.jpg?language_id=1)
While many believe property investment is reserved for the uber-wealthy, a large portion of Australian residential property investors earn under $100,000. In fact, more than 20%, according to the ABS.
And, if you do earn under $100,000 a year, property investment may be a necessity, not a choice. Most average income earners need to leverage investment property in order to build their wealth and NOT retire below the poverty line. It’s a disturbing statistic: nearly half of all retirees who rent are living in poverty.
Buying and leveraging property is key to building wealth. It may not seem like it, but most property investors in Australia fall into the category of middle class, according to Ed Chan, the founder of Chan & Naylor Property Accountants. I have helped hundreds of Australians build wealth through property and a vast majority fit the middle-class category.
According to CommBank data, the average Australian investment property buyer is around 43 years old, gets a loan for just over half a million dollars, but has help from the Bank of Mum and Dad.
So, if you don’t have the Bank of Mum and Dad, and earn under $100K a year?
1. Don’t buy where you want to live
One of the biggest mistakes that aspiring property investors make is trying to buy in areas where they want to live. Of course, Paddington or Prahran are too expensive for most Gen Z or Millennial incomes, they’re too expensive for most Baby Boomers too! Instead, look for affordable suburbs that meet your financial budget. These areas may not be glamorous, but they often offer better investment potential and much lower entry costs.
2. Rentvest
Despite what your parents tell you, you don’t have to live in it! In fact, it is often more affordable to rent where you want to live and buy for investment. This is called Rentvesting. It can be a much better way to cash flow your investment, while also allowing you to maintain your current lifestyle (within reason) and buy assets that are more likely to increase in value. Finding affordable high-growth areas is the key. Not only will you be in a better position to buy again, but rentvesting can save you up to $10,000 per year in real costs!
3. Get a second job
There are two things people need to do to afford a property: either earn more or save more (or a combination of both). If your current income isn't enough to support your investment goals (and you’re not in a position to ask for a raise), consider taking on a second job. Many of our clients have done this to boost their savings and improve their financial position. If you can drive for rideshare services on weekends or take on freelance gigs, do it! Every little bit helps.
4. Budget wisely
Create a budget and stick to it! Identify areas where you can cut back on spending. How frequently are you dining out? How much does a night out cost you when you add up the cocktails and late-night snacks? The often-cited "smashed avocado" spending highlights how small sacrifices can add up over time. If you would like to benefit long term from leveraging into property, you need to make some sacrifices before you can reap the rewards of financial freedom.
5. Think outside the square
If you're struggling to save for a deposit, consider alternative strategies to get into the market. This could include pooling resources with family members, looking for properties that require minimal initial outlay, or exploring government grants and incentives for first-time investors. Lateral thinking and a strong will are your allies in overcoming financial barriers.
6. Remember what's at stake
The property market is becoming increasingly competitive, and the longer you wait, the harder it may become to enter. It's essential to stay motivated and persistent! Understand that securing your financial future through property investment is worth the effort and sacrifices. If you don’t get in now, you might miss the opportunity altogether.
7. Leverage professional advice
Engage with property accountants, financial advisers, and real estate experts who can provide tailored advice and help you navigate the complexities of property investment. Buying property can seem scary, but it doesn’t have to be!
In Australia, the poverty line is defined as 50% of median household income after tax. In 2022 it was considered $489 a week for a single adult. We have experienced record high inflation since then and currently the maximum aged pension is $501.25. These numbers are depressing. Don’t be one of these statistics. Don’t rely on government support if you would like to live well in your retirement.
And don’t despair, by adopting these strategies, you can overcome the income barrier and start building a property portfolio that secures your financial future. Statistics show that the gap between wealth and the middle class is getting bigger and the dream of home ownership is fading for many hard-working Australians. But remember, property investment isn't just for the wealthy—it's a viable path to wealth creation for anyone willing to put in the effort and think strategically.
I have been in your position. It feels overwhelming to consider leveraging into property when you can scarcely afford your living costs. But it is possible and indeed critical to make the sacrifices you need to build some security for your future. When I restarted my property investment journey 5 years ago, I wasn't even earning $90,000 a year, but I did it. Anyone can make a start on their property journey. All you need is a job or the willingness to get one!
