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HOW MUCH WOULD YOU SPEND ON AN INVESTMENT PROPERTY?

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Written by Melanie Toye, June 15, 2014

For some, this question may be answered by finding how much they can afford to borrow. For others, it may be how much they feel a good investment property price is worth.

There are many different types of investment properties to look into, such as units, townhouses, houses etc. And once the type of real estate investment is chosen, the amount you want to spend on an investment needs to be decided upon. And this can be decided upon by a range of points to consider:

1.  your budget
2.  strong growth areas
3.  low, medium or high value properties

Budget

Of course your budget is the number one priority when considering how much you can afford to spend on an investment property. But this does not have to stop you from buying an excellent investment property. There are ways to either find a great bargain in the market or source additional funding from investors. So never let a budget stop you from finding that dream investment property. 

Strong growth areas

Work out what you want from an investment property. Do you want to buy and sell to make profit? Or would you like to hold it for the long term and earn an income from it? Whichever option you want to take, finding the right location to buy your property is top on your priority list when shopping. If you want to buy and sell in a couple of years, then buying in a strong growth area will give you a higher chance of making this happen for you. And if you want to rent out your property for the long term, strong growth areas, will also have your rent placed at a medium to high rate with ideally less vacancy time on the market. 

Low, medium or high valued properties

For investors, you need to decide upon whether you want to buy a low valued property compared to a high valued property. You might say, 'Hold on, I want to get the best deal.' However getting the best deal is different to looking for properties in a low, middle or high price range. 

For instance say you bought a high valued property. This will cater to high paying renters. Plus it means possible lower maintenance fees, as the property may be relatively new. And the equity in the property will increase more over time, than a lower valued property. 

With options brings decisions

When it comes to determining how much you would spend on a property, you need to take into consideration the above three factors. And see if what you can afford is really how much you would want to buy. Noting the first investment may be smaller than your tenth investment property. Some experts suggest to start small and allow the capital growth in each property to grow, to give the buying power to buy bigger over time. While others prefer to jump in big and let that big investment grow bigger, quicker and then use equity or profits from the sale to buy more properties. 

Before buying any property, find out your borrowing capacity and mortgage options from the experts in the industry, Australian Mortgage Managers. Call today on 1300 799 366 or email: This email address is being protected from spambots. You need JavaScript enabled to view it. . 

^Please note the above information are examples only and is not based on specific financial circumstances. Always discuss with a professional before jumping into a major purchase.