A Practical Guide for First-Time Property Investors with a Low Deposit in NSW

Property investment is a dream for many Australians, but for first-time investors, especially those with limited savings, getting a foothold in the market can seem impossible. With property prices in NSW being some of the highest in the country, it’s no wonder many feel overwhelmed by the idea of coming up with a deposit, navigating mortgages, and finding the right property.

But don’t be discouraged. In fact, many Australians have started their investment journey with limited funds and managed to grow their portfolios. This guide will walk you through the process of getting into property investment even if you’re working with a tight deposit.

Problem: The High Cost of Entry in NSW’s Property Market

Property in NSW, particularly in Sydney, can feel out of reach for new investors. According to CoreLogic, the median house price in Sydney was around $1.25 million in 2023, and even in regional areas like Newcastle or Wollongong, prices hover around $700,000. For first-time investors, these numbers can be daunting.

While a 20% deposit has been the traditional goal for home buyers, saving that much can take years—especially with the rising cost of living, rent, and other financial commitments. For instance, a 20% deposit on a $700,000 property means saving $140,000. This high entry point can deter many would-be investors, especially those just starting out in their careers or who don’t have significant savings.

However, there are options for first-time property investors with smaller deposits. You don’t need a six-figure sum to get started in property investment.

Agitation: Why Waiting Too Long Can Hurt Your Investment Goals

It’s easy to think that you should wait until you’ve saved up the “ideal” deposit before getting into the property market. But here’s the harsh reality: Property prices in NSW have historically gone up over time, and they are likely to continue that trend. The longer you wait, the more you may need to save. For example, over the past 10 years, Sydney property prices have increased by an average of 6% per year. That means a property worth $700,000 today could be worth more than $1.25 million in 10 years. Waiting could cost you more in the long run.

Also, consider that interest rates are constantly changing. As we’ve seen over the last few years, the Reserve Bank of Australia (RBA) can increase rates quickly. This impacts your borrowing power and could make it even more difficult to secure a loan with favourable terms later on.

Let’s not forget about rent. If you’re renting, you’re paying off someone else’s mortgage instead of building equity in your own property. Every year that passes is another year of missed opportunity to build your own wealth through property.

So, what can you do?

Solution: How to Get into the NSW Property Market with a Limited Deposit

Here’s the good news: even with a limited deposit, there are ways to enter the property market and start your investment journey. You just need the right strategy and a solid plan.

1. Low-Deposit Home Loans

One of the most effective ways to get started with a smaller deposit is by exploring low-deposit home loans. Many lenders offer loans with as little as 5% deposit. For a $700,000 property, that would mean needing just $35,000 for a deposit—far more achievable than $140,000.

However, if you have less than 20% for a deposit, you’ll need to pay Lenders Mortgage Insurance (LMI). This is an insurance policy that protects the lender in case you default on the loan, and it can add to your upfront costs. But keep in mind that while LMI may seem like a burden, it allows you to enter the market sooner rather than waiting years to save a larger deposit, potentially offsetting the cost of LMI with property value growth.

1. Government Grants and Schemes

First-time buyers in NSW can take advantage of several government schemes aimed at helping people enter the market. One of the most notable is the First Home Owner Grant (FHOG). If you’re buying or building a new home, you may be eligible for a $10,000 grant.

Additionally, the First Home Loan Deposit Scheme allows eligible first-time buyers to purchase a property with as little as 5% deposit without paying LMI, thanks to a government guarantee on the loan.

For properties valued up to $800,000 in NSW, you may also be exempt from paying stamp duty, or receive a reduced rate, under the First Home Buyer Assistance Scheme. This could save you thousands, which can be redirected toward your deposit or other upfront costs.

1. Regional Areas Offer Better Affordability

If Sydney prices feel too high, consider looking at regional NSW. Areas like Newcastle, Wollongong, and the Central Coast offer more affordable entry points while still showing strong growth potential. For example, while Sydney’s median house price sits above $1 million, Newcastle’s median price is about $850,000, and you can find even lower prices in other regional centres.

Plus, with more people embracing remote work, demand for properties outside of the major cities is increasing, which can provide capital growth opportunities over time.

1. Consider Rentvesting

Another strategy that has gained popularity in Australia is rentvesting—where you continue renting where you want to live but buy an investment property in a more affordable area. This allows you to enter the property market without having to sacrifice your lifestyle or live in an area you might not prefer. For example, you might rent in Sydney while purchasing an investment property in a regional area where you can afford a deposit and mortgage. The rent from your tenants can help cover your mortgage repayments while your property appreciates in value.

1. Start Small: Apartments or Townhouses

While many dream of owning a house with a backyard, apartments or townhouses can be a more affordable entry point into the property market. In Sydney, the median unit price is generally lower than house prices, and they can still provide strong capital growth over time, especially in well-located areas. For instance, in some Sydney suburbs, you can find units priced between $500,000 and $700,000, which significantly lowers the deposit requirement.

1. Work on Your Financial Health

While finding a low-deposit home loan and leveraging government schemes can help you get into the property market, it’s essential to ensure that your financial health is in good shape. Lenders will look at your credit score, income stability, and existing debts when assessing your application.

Before you apply for a loan, it’s a good idea to pay down any high-interest debt (like credit cards or personal loans), ensure you have a stable income, and try to save beyond just the deposit to cover other costs like legal fees, inspections, and any unexpected repairs.

Final Thoughts: Don’t Let a Limited Deposit Stop You

The NSW property market may be competitive, but with the right strategies, you don’t need to be a millionaire to get started. Whether it’s by taking advantage of low-deposit loans, exploring government schemes, considering regional investments, or rentvesting, there are plenty of options available to first-time investors with limited deposits. The key is to take action, do your research, and get into the market before prices rise further.

Remember, the best time to invest in property is when you can afford to—so why wait?

By following these steps, you can start building your property portfolio and set yourself up for long-term financial growth, even if you’re starting small.

We at Investn can guide you every step of the way on this exciting journey to Invest in property with only $35,000. Simply Click Here to book a Free 15-Minute Discovery call