to a principal and interest repayment loan
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