Why it doesn’t cost as much as you might think to start investing in property.
A lot of people think they have to be well-off in order to become a property investor, but it is possible to start investing in property for less than $30,000, says Nathan Birch.
And he would know. As the co-founder of Binvested, he has helped countless clients do just this over the years, while growing his own portfolio to more than 200 properties.
First thing is first – change your mindset!
If you think it takes $200,000 to get into property, then you probably live in Sydney.
But houses in Australia’s most expensive capital aren’t the only option when it comes to investing.
“I see people get into property for as little as $25,000 – and that’s putting in a 20% deposit,” Nathan says.
He says it is possible to buy properties in some metropolitan areas of Australia for as little as $150,000 to $200,000 – that’s the purchase price, not the deposit size.
These are properties that can have a neutral cashflow, strong growth prospects and offer a low entry point to the market.
But will they make you rich? It all depends on your strategy.
Building a foundation portfolio.
“I’ve seen lots of my clients over the years become millionaires by starting off with $50,000 or $100,000 and by being committed for a period of two or three years to do the hustle to push themselves from property one to property two to property three to property four,” says Nathan.
Being able to expand your portfolio means you will hold more properties throughout each market cycle. What does this mean? It means that having five properties go up in value will improve your financial position more than having one go up in value.
For example, if you have five properties that you paid $200,000 for – with a starting deposit of just $50,000 for each – then you would have a $1 million networth position.
If they each go up by 10%, then you will have earned an extra $100,000 – which you can use to fund two more purchases.
Then, if they went up by another 5%, you would earn another $70,000 – which you could put into another property.
How much income would you need to earn?
It isn’t necessary to be a high income earner to get into property investing. Even a yearly income of $40,000 is enough to get a loan for a $150,000 property.
If the properties you are buying have a neutral cashflow, then you aren’t forking out your own money each week to pay them off.
As long as your income is stable and you fit in with the servicing requirements of your lender, it is possible to get into property on a modest income.
Structuring your investments right.
You may think this all sounds good in theory, but just how achievable is it?
Whether or not you become financially free through investing depends on the way you structure your acquisitions. Each property is like a piece of a puzzle. You may need to build a good cashflow before you can move on to buy more. Or, you may need to improve your capital position by purchasing strong growth properties.
This is where a well thought out strategy comes into play. And before you can devise this strategy, you need to have a good understanding of your current financial position and how you would like to improve it.
Building a team of experts.
It can be pretty mind boggling trying to do this on your own – which is why it is a good idea to engage some experts to help.
A good buyer’s agent, mortgage broker and financial planner can help you plot a trajectory towards achieving your end goal.
They can even help you identify alternative ways of getting into property, such as through a Super fund, or what you need to do to get started on your journey.
Do you have enough to get started?
If you have $30,000 to $50,000 saved up, you may be much closer to buying a property than you think.
Just make sure you have a good understanding of the property market and a well-thought out plan of how you will turn this starting sum into an asset bank for the future.