It’s difficult to save for a down payment on an investment property. High property prices and the challenges of managing finances can lead people to believe that reaching the goal is impossible.
On the contrary, it can be quite achievable. We’re going to walk you through five proven methods that will help you in saving wisely.
1. Make a Dedicated Savings Plan
Having a dedicated savings plan is the first and most significant step in putting together enough funds for the deposit. The goal is to maintain savings goals that are well-defined and set for specific periods.
A good strategy is to target at least 20% of your target property’s value. For example, iIf your investment property is in the vicinity of $500,000, it’s recommended to save enough for your deposit, which is $100,000.
Here are some tested tips to get you started:
- High-interest savings account: By keeping your funds in designated savings for deposits, you can boost your savings earnings and prevent the temptation to spend money that should be saved.
- Savvy planning on the main account: Configure transfers from the main account to another savings account. This will help you avoid forgetting to save and dropping the money elsewhere.
You will save a significant portion of your income in this area separately, and the result will be a sharper focus on building a deposit for your investment property without any unnecessary delay.
2. Utilization of Your Equity in Your Current Property
If you are a homeowner currently, then you are just sitting on a goldmine to make use of equity left in your current property to secure a deposit for that next investment property. This is perhaps one of the brightest moves you could ever make to hasten your property investment moves.
Here’s how it works:
- The difference between your home’s worth and the amount you owe on your mortgage is known as equity. You can borrow up to 80% of your property’s value without any extra fees from most lenders.
- Starting investing earlier and saving from scratch is possible with this equity. You can benefit from the rising market and tap into the value of your current property through this approach, making it easier to amass wealth much quicker.
It’s noteworthy that nine out of ten of the 2.15 million Australians who possess rental properties have only one or two, as reported by the Australian Taxation Office (ATO). It is evident that many investors start small and use equity to expand their portfolios.
3. Reduce Expenses and Enhance Income
Reducing your unproductive costs and increasing your income are two hands-on approaches to accelerate your savings. Basic as they may appear, these two can have an impact on your bottom line when saving for an investment property deposit.
In this regard, consider the following strategies :
- Review your budget: Begin with what you can cut down. That means less frequent eating out, cancelled unused subscriptions, and finding better deals on utilities.
- Consider side hustle: Freelancing or part-time work can give your savings a significant boost. Even renting out a spare room can add to that deposit fund.
4. Squeeze Tax Benefits
While tax benefits are overlooked, they play a huge role in helping you get that investment property. Understanding and making use of tax incentives can help you save better and reach your deposit goal sooner.
Consider these tax savings:
- Tax deductions: Properties that have been put in for investment purposes offer tax deductions. Some of the tax deductions may include repaying interest, maintenance costs, and depreciation.
- Consult an expert Investment property agents can guide you through the tax system and ensure that you get every deduction.
Tax benefits are another smart way of reducing overall expenses and keeping more money in your pocket for your investment property deposit.
Read more: Investment Property Tax Benefits: What You Need to Know
5. Rentvesting or Joint Ventures
When saving for the investment property deposit, there are two other ways you can go: reinvesting and joint ventures. These can help you invest sooner and share the burden of saving with others.
- Rentvesting: Rentvesting entails renting where you desire to live but investing elsewhere in a mortgaged property. This helps you develop a property portfolio in cheaper areas of the country and, meanwhile, enjoy your lifestyle today. Further, you might enjoy some tax savings on your investment property from owning a rental property, which simply builds your savings.
- Joint ventures: The other strategy is to form a deal with a friend or family member to pool together resources and buy a piece of property. By doing this, the weight will not be too much for you, and you will be able to enter the market earlier. Make sure to create a contract for such agreements to avoid forgetting any terms later.
Why Choose Citadel as Your Investment Property Agency?
You need an agency that is aware of all market situations and has your best interest. Citadel, establishing itself as the most trusted investment property agency in Australia, offers deals tailored to your preferred conditions.
- With our data-driven approach, you’re assured of making informed decisions. Additionally, you can obtain access to local deals that you won’t find anywhere else, giving you value for your money.
- We also use the power of local know-how with our nationwide outreach to ensure that buying the next investment property has never been made smoother than this.
By choosing Citadel, you choose from the best brains that make it smooth and stress-free. Ready to get started? Contact us today!