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How to Invest in Property With Little Money?

People often talk about how much money there is to be made by investing in property.

It’s no secret that property investing can be the key to financial freedom.

So why doesn’t everyone start investing in property?

One of the biggest barriers for people looking for investment opportunities can be the high cost involved when entering the industry.

A lack of capital or borrowing capacity can be a major deterrent for many potential new investors.

The good news is that there are plenty of opportunities to invest in property with not a lot of money.

I’m going to share some of these key strategies for those without sufficient capital, answering the key question “how do I invest in property with only a little money?”

Option # 1: Joint Ventures

The first method in how to buy property with a small amount of capital is to go into a joint venture with someone who has the necessary capital.

This could be anyone you trust – family, friends, or anyone with the money to buy property while also being someone you can do business with.

Of course, this option isn’t available to anyone and will largely depend on your existing relationships and appetite for entering into an investment opportunity with someone else.

But joint ventures have become increasingly common due to the rising cost of housing in recent years.

Depending on the willingness of the other party, joint ventures can also be a great option to buy investment property with no money down.

Option # 2: Owner-occupier loans

There is certainly an advantage to buying property with the intention to live in that home.

Doing so means you’ll be eligible for the first-home buyers grant. This means you will receive a concession for transfer duty when purchasing your first place of residence (and meet some other key requirements).

Most lenders require a deposit of at least 20% or lenders mortgage insurance (LMI) will apply.

LMI is an insurance that a lender will take out to insure itself against any risk in not recovering the loan balance in circumstances where the borrower can’t make repayments.

A first-home buyer scheme can allow you to pay a significantly lower deposit without having to pay LMI.

This can save first-time buyers thousands of dollars when it comes to saving a deposit, allowing more immediate access to property investing.

Of course, with investing in mind, you’ll have to be willing to live in that property for six-months to a year before turning it into an investment property that can generate passive income through rent.

This can be a big drawback for many new investors who want to build that property portfolio immediately.

It can also limit your buying options, as you’ll have to purchase property in a location you’d be willing to live.

Option # 3: Guarantor Loans

A third option when considering how to invest in real estate with little money is to consider a guarantor loan.

This mostly involves someone, usually parents, putting up equity in their own homes which then becomes a source of finance for your home.

This  equity isn’t necessarily handed over to the borrower, but allows the bank to take this equity and use it to cover the shortfall of the deposit on the new home.

A guarantor loan also shows lenders that you’re less of a risk,  who will often waive the cost of LMI as a result.

Once again, this strategy on how to buy investment property with no money relies on your relationships and the resources of others.

While less common, it is possible to get 100% loan, meaning no money deposited at all. However, this is a higher risk for the lender which means it is pretty rare.

You also may be required to live in the home for around 12 months after purchase. Only when that period ends will this be an investment property available to rent and generate passive income.

There are also similar programs like the first home loan deposit scheme (FHLDS) which allows you to borrow up to 95% of the property’s value and the government will cover the deposit. LMI isn’t applicable in this instance either. 

For more on buying a property using someone else’s money, check out the video below:

Option # 4: Investing through a Real Estate Investment Trust (REIT)

The fourth option when considering how to buy how to invest in real estate with little money is the option of investing through an REIT.

This strategy involves investing in property using stocks and pooling investor’s money together to invest in property.

REITs are traded on the ASX and allow investors to take part for as little as $500.

This allows you to earn an income from rent and capital growth without having to first save a massive deposit and buy a physical property.

However, there are some considerable drawbacks to buying property this way.

It’s important to do your due diligence on the management team taking care of the investment, and insure their debt levels are low.

Also make sure you are aware of the dividend payout ratio (how much of the profits are paid to investors) to get a good idea of how much the potential returns could be.

Remember, an REIT can only be discussed and recommended by a licensed financial planner.

The bottom line…

These are just some of the ways to invest in property with little to no money.

Of course, having that deposit will always make things easier, and for many will just require a bit of sacrifice and hard work.

But for those who want to know how to invest in real estate with no money, it’s all about taking advantage of or leveraging opportunities.

This may involve an alternative path, such as discussing your options with loved ones who have the means to invest but aren’t quite as aware of all the benefits of owning investment property.

PK Gupta
Published: 17 Jan 2024

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