Save Money to Buy an Investment Property for Sale
It’s no secret that saving money to buy an investment property is a challenging affair. But, with about one in every five Australians owning property, you have no reason to make that an excuse. So, you can become a landlord, too.
Most experts recommend saving enough to meet at least 20 percent of the property cost. However, it’s possible to venture into the property market with as little as 5 percent. Plus, you’ll need to meet the purchase costs, such as conveyancing and building inspection fees.
Typically, when starting to save, consider the location and type of the property you want. This should help you to shape your saving journey. This post is going to provide some guidance on how to save for an investment property for sale.
Let’s get right into it.
Are you looking to buy an investment property for sale, but aren’t sure how to save the money to do so? Read on to discover how it’s done.
1. Choose Your Saving Rate
Experts suggest saving about 50 percent of your monthly income if you’re serious about investing in property. But, with this approach, there are varied things you need to take into account.
Review your current expenses, including rent, transportation, food, healthcare and others. Most people have an expense problem; they make enough money but spend most of it. You want to ensure that you identify where most of your money is going.
Still, you can start with ten, 15, or even 30 percent of your income. It all depends on your income and monthly expenses. But, you need to put the money away before paying your monthly bills and expenses. This will compel you to work with the remaining amount.
Before you start this commitment, ensure you have paid off your debts first. Also, be sure it’s something that you want.
2. Eliminate Disposable Expenses
This approach compels you to focus on priorities, such as food, rent, and utilities. It calls for sacrifice, and it’s only a great idea if you’re really ready. You may want to look at it like trimming your lifestyle.
When defining your spending limit, here are a few tips to consider:
- Don’t use your car for short trips or carpool to work
- Reduce or stop drinking and going out to eat
- Opt for inexpensive entertainment options
- Downgrade or eliminate your paid memberships and subscriptions
Take the time to review your lifestyle to identify areas where you can reduce expenses. Some expenses may seem trivial, but their cumulative figures could be substantial.
At first, it might be hard to adapt to your new lifestyle. But things eventually become normal down the road. Don’t forget that savings come first before expenses.
3. You Might Want to Relocate
This is an option that you have, and it will depend on your household needs. So, if it’s possible to spend less on your home, you can opt to relocate to a cheaper home or place.
Typically, get a home that the payment is not more than 30 percent of your annual income. This leaves you plenty of money to save and work with. Well, downsizing isn’t something easy, but it’s a good place to start.
A cheaper and smaller home means lower rent and utility bills. This gives your savings a boost. You can speak to a real estate agent to show you options for cutting costs.
4. Make More Money
If you think your monthly income won’t suffice your saving plan, consider finding additional ways to generate money. If you have a full-time job, consider the possibility of asking for a raise. Try to reason with your manager to see if this can work.
Starting a small business is also another great option. It can either be an online or offline business. The aim here is to find a business idea that can generate money for you without overworking yourself.
Is there a company or person that’s willing to pay you more for your time and skills? If so, switching careers or employees is also an option on your table. This can help you to increase your saving rate.
You can also consider taking a second job. This is ideal for those with part-time jobs. Think of ways to make money from home such as editing, writing, tutoring or virtual call centre agent. Basically, find a doable job that can generate a good amount of income.
5. Consider Refinancing
Do you own a home? You can refinance it to get more cash for buying an investment property for sale. Refinancing typically means switching your mortgage to get a reasonable interest rate and term. A lower interest rate allows you to reduce your costs.
First, you need to have enough equity in your home before refinancing. Some lenders will allow you to refinance up to 95 percent of your home’s value. Also, ensure your loan amount doesn’t go up after refinancing.
During a refinance, there will be closing costs and other costs. Make sure the amount of these costs is worth the money you’re getting. Also, opt for refinancing only when it makes sense. For example, you want to ensure your job is secure and that you can manage the loan on one wage.
6. Track and Prioritise
Saving money to purchase an investment property for sale is a continuous process. Even after cutting your expenses and making lifestyle changes, continue monitoring your lifestyle to find more ways to save.
Start tracking all your weekly or monthly expenses. This will help you to note any unnecessary costs that can go into your savings. Use a finance app, such as Personal Capital, to keep track on all your expenses.
Take a hard look at the expenses you kept. Can you save more? The lower your monthly costs get, the better.
Investment Property for Sale – The Takeaway
There are many ways to save money to buy a property. But, it all depends on you. The key is to start saving now and being consistent. It doesn’t mean that you need to go overly frugal to save, but a few changes in your lifestyle could make a difference.
Keep your goal realistic and reasonable. Sometimes it can be great to start by purchasing a low-cost property. You can then advance to high-end options as you save and grow.
Do you have any question? Feel free to get in touch with us, and we’ll be glad to help.