Buying an investment property is a big commitment for anyone, especially for young adults looking to buy in a competitive property market. Saving for a deposit, keeping up with mortgage repayments and looking for the right property are just the tip of the iceberg.
Investors under 30 face unique challenges while trying to get on the property ladder. But with a good mindset, careful planning and extensive research, you can achieve your investment goals. Below we list ways young investors can overcome barriers and successfully enter the property market.
Be Disciplined with Your Money
House prices are going up faster than young people are saving. Studying, overseas travel, and time with friends are common hurdles for young people. But disciplined saving is the most effective way to meet the initial home deposit.
Ensuring you save more than you spend will go a long way. It may be a simple concept, but it’s one that plenty of people manage to get wrong. If you take on debt, ensure it is good debt, meaning you never borrow money to buy depreciating assets like a car or phone.
Explore Creative Ways to Meet the Deposit
Affording an initial home deposit is one of the biggest barriers to buying a property. Fortunately, there are a number of unconventional ways to get the money together. You could use contributions from your KiwiSaver account or, if you are eligible, apply for the HomeStart grant under the scheme.
If your parents are homeowners, they can also provide support by acting as guarantors. They can leverage the equity in their property to secure a home loan for you. You should also find a mortgage lender who offers low deposit loans. iLender offers loans with deposits of as low as 10 per cent.
Manage Your Expectations
Investing is all about numbers. Understanding how a good investment property looks and feels is one of the first things you need to do. Remember to avoid making emotional decisions when looking at investment properties. Maintain a critical perspective and thoroughly complete due diligence processes even when an opportunity seems perfect.
There is often a big difference between a property you think would be nice to live in and one that will make a good investment. Be prepared to thoroughly research areas you’re unfamiliar with. Look at properties that are rough around the edges and in locations that aren’t as popular.
Do Your Research
Knowledge is the difference between investing and gambling. Mistakes in property investment are very expensive, taking many investors years to recover from financially. With limited finances, young investors absolutely need to ensure they know what is happening in the property market and the areas they’re looking in.
Get a good understanding of cash flow, rental yields, capital gains and the various mortgage structures that are available. Different options have their own advantages depending on the investor and their individual circumstances.
Investing while you’re young means you have to make sacrifices. Having a clear strategy and a positive mindset will help you prepare for your investment endeavor. Remember that the sooner you begin investing, the greater the benefits will be in the long term.
The financial stability and freedom you are creating far outweigh any sacrifices you make now. Keep that in mind when your peers go travelling or out for an expensive meal.
iLender is Here to Help
If you need assistance or advice with any aspect of property investment in New Zealand, we’re here to help. Our expert mortgage brokers have the knowledge and experience to help young investors get onto the property ladder and achieve their goals.
Call us today on 0800 LENDER (0800-536-337) or contact us online.