How much do I need to buy an investment property in Australia?

Published 19 Sep 2022 | Updated August 9th, 2023 3 min read by Property Ducks To start your portfolio in the property industry you will need as little as 5% of the property value (apartment, house, townhouse, etc). – which means your monthly home loan repayments will be lower. If you want to know what the difference is between saving 5% and 20% deposit, and what other options you have to cover your deposit, keep reading and we will guide you on how to maximise your chances to invest.

So, how much do I really need to save for the deposit?

The answer to this question varies from person to person, but usually you need a minimum 5% deposit, however some believe it is ideal to have available at least 20% deposit to avoid paying Lenders Mortgage Insurance (LMI).

What is Lenders Mortgage Insurance (LMI)? Lenders Mortgage Insurance (LMI) is an insurance required on property loans when the deposit is less than the 20% of the property value. This insurance is usually required for banks or mortgage lenders to be protected in the event you will not be able to cover your monthly repayments.

Tip: Some occupations are entitled to borrow more funds without mortgage insurance due to the nature of their jobs. Chat with us to find out more.

How can I choose the best property to invest?

You should first seek to understand your current income and expenses, then review how much savings you have for the deposit. Remember, it is important to ensure you can cover your expenses so you can continue with your life normally (groceries, bills, clothes, entertainment, etc). Based on how much income you receive monthly, and your monthly expenses, think about how much you are comfortable to pay in monthly home loan repayments. These two values (monthly home loan repayments and deposit) will help you to decide the right type of property based on your individual financial circumstances.

For example, if you want to buy a $750,000 property, you will need between $37,500 (5%) and $150,000 (20%) deposit, but you should also contemplate how much you will be able to pay in monthly repayments for the home loan.

Can I use my existing properties for the deposit?

Yes, you can use the Equity of your existing properties. The equity is basically the value that you have already paid for your loan to the bank or the increase in the value of your property over time. However, you will only be able to use up to 80% of the value.

To calculate the equity available for deposit, use the formula below:

Equity available = 80% property value – Current loan balance

For example, if the value of your property is $700,000 and your current loan balance is $450,000, the equity available you will have for the deposit is:

Equity available = (80% x $700,000 – $450,000) = $560,000 – $450,000 = $110,000

How can Property Ducks help me?

At Property Ducks we will guide you through the entire process, it will be stress-free for you, so you can spend more time doing the things you love. We’ll look at your current financial situation and goals in more detail, discuss a suitable investment strategy and timeframe, and give you an idea of the type of properties we have available. We’ll shortlist the most suitable for you, we’ll pull out all the stops to make sure you get the right property at the right price.

Finally, we’ll connect you with our team of trusted professionals from Mortgage Brokers, Accountants, Conveyancers until Property Managers to help you find tenants to rent the property. We’ll make your investment journey as seamless as possible!

with one of our Property Duck advisers, where we learn about you: your current financial situation, your lifestyle and financial goals, and any concerns you might have when it comes to starting your property investment journey.