Buy What I Can Afford or Wait and Save
If you’re at the start of your property investing journey, and you’re still saving your money for that first deposit, it can be so tempting to jump into the first property that comes your way and fits into your budget.
I often get asked “Should I get a cheaper property because that’s all I can afford right now, or should I keep saving and wait?”
This is such a good question because it shows the keenness of new property investors. It’s great that you’re ready to take action now! But sometimes the best action you can take is to build up that deposit a little further. Here’s why…
What Does an Investment Property Cost?
To get into the kinds of properties right now in Australia in 2017 that are best positioned for capital growth now, but also long-term success, you’d be looking at around $500,000 (give or take 50K). Properties going for less than that are usually missing at least one or two important features that are going to end up costing you money.
This means that you will need about $50,000 saved for a deposit, and then a little more to cover costs. That’s what you need to be aiming for.
Why Avoid Cheap Properties
If all you can afford is a $300,000 property right now, resist the temptation to jump into that opportunity. Because you might end up in an area that isn’t going to see any capital growth. You aren’t going to be buying in the middle of the market, which means that you’ll have trouble getting good tenants and might suffer from issues like rental vacancy and high maintenance costs. All of these things can set you back for a long time.
It’s much better to keep working and saving for another 6-12 months and grow your deposit to cover the deposit and costs of the right property.
Even though it is important to get that first property as quickly as possible, if you get the wrong property, it will set you back and you will regret it.
Hold off and get a quality property from the beginning. This is crucial to your success because your first property is the most important one to your portfolio – it determines how fast the rest of it will grow!
Happy property investing,
Daimien J Patterson