You want to expand your portfolio, but don’t have a deposit ready to go…what do you do?
Do you miss out on the deal and live with regret? You may not need to. First, give the following tips a try.
Fast car or fast cash?
Whenever b Invested founder Nathan Birch needed to free up funds to make the most of an opportunity in the past, he did whatever he needed to. On one occasion he sold a car he had recently purchased because the money for the sale was what he needed to get a deposit on a great purchase deal.
Do you have an asset worth $20,000 or $30,000 that you could trade in to leverage into something worth much more? You might be able to offload a car, a boat, or a caravan…. These are all things that depreciate in value. Sell it now and you can always buy one again later in life…and possibly even for cheaper.
Don’t stop drinking takeaway coffee
You’re probably sick to death of hearing that you need to give up your soy lattes, or avocado on toast (mostly from Baby Boomers).
The truth is, it would take a very long period of going without these things in order to make a meaningful difference to your borrowing power. In fact, a recent Finder study revealed that to save an average deposit on a median priced property in Sydney, you’d need to forego more than 50,000 takeaway coffees… that’s about 143 years’ worth of scrimping, which is not a timeframe you should be working towards.
Rather than denying yourself life’s little pleasures, look to make more meaningful savings.
Household bills can be slashed by more than $500 a month simply by switching energy providers, insurance firms, streaming services, utilities and other things from the average packages to the best ones on market.
Turn space into income
Got a spare room in your house? An unused car parking space in an area near a station or CBD? Storage room that could be hired out? Even a car that you don’t need during the day? You could turn these things into hundreds of dollars a week by renting them out through the many share economy platforms that have emerged in recent years.
Work a side hustle
Long term gain often requires short term pain and the best way to create more money for yourself to put towards a goal is to work a second job.
Early in his investment days, Nathan Birch realised he needed to be earning twice as much as he currently was in order to service the investments he wanted to make. So, he simply worked two jobs.
You might want to pull beers on the weekends to boost your income (while also cutting down on your spending), or you may have a skill in your regular job that you could put to use on a freelance basis out of hours.
Find a partner
Is there a deal on the table that’s too good to pass up, but you’re only able to stump up half the deposit? Consider a joint venture with a likeminded investor, family member or friend.
You may be able to raise enough equity each to leverage into future investments, or you could buy the partner out down the track at an agreed price and share of the equity you have made.
Refinance current deals and check market rents
If you already have a number of investment properties, you could free up more cash and equity by giving your portfolio a tune up. If you haven’t had your properties valued for a while, you might find that doing so unlocks enough useable equity to fund your next deposit. Most markets have had considerable growth over the past two years of Covid.
In the process of getting them valued, you may be able to negotiate better interest rates on their mortgages.
Meanwhile, rents have been on the rise as vacancy rates tighten. Your properties may be worth extra dollars each week in rent and you didn’t even know. Check asking rents in the markets you are invested in and see if you can justify an increase.
Giving up coffees to save a deposit
Best ways to save for a house deposit