A guide to investing in property on a low or fixed income in Australia - part of the Giraffian Children's website.
Why are you interested in investing in property? There are a number of possible reasons, and you may find some of the following reasons describe how you feel.
- Someone told you you should invest in property
- You want to secure your future in the long term
- You want to earn a large sum of money in the short term
- You want to increase your day-to-day income via property investment
- You want own your own home outright
Each of these goals can be reached by a slightly different way. Let's address them one at a time.
Someone told you you should invest in property
This is possibly the worst reason to be investing in property unless you are prepared. If you are here simply because you heard at a BBQ that property investment is the way to riches, you're in the wrong place. Unless the advice came from someone who knows your financial situation and is genuinely interested in improving your financial future, property investment may not be for you. But don't be put off - keep reading around this site and you may learn something, and you may decide you're in the right place after all.
You want to secure your future in the long term
Property is certainly a long-term investment, especially if you are on a low income. Over a long enough time frame - at least 10 years - it can perform extremely well. If you are thinking for the long term and have a deposit ready, you are probably most suited to simply buying an existing house as a rental property. Rents go up over time and mortgages go down, so over a long period of time the tenant will pay the house off for you. This strategy is very safe but more appropriate for someone who is still young, and has a low income due to being a junior at work rather than anticipating being on benefits for the long term. But there are certainly ways to improve the amount of money that can be earned from a rental property, which we will discuss later.
Just remember property can go down in price as well as up. On a low income you are likely to be investing in quite cheap properties for a steady rental income and concentrating on paying down the loans, so any fall in value shouldn't be a problem as long as the rent keeps coming in.
You want to earn a large sum of money in the short term
By 'short term' I hope you mean at least a year. Property is slow moving. It usually takes 60 days (2 months) just to buy or sell a property. Then you need to allow time to do something with the property so you can earn that lump sum from it. Unless you've picked up a real bargain that only needs a coat of paint over the weekend, chances are you'll need to allow at least a month to renovate it, or up to a year to subdivide. Then add your trailing time to sell. If these timeframes sound reasonable, then these techniques may be for you. Bear in mind that renovating on a budget can take much longer than you see on television, so allow far longer than you initially planned for a renovation.
You want to increase your day-to-day income via property investment
If you want to earn money from property straight away, even if it is just a modest sum, you will need to buy a property that makes you money from day 1, after expenses. These properties are called positively geared properties, and they do exist, but you have to find them.
You want own your own home outright
This is one of the most common drivers for people to invest in property. They are simply looking for a way to be able to pay their own home off faster. You can certainly use property investment to help you do this - any extra money you earn can go straight on your own house - but the safest way to do it is simply to buy or build a house and then sell it for more than you paid for it after you have lived in it for a few years. And then repeat this process a few times until you end up in the house you always wanted, fully paid off.
Next we list the ways you can make money from property in a low income.