With the surge in property prices over the past few years, the barrier to entry has never been higher. However, there are many different ways to get into the market. If you only have a small deposit or limited borrowing capacity, it might be worth looking at some alternative ideas. Here are some options worth considering:
Convert your PPOR into an investment property
One approach to starting your investing journey is to convert your principal place of residence (PPOR) into an investment property. By renting out your current home, you can generate a steady flow of rental income.
Additionally, you may be able to access depreciation and tax benefits, which can further boost your cash flow. This strategy allows you to leverage the property you already own to begin building wealth through real estate.
Owner-occupier strategy
Another viable option is to purchase a property as an owner-occupier and live in it for a period of time before converting it into a rental property. This approach is particularly appealing for first-time homebuyers, as it may still make them eligible for government grants or incentives including the stamp duty exception.
This could potentially allow you to access lower deposit home loan options as well as government-backed programs. For example, the First Home Guarantee can help you buy a home with a lower deposit while not being required to pay Lender’s Mortgage Insurance (LMI).
Rentvesting
Rentvesting is a creative strategy that involves renting a property to live in while simultaneously owning an investment property that aligns with your budget. By renting where you want to live and investing where it makes financial sense, you can potentially offset your mortgage costs with the rental income generated by your investment property.
This approach allows you to maintain flexibility in your living arrangements while building equity in real estate. It also means that you are living in the location that you want, while not missing out on the potential upside from capital growth. You might even be able to identify areas that are ripe for growth.
Joint property investment
If saving up for a deposit on your own proves to be challenging, consider partnering with a friend, family member, or group to purchase a property together. Joint property ventures have become increasingly common, especially in markets where housing costs are prohibitively high. By pooling resources with others, you can overcome financial barriers and access opportunities that may have otherwise been out of reach. It also allows you to get into the market sooner and capitalise on any potential growth while you save and build equity for your next purchase.
