Saving for a deposit on an investment property can feel impossible, especially if you’re already paying off your own home. However, being diligent with your money is worth it, because of the great financial returns that you can make over time. Here are 5 ways to save for an investment property:
1. Figure out how much you need
Before you get serious about savings, it helps to have a goal in mind. So figure out what kind of investment property you want to buy, where you want to buy it, what you can afford, and how much you’ll need as a deposit to make that happen. This could involve chatting with a mortgage broker, or undertaking your own research. If you’re on a tight budget, don’t rule anything out until you’ve undertaken your own due diligence.
2. Renegotiate your existing home loan
Depending on your circumstances when you purchased your principal residence, you may be able to renegotiate for lower payments over a longer period of time or to make interest-only payments for a period of time, while you save the money you need for your investment down payment. You can do this on other loans as well, such as your car loan, but be aware of the extra interest you’ll end up paying over the term of your loan by doing so.
3. Rent out your extra space
If you have a spare bedroom or a garage that you can do without for a while, you can make extra money by renting those spaces out. There are plenty of websites that can help you do this that can suit your needs. If you don’t want a full-time tenant, a great option to consider is renting to travellers with websites like Airbnb. You don’t have to give up your living space entirely, and you can keep the space free for when you need it, while still earning extra cash to put towards your investment property deposit.
4. Use your super to purchase your investment property
You can use your super to buy an investment property so long as you don’t ever intend on living there. To do this your super has to operate in part as an SMSF. You can use your super to cover the deposit, and mortgage the rest. Establishing an SMSF is a complicated process, you’ll want to seek professional financial advice so that you understand your responsibilities to ensure your fund is set up correctly.
5. Cut down your expenses
If just for a little while, consider how you can make your life cheaper in order to save more. Stopping magazine or tv subscriptions like netflix, cooking more at home, and skipping a holiday in favour is a ‘staycation’ will mean that there’s more money available to put aside for your deposit.
Purchasing an investment property is a great financial decision for your future, and the sooner you can get into the market, the more you can reap the benefits of an investment property. You could use all 5 of these tips, combine only the ones that will work best for you, but if you use them, you will find saving for an investment property deposit is within your reach.