Myth has it that property investment is only possible for those on high incomes. The community stereotype of the investor is such that most of us can’t imagine that such people were ever on an average wage.
“But like many other stereotypes these are simplifications that get in the way of real understanding of the process at work,” Barrie Magain of Magain Property Management said. “Statistics in fact show that most Australian property investors are ordinary wage earners - family people preparing for their retirement. The typical couple might start by buying their own home or apartment for say $180,000. To do this they have probably saved about $25,000 deposit including stamp duty and legal fees. Let’s say their combined income is $45,000 - the main breadwinner bringing in $30,000 and a part time working spouse $15,000.”
Barrie said that depending on income and expenditure it may take the average couple ten to fifteen years to pay off their home. The family home probably needs to be about fifty percent paid off before the owners can start buying investment property. Most people should be in a position to start talking to their accountant and shopping around for finance after about ten years. By then their home will have doubled in value, increasing their equity and making the remainder of the loan a proportionately smaller amount of the total value of the house.”
According to Barrie, depending on the couple’s income and expenses they could buy another investment property every two to five years. He explained that rents go up but repayments stay the same. Most people are ready to buy again when rent on their first investment increases sufficiently to cover repayments. Barrie also suggested that many families are in a position to buy at a faster rate.
The scenario Barrie has suggested will vary from family to family depending on a host of factors and he has deliberately erred on the conservative side. However, he believes that many people starting to buy investment property between the ages of thirty five and forty could end up with a portfolio of between five and ten properties by the time they reach fifty five.