3 Ways To Finance An Investment Property Deposit

3 Ways To Finance An Investment Property Deposit

For the majority of investors looking to build a decent sized property portfolio, it’s likely you’re going to need finance at some stage.

Todays article looks at at 3 Ways To Finance An Investment Property Deposit.

  1. Save

For many of us saving for a deposit for a home is something we’re not likely to do many times in our lifetime.

Saving for a deposit requires budgeting and discipline.

10 things that might help you save for a deposit.

Lenders like to see a consistent savings history. They also like to see you can save your way to a deposit .

Hidden costs associated with buying an investment property.

The total amount you can borrow depends on a variety of things, including your income, your savings, your job, etc.

  1. Equity

The second way people create a deposit for an investment property is through equity.

Equity is simply the difference between the value of your property and how much you owe the bank.

Example:

Value of property: $450,000

Debt on property: $350,000

Equity: $100,000

Equity only becomes a possibility once you own another property.

Many investors use the equity generated from their own home, usually their primary place of residence, as a deposit for their next purchase.

There is an old saying – you’ve got to have money to make money – which is true in this case. For most investors the hard work is saving for your first deposit, after you own one property it becomes increasingly easy to buy more.

There are several ways you can manufacture profit or growth into a property without relying the market.

  1. Self Managed Super Fund 

Self Managed Super Fund’s are another way you can access money in order to finance a loan, or pay a deposit.

In SMSF’s you need a deposit of at least 20% to purchase a property and the rules are slightly different to regular investment lending.

There are a couple of other ways you can generate a deposit; such as being gifted money or an inheritance, etc. Unfortunately not many of us will have this opportunity in our lifetime.

Now that we have spoken about how to generate a deposit, we can talk about how to finance a loan.

The most common way to finance a loan is through a bank. We recommend you contact a mortgage broker as they have access to a range of lenders with a range interest rates.

A broker can compare the market for you, and will also give you a realistic idea of what sort of loan you could afford to service based on your current financial situation.

Aside from borrowing money from the bank for a loan, you can look at joint venture’s, options, paying cash or paying using an inheritance.

The information contained in this article is for general information purposes only and should not be regarded as a substitute for professional legal, financial or real estate advice. The information is provided by Pumped On Property and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained in this article for any purpose. Because every persons needs and financial situations are different, the information in this article are intended as a guide only. Any reliance you place on such information is therefore strictly at your own risk.

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Kristal Everingham

About

Kristal Everingham is a Property Acquisition Manager at Pumped On Property. Her mission is to show you how to replace your income through property investing so you can do what you love…full time.