If like many people you've decided that an investment property is the right move for you, it's time to get serious about saving. Although some investors are lucky enough to be able to enter the market straight away, for many it involves intensive saving before going in search of mortgage solutions.
There's no easy way to figure out exactly how much you'll need to save, but with some sound property investment advice on your side, you should be right on track in no time at all.
Weighing up the size of your deposit
As with any property purchase, the first step is to make sure you have built up a significant deposit. Although the general rule is that you'll need at least 5 per cent of the property's value, in reality you need to save closer to 20 per cent, if possible.
Just because the median price is listed at a certain level, you should only ever use this as a guideline.
With this in mind, you will need to collate information on property prices in your chosen area. There are various indices you can rely on, including the CoreLogic Home Value Index. November results show the median dwelling price across the nation's capitals stood at $595,000.
This means you're going to needs tens of thousands of dollars to put yourself in the best possible position with a mortgage broker. If you're serious about becoming an investor, then setting aside money sooner rather than later is the only course of action.
Know about your mortgage insurance options
Taking out lenders mortgage insurance (LMI) could work in your favour as an investor. It's not to be confused with mortgage protection insurance, which ensures you can continue to meet your mortgage repayments if you were suddenly unable to.
Generally speaking, you will need to put down a much smaller deposit when you take out LMI, meaning you can move onto your next investment sooner rather than later.
LMI costs will be written off over a period of five years, which will also make it easier for you to move up the investment ladder. If you're eager to make those all-important first steps, then this could be the right choice for you.
Take into account extra costs
Although the property you choose might be in an ideal location, it's possible you will have to make some changes in order for it to appeal to your target market. This will ultimately govern how much you need to save.
For example, a four-bedroom detached property in a leafy suburb might be ideal for families, but does it have everything they need? It might be that you decide to landscape the garden to make it more child-friendly or have a driveway installed – all these changes will cost money.
The renovations market is massive in Australia, with good reason. Even the slightest of alterations can make a good property great, which is ultimately what you want as an investor. The Westpac Renovation Report revealed that home renovations increased 147 per cent between 2010 and 2014, with 89 per cent of people believing it is a good strategy for increasing a property's value.
The bank also noted that the value of renovations is rising, as $600 million of work was approved in August 2014, up 40 per cent from December 2013. Although the size of your deposit will undoubtedly be crucial, you also need to think about any additional expenses such as these when putting together a savings plan.
Different parts of the country will attract different property prices, and the same goes within individual towns and cities. Just because the median price is listed at a certain level, you should only ever use this as a guideline.
After all, half the properties in that location will be over that particular price boundary, while the other half will be lower. Once you know what your budget is, then you can start discovering whether you're likely to find the right property in that particular area.
The Real Estate Institute of Australia (REIA) recently revealed that median price growth is slowing across the nation. With this in mind, you could discover some locations are becoming more affordable than you first thought.
In the third quarter of 2015, REIA noted that house prices increased 2.3 per cent, while a rise of 2.1 per cent was registered among other dwellings. It's crucial that you're paying a fair price for your property, which is where the guidance of an independent real estate network can really come into its own.
Information is key
The amount of information that's available to would-be investors is vast – it's knowing which is the most relevant that is the biggest challenge. The REIN Group offers property investment seminars and other tools that will help improve your chances of success right from the very start.