Get the right start in property investment
As you look to start investing in property, knowing where to begin is often the biggest challenge.
Where should you buy? What steps do you need to take? And most importantly – which properties will actually help you achieve your goals? These are questions many of us have when starting out in property investment.
It’s also why having a property investment plan is critical for first-time investors.
Our property investment plan for beginners is designed to help you set the best possible foundation for your investment property portfolio, by helping you identify the right strategy and property types for your needs.
You then have the option to execute this plan through our in-house property investment services, ensuring you receive the highest-quality, tailored support as you build your property investment portfolio.
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How our property plans work
At Momentum Wealth, we understand that every investor has unique goals and circumstances, and there is no one-size-fits-all approach on how to invest in property. That’s why we work with you to gain an in-depth understanding of your unique situation, so that we can provide you with tailored advice specific to your circumstances.
1. We review your situation and goals
Our experienced team of property experts will work with you to evaluate your unique situation. They’ll conduct a review of your financial position and tolerance to risk, and gain an in-depth understanding of your short and long-term property goals.
2. You receive your property investment plan
We develop a tailored, written property investment plan to match your objectives. This will include a model portfolio to work towards over the longer-term, as well as tailored steps to action over the next 12 months, which you’ll have the option to review on a yearly basis.
3. We’ll help you execute your plan
We’ll help you action your plan through our award-winning, in-house property investment services. Leveraging the combined expertise of our property investment divisions, we’ll work together to ensure you receive the right support at every stage of your property investment journey.
Benefits of working with us
Expertise in all areas
When you work with us, you benefit from the collaboration of all our in-house property investment experts – from our award-winning finance brokers to our experienced property strategists and real estate management specialists. This collaborative approach ensures you receive the best advice in all aspects of your portfolio from the moment you start investing in property.
Experience you can trust
Since 2006, we’ve supported over 3,000 clients through our dedicated property investment services, many of whom were buying their first investment property. Our knowledge of the real estate market has returned outstanding results for our clients, whose properties have outperformed the broader market and delivered them greater long-term wealth.
We’re here to support you over the long-term. As your trusted property investment advisors, we’re available anytime to discuss your questions and concerns. Outside of your yearly review, we’ll be in contact with you regularly to provide market updates, advice and education to help you grow your portfolio, and to identify any opportunities to maximise your wealth.
Property investment for beginners – your essential pack
Getting started in property investment? Download our investor pack to access our essential toolkit for beginner investors:
- Free budget planner
- Beginner’s Guide to Property Investment
- The 3 essential factors that drive property growth
What our clients say about us
Get started today
Ready to take the next steps? Request an obligation-free consultation with our property experts to get started
Frequently asked Questions
How does property investment work?
With a proven history of long-term performance and less volatility in comparison to most other asset classes, property has long been a popular form of investment in Australia. As a result, many investors recognise property as an important part of their wealth creation strategy.
There are 3 key components to generating a return on investment when it comes to real estate:
- Capital growth
- Manufactured equity
- Cash flow
Capital growth refers to the increase in value of an asset over time. It is measured by comparing the current value of the asset to its purchase price.
Capital growth is one of the core focuses for most property investors, as this growth can then be used to support further portfolio expansion.
By identifying locations and specific properties that are exposed to strong demand and supply factors, investors can see the value of their property increase, which can add up to significant amounts over time.
Manufacturing equity refers to adding value to your asset. It is essentially any strategy you use to build – or “manufacture” – more equity in your property.
Such strategies may include renovating or extending an existing property or buying sites with subdivision and development potential.
Cash flow refers to the rental income generated by a property, versus the costs of holding the property.
Most residential investment properties will be negatively geared in the early stages. By actively managing your portfolio, you can reduce your cash outlay, or even convert your property to be income-positive over time. This may include adding rental value to the property through renovation or development; paying down and/or refinancing your loan; or adding an ancillary dwelling to your property as a second source of rental income.
What is negative gearing?
Property investments can generate positive cash flow or negative cash flow. Positive cash flow is when your rental income exceeds your expenses. Negative cash flow, on the other hand, is when your expenses exceed your rental income.
‘Negative gearing’ occurs when the costs of owning a rental property exceed your rental returns. The upside of negative gearing is that any net rental loss you incur during the financial year may be offset against other income you earn, such as your salary. This, in turn, reduces your taxable income – and therefore the amount of tax you pay.
How much deposit do I need for an investment property?
