— Property

Strategies to Start Investing in Property With Little or No Money

Owner-Occupier Loans

When lenders look at finance applications, there are differences in their approach depending on whether the potential buyer is looking to purchase an investment property versus buying a property to live in. One of the most tried and tested ways to get into the property market as an investor is to buy as an owner-occupier and then turn that property into an investment. The advantages of doing this are that the barriers to entry into your first property are far lower.

Advantages of Buying as an Owner Occupier

The first significant advantage of buying as an owner-occupier is that you can be eligible to pay low or no stamp duty. In most cases, it is possible to get the First Homeowners Grant. If you meet specific requirements, you can claim a first home concession for transfer duty when acquiring your first residence. However, some requirements regarding this scheme differ from state to state within Australia. Check on your local government website for more information. Lenders’ Mortgage Insurance (LMI) is the other big-ticket issue for property buyers. LMI applies to loans where the purchaser wishes to take out a loan with less than a 20% deposit saved. This fee is quite costly and can often cost tens of thousands.


Guaranteed Loans

A way to avoid this is to use a guarantor loan, which in most cases involves parents, who effectively put up equity in their own home so that you can use it as a deposit. Getting a 100% loan is sometimes possible, meaning no money is deposited. However, these are rare as they are considered a much higher risk to lenders. Similarly, government-backed programs (FHLDS) allow you to borrow up to 95% of the property’s value. The Government will effectively make up that deposit shortfall, and you won’t need to pay LMI.
To access these loans and incentives, you must stay in your home as an owner-occupier for 12 months after purchasing the property. Afterward, you can move out and rent the property as an investment. If you are buying in a high-growth area, you might even see an equity uplift that you can access to buy your next property.

Joint Ventures

Another common way to buy the property with little to no deposit saved is to partner with someone who does. This is not exclusive to romantic partners; it may include a parent, sibling, other family members, or friend. If you have a job or regular income, little debt, and low expenses, you might be a good candidate for a loan from a bank. By partnering with another party that brings the cash component, buying a property that you might not have been able to have done by yourself is possible. Buying an investment property with someone else is not always practical, depending on the relationship. However, this deal happens frequently in small developments and even renovations intended to be sold.

Creative Savings

Lenders like to see savings as it suggests you manage money well. When you buy a property, lenders look at your savings and how much you can afford to borrow based on your income and expenses. However, each lender analyses these savings differently. Some lenders might consider those genuine savings if you take out a large personal loan to cover stamp duty and a deposit and leave that money in your account for three months. Assuming you can service what would effectively be a 105% LVR, this could be a strategy that could work for people in some circumstances.

Buying Off-the-plan

It’s possible to buy apartments or homes off the plan, and because the property will not be built for some time, you might only need to pay the initial deposit upfront. While this is typically something like 10%, this will still be lower than other property investments. Stamp duty can sometimes be delayed (or exempt), but it’s essential to check on a state-by-state level.

Gemma Broadhurst
I am a writer by profession, and I love to write in my spare time. I am one of the most experienced writer for newspriest. I always make sure that whatever is written on my blog is 100% genuine and true. I am a University of Florida graduate pursuing a Master's degree.

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