Understand why there is no single deposit figure and how to plan for the other upfront costs of buying an investment property.
There is no single deposit amount for every buyer
The deposit you need for an investment property in Australia depends on the lender, loan structure, property, borrower and your financial position. A deposit percentage seen in an online article is not a lending approval. Some buyers may also need to consider lender’s mortgage insurance or other lender requirements, while available equity and loan arrangements can change the cash required.
Ask a mortgage broker or lender to assess your own circumstances before setting a budget. Confirm how much you may be able to borrow, what conditions apply, which funds can be used and what cash needs to remain available after settlement. Do not treat indicative borrowing calculators as confirmation of finance.
Budget for more than the deposit
The purchase price is only one part of the cash requirement. Depending on the property and state or territory, upfront costs can include transfer duty, conveyancing and legal fees, title or council searches, building and pest reports, loan establishment costs, insurance and settlement adjustments. Apartments and townhouses may also involve strata or community-title charges.
Duty rules and calculators differ across states and territories, and concessions generally depend on eligibility and intended use. Check the relevant state revenue office and ask your conveyancer or tax adviser about your situation. Moneysmart’s guide to investment property costs outlines common purchase, ownership and selling expenses.
Keep a buffer for ownership costs
After settlement, owners may need to pay rates, insurance, property management, repairs, maintenance, land tax where applicable, strata levies and loan repayments. Rent can be interrupted by vacancy or a change of tenant. Moneysmart advises buyers not to rely on rent to cover the mortgage because the property may be empty at times.
Build a cash-flow estimate that includes a vacancy allowance and realistic ongoing costs. Consider whether you could cover an unexpected repair or several months without rent. A tax deduction, if available to you, does not remove the need to fund an expense when it is due.
A useful cash-to-complete checklist
Before making an offer, ask your finance professional to confirm the deposit and loan assumptions; check current duty with the state revenue office; obtain conveyancing and inspection estimates; include insurance and settlement adjustments; and decide what emergency cash you will keep aside. Add a contingency for costs that are not yet known.
Separate money needed to complete the purchase from the buffer needed to hold it. If the purchase uses nearly all available cash, revisit the price range or timing with your broker and adviser. The right budget is one that accounts for both settlement and the months that follow.
Use the numbers to set a realistic brief
A clear cash-to-complete estimate can help determine the property price range and costs you need to verify. Nextprop can help assess the property and purchase price within an agreed brief, while lending, legal and tax professionals advise on their respective areas.
Talk with Nextprop about your property brief after checking your finance position. This article is general information only and is not personal financial, credit, legal or tax advice.