( CHA CHING ! )
PROPERTY INVESTMENT
MADE POSSIBLE
Michael Sloan explains how to get started in property investment , even if you ’ re on a low income .
roperty investing is possible for
P low income earners . In addition to
the traditional ways of getting into property investing on a limited income , crowd funding now enables aspiring property investors to buy a share in a property for as little as $ 2,500 .
Let ’ s look at some of the options for property investing for low income earners .
OPTION 1 . Joining forces with friends and relatives
This option will boost attractiveness for banks . For example , a young person living at home earning $ 45,000 a year with savings of $ 30,000 is not an attractive client for banks . But if you can get three people with combined incomes of $ 135,000 and provide a deposit of $ 90,000 , it ’ s a totally different story .
If you choose this option , you must have a written agreement in place , and you must split the loan along ownership lines . Some companies specialise in agreements for situations like this – one example is Pod Property . For example , if you buy a new townhouse and your loan is $ 360,000 including buying costs , each of the three buyers can have a loan split of $ 120,000 . One may pay interest only , one might make principal and interest payments and one could make large extra payments . When the property is sold – per the sale date in the agreement – your net proceeds will vary depending on your loan balance at the time of sale .
OPTION 2 . Family pledge loans
A family pledge loan can work for low income earners buying a low-priced property , particularly those living at home as no rent means you can borrow more . Essentially if you have a family member with equity in their home , they can let you use that equity as a deposit to buy your first home or investment . You will need to show the bank some savings history but you can borrow 100 per cent of the cost of buying the property .
OPTION 3 . Crowd funding – an exciting new option
If you are saving a deposit for a property , chances are you feel like you ’ re constantly chasing the market , with prices rising faster than you can save , and you ’ re probably receiving very little interest on your savings . Now , thanks to property crowd funding , you can put your savings into a share of a property , which is more likely to generate you a higher return than bank interest , plus there ’ s potentially capital growth to consider as well .
Alternatively , you might have some money inside a self-managed super fund that you can use to invest in property instead of shares . Parents or grandparents who want to put money aside for the future of young ones can now put that money into an investment property instead of shares or a bank account .
As you can see , property crowd funding creates new possibilities . One example is DomaCom . This company offers property crowd funding and uses a model that enables low income earners to invest in direct property , in a new way . Here ’ s a brief overview of how it works :
• A property is loaded on to the DomaCom platform , and through your financial advisor , you nominate to buy a percentage of that property . Your investment can be from $ 2,500 to any amount you like .
• Each month you receive your share of the rent .
• Every year the property is revalued so you know how it is performing from a capital growth perspective .
• After five years all owners vote on whether to hold this property for a further five years . The vote must be unanimous – if you vote to sell and the other owners vote to hold , they have 30 days to buy your share , otherwise the property is sold and your share is paid to you .
• At any time during those five years you can offer your share for sale through the platform at whatever
26 OH ! MAGAZINE ( APRIL 2017 )