Just because you don’t earn a six-figure salary, or you don’t have many assets yet, it doesn’t mean you can’t break into the property market. Low-income earners comprise a huge proportion of the investing market, and while they face specific challenges, the most committed, driven and creative among them can reap the biggest rewards. While there are always risks and challenges for any property investor, low income earners have two big barriers – amassing a deposit, and finding a bank that will lend to them. Here are some tips to help you overcome these barriers and break into the property market.
THE DEPOSIT
To build a solid property deposit you need to know exactly what target figure you’re aiming for, as this will give you a goal to work towards. Once you’ve set this target figure you need to do a budget so you can identify opportunities to save money. Reduce unnecessary expenses like buying your lunch everyday or travelling while saving. If you are renting, consider moving back to your parent’s place to save rent money. This will help you improve your borrowing capacity as you now have lower living expenses. If you have any other debts, you need to pay these off as they will severely impact the amount you can borrow.
GETTING YOUR FINANCE APPROVED
For low-income earners, getting finance is easily the most challenging part of getting started. This is where a lot of beginner investors get stopped. Without a mortgage, you won’t be able to buy an investment property. Not only that, you may not get your finance approved or you may be limited to how much you can borrow. Luckily there are a few ways to overcome these challenges & increase your chance of getting your loan approved:
- MAKE IT YOUR PRIORITY TO SAVE – With tighter lending policies, lenders are now looking for bigger savings from borrowers. Not only do you need to save more, you also need to show that you’ve been doing it consistently for a period of time. To make it easier, you can automate your savings so a portion of your income gets paid directly into a separate savings account.
- KEEP YOUR CREDIT RECORD CLEAN – Having a clean credit record is a must for any borrower. Having a blemished credit record will dramatically reduce your chances of getting a loan approved with the mainstream lenders
- ASK YOUR PARENTS TO BE YOUR GUARANTOR- By having your parents guarantee your loan application, you can break into the property market sooner. You can borrow the entire loan amount and your parents will guarantee the whole mortgage. This ties them up to the entirety of the loan term. Your guarantor can also give guarantee to just a portion of the loan or split the loan between you and them.