Almost all Australian lenders will require borrowers to contribute some form of deposit before they approve a mortgage.
The amount of money you need for a deposit will depend on a number of factors. These include the price and location of the property you are purchasing; your eligibility for government grants and incentives; the lender’s individual policies; whether you are using any equity from an existing property you own; and your own property investment strategy.
However, as a general rule, you’ll need to pay at least a 20% deposit (an 80% loan-to-value ratio) for a loan if you want to avoid paying Lender’s Mortgage Insurance – or LMI – across the life of the loan.
LMI is an insurance policy that you pay as the buyer if you take out a loan for more than 80% of a property’s value, to protect the lender in the case that you default on your loan repayments. LMI is around 1-3% of the value of the loan, generally increasing the higher the loan-to-value-ratio (LVR) is.
Some banks will be willing to lend up to 95% of a property’s value with LMI, providing you have a strong credit history, evidence of genuine savings and a steady income.
However, you will also need to factor in the additional upfront costs associated with the purchase of a property, including stamp duty and conveyancing costs.
How does owning an investment property affect taxes?
If you earn income from a property at any time, you will have to report the income and expenses to the Australian Taxation Office (ATO).
Any rental income you receive forms part of your annual taxable income, which is taxed at your marginal tax rate for that year.
However, there can also be tax benefits to owning an investment property. Most costs associated with your investment property can be deducted against your taxable income – which, in turn, reduces the amount of tax you pay overall.
Common property tax deductions include:
- Loan interest
- Rental expenses (marketing, property management fees, commission etc.)
- Rates & fees (council rates, water rates, strata fees, etc.)
- Maintenance & repairs
- Depreciation (depreciation of the building and fittings, depending on when they were installed)
- Pest control
- Accounting costs
- Legal expenses
It’s important to understand both your tax obligations and the tax concessions you are entitled to as an investor. An experienced accountant will be able to help you navigate the complexities of taxation relating to your investment property.
How do I start investing in property?
There are several key components to starting a successful property investment journey. These include:
1 – Define a strategy
Any property investment journey should start with a clearly defined strategy.
When it comes to property investment, there is no ‘one size fits all’ solution and every investor will have their own individual set of circumstances and goals.
Your property investment strategy should therefore be tailored to your unique situation, taking into account your objectives, your appetite for risk and your financial position.
We recommend working with an experienced property investment expert to develop a tailored property investment plan specific to your circumstances.
2 – Structure your finances
Maintaining a healthy lending portfolio is a critical component of any investment strategy. From securing the right loan solution, to structuring it in a way that minimises your risk, effective financial planning is key to your success as an investor.
Having the right loan structure in place can have significant implications not only on the security of your asset, but also on your ability to purchase more assets and access your property’s equity in the future.
It’s advisable to speak to an experienced mortgage broker with extensive knowledge of the lending market who can identify loan solutions that best suit your unique circumstances.
3 – Proactively manage your property
While many property managers excel at day-to-day management, choosing a property manager with a proactive approach to maximising your property’s rental performance can help to increase your return on investment. This may include recommending cost-effective improvements to enhance market rent, implementing special clauses to protect your rental cashflow, or identifying opportunities – such as dual-income strategies – to increase your rental returns.
If you would like our experienced team to assist you in starting a property investment portfolio, please contact us to book a free consultation.
How does equity work when buying an investment property?
‘Equity’ refers to the difference between your property’s market value and the balance owing on your loan. For example, if your property is worth $500,000 and you owe $200,000 on your mortgage, your equity would be $300,000.
When it comes to buying an investment property, you might not need to put down a significant cash deposit. If you’re a homeowner, you may be able to use some of your home equity in lieu of cash savings as a deposit on an investment property.
In the same way as when you purchase a home to live in, a bank will most likely lend you up to 80% of your investment property’s value. While it may be possible to borrow more, borrowing above the 80% benchmark will generally incur Lender’s Mortgage Insurance (LMI).
The following example demonstrates how you can leverage off your home equity to purchase an investment property:
Let’s say you own a home valued at $500,000 and your mortgage balance is $200,000.
A lender will determine your lending equity based on 80% of your home’s value, minus your remaining home loan debt.
This works out to be:
- 80% of $500,000 (your home’s current value) = $400,000
- $400,000 minus $200,000 (your mortgage) = $200,000
This $200,000 equity can be used to pay a deposit on an investment property. From there, you can source another loan for the remaining balance of the purchase price.