Best Starting Out Strategy For New Property Investors

Best Starting Out Strategy For New Property Investors
02-Aug-2019

Whatever your circumstances there is never a bad time to talk about ways you could get ahead in the property market, even when the requirement is starting out with minimal risk and outlay.

There are two good options for you here buy, renovate and sell or buy, renovate and hold. Buying a property to renovate and sell on or ‘flip’ is a fairly well documented process, here choosing the right property and how much to spend on renovations versus the potential return on investment are the main points of interest.

However buying a property to renovate and hold with the view to living in it also provides a great, sometimes overlooked option, particularly for those just starting out in the property market.

5 Benefits Of Buying To Live In

Once you have purchased your house, here you have choices. If you are young and have time on your side, you won’t need to rush to make your fortune in 5 years. It’s a long term game for you.

  • Low LVR Ratios. One of the more apparent benefits of buying to live in is Loan to Value Ratios (LVRs) are virtually always less than when you buy to rent or renovate. You can get 80% lending from banks, in fact, sometimes more than that.
  • Access To Kiwisaver Funds. If this is classified as your first home, you can get assistance from the Government through Kiwisaver and other grants, so you may not need to save up as much as you thought you’d need or get a massive loan from the ‘Mum and Dad’ bank for a deposit.
  • Flatmates Help With Servicing The Loan. Getting a few flatmates to help you pay some of your mortgage or even all of it is a great way to fund your investment. Make sure to set up principal and interest payments, so debt is always reducing. If you can, put more money in to reduce debt quicker.
  • More Time To Renovate. Renovate one room at a time, add rooms, or whatever you need to do to increase value. If you are in a hurry, you can do this to speed things up, but if you don’t have a lot of extra cash, then take time and do what needs doing as you go.
  • Rinse And Repeat. Five years down the track you can make the decision to sell, make a profit and do it all over again or use the equity made in this property to buy another property for yourself to live in. Again the new property can be purchased at the lower LVRs, and you repeat the process.

This is one simple but very effective strategy that is particularly beneficial to younger people who have time on their side but also works for people with children who just left home or people with children who are still at home as long as they don’t mind moving often. Just imagine if you started this at 20 and only bought one property every five years, you would just be buying your 7th property at the age of 50 with some of them becoming debt-free homes. 

The property industry provides you with so many options depending on how you want to get involved. This is just one strategy of many, and of course, you’d still want to take into consideration all the other fundamentals of buying property covered here in the Property Ventures blog.