Where you are in your property journey (first home buyer, rentvestor, first time investor or sophisticated investor) will determine this amount.
As we’ve previously discussed, there are a lot more costs involved in buying a property than just its purchase price. Where you are in your property journey (first home buyer, rentvestor, first time investor or sophisticated investor) will determine the minimum amount of money you need to make a purchase.
For a rentvestor, first time investor or sophisticated investor
When purchasing your second or subsequent home, or a home you won’t live in, most lenders will provide a loan up to 90% of the purchase price (again, dependent on your circumstances).
So, when purchasing your first or subsequent investment property, you will need a minimum of 10% of the purchase price to be able to buy the property, PLUS extra money for stamp duty, finance and settlement costs:
For a first home buyer
When purchasing your first home, most lenders will provide a loan up to 95% of the purchase price, dependent on your circumstances.
Therefore, when purchasing your first home you will need a minimum of 5% of the purchase price in genuine savings (not a gift), PLUS some extra money for finance and settlement costs:
Should I rely on having just the minimum amount needed to invest in property?
The short answer is no; you should always have a savings or liquidity buffer in addition to your estimated settlement requirements, in case of changes to costs or circumstances. It’s important to note that costs are subject to change up until settlement.
Also, for new home builds, interest is payable on the land as you construct the home and an allowance should be made for any delays in construction. A general rule of thumb for the ideal allowance would be:
20% Deposit / Equity Top Up
6% Stamp Duty, Finance & Settlement Costs
4% Liquidity Buffer
TOTAL: 30% of purchase price
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SUMMARY
Where you are in your property journey (first home buyer, rentvestor, first time investor or sophisticated investor) will determine the minimum amount of money you need to purchase a property. Let’s take a look at the various costs involved, including why it’s a good idea to have a buffer amount up your sleeve.
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