One thing that every low-income earner out there thinks to themselves whenever the thought of real estate crosses their mind is, “I want to buy an investment property too.” While purchasing investment property might seem utterly impossible for someone on a low income, it can be done. You can become a property investor if you know the right way to go about it. However, it requires a high level of diligence, discipline, and sacrifices for a low-income earner to be able to buy an investment property.
When you think about getting an investment loan, income level is a significant factor that would be considered. However, there are many other obstacles to overcome in the race to buy investment property. Purchasing investment property is a very sure way for a low-income earner or an average-income earner to achieve wealth, so there is every need for discipline and sacrifice to come to play. With discipline and diligence, you can get yourself to qualify for an investment loan even if you are a low-income earner.
What is the Best Way To Buy Investment Property with Low Income?
If you are a low-income earner and you are looking to buy an investment property, the best way to buy investment property is to get an investment loan. However, when you want to apply for an investment loan, some things would be considered before you will be deemed eligible for the loan. To qualify for an investment loan with which you can buy an investment property, here are some tips for you to follow;
Increase Your Credit Rating
Your credit rating refers to the level of sound financial discipline you have been able to exhibit over some years. Nowadays, almost all major loan lenders worldwide have access to the credit history of anyone applying for a loan, and this helps significantly. Some of the factors that would be considered before you are qualified for a loan to include:
- Your employment history: Loan lenders want to know if you have a stable source of income or not before they give you credit. The reason for this is that they can get the assurance that you would be able to pay back the loan if it is granted to you.
- Transactions and Savings Regularity: The regularity at which you deposit money in your deposit account or make deals is also a factor that would be considered. Loan lenders want to ensure that they are borrowing money from someone whose transactional and money-saving life is alive.
- Existing Debts: Before borrowing your money, loan lenders also try to find out if you have any existing debt, even on your credit cards. They do this to know if you are the type who pays back his debt or not.
- How early you pay your bills and if you pay them on time and in full. Loan lenders also consider this.
So, if you work on these factors for a period, it will help your credit rating which will, in turn, help you to get qualified for an investment loan.
Saving for a Deposit
Although this might seem easy to say, it is a bit hard to achieve. However, you can try keeping a small percetage of the property value for your deposit to increase the degree of your loan suitability. Saving a deposit also helps you make it evident to the loan lender that you are financially disciplined enough to take a loan. You can even meet a family member or close friend to act as a guarantor to help you with the deposit payment. You can increase your deposit savings by cutting down on unnecessary expenses. Draw a realistic budget so you can monitor the rate at which you spend money. This will go a long way in helping you save money for your deposit.
Finding the right property to invest in
You can also increase your chance of qualifying for an investment loan by finding the right property to invest in. This means you must find the best place to buy investment property. Loan lenders are more likely to borrow your money for a property in a location with possible capital growth, high buyer demand, high rental yield and a relatively reasonable price. Also, the lender is expected to consider your estimated yield income from the property investment and take it into account when calculating your lending capacity. If the property you are investing in has a high revenue generating some yield, it helps boost your suitability for the loan.
Draw a Comparison Between Competitive Home Loan Lenders
The property investment loan market is quite competitive, and there are different ranges of loan lenders with different features of the loan. So, make some time out to collect a list of property loan lenders, compare their loan features before selecting which one to apply for. You should consider factors such as the ongoing fees, interest rates, offset facility and others before choosing a lender to apply for a loan with. You should do this because it is likely to help you reduce the interest payable on the loan you take.
Calculate Upfront Expenses
Many lending companies let you calculate your upfront expenses into your loan amount. Some of these costs include LMI (Lenders’ Mortgage Insurance), stamp duty and some government fees. This helps you bring down the initial purchasing cost.
It is advisable that you consider consulting different professionals such as an accountant, a local mortgage broker, a financial planner and other seasoned experts in the property investment field. This will help you a lot in the bid to break into the property market. Although the whole process of buying investment property as a low-income earner might seem a bit tedious and stressful, with discipline and sacrifice, you will enter the investment market very soon. All you need to do is take the first step. Like it is wisely said, the journey of a thousand miles begins with a step.
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