Income and Deposit

Let’s cut straight to it. How in the world do you buy a property?

Moulah. Dollarydoos. Kesh. Income.
How much can you borrow on your income? Multiply your taxable income by 6. Is it exact? No. Is it a good indicator of approximately where you’re at? Yes. By taxable income, I’m referring to your income statement that says how much you made last year. This document has now phased out and replaced group certificates and is visible on your my.gov.au portal in the ATO section. Gross Income is the number you’re looking for. If you have two jobs, add the figures together.

Example:

Annual salary of $60,000 + $10,000 of overtime and penalties = $70,000 p.a.

$70,000 x 6 = $420,000 as a rough amount you can borrow.

Deposit

Wages in Australia (generally speaking) are not the main thing holding people back from getting into property. This is going to be controversial, but the main thing holding people back from home ownership is “entitlement.” To get a deposit, you need to save. This means putting aside more from your earnings than you spend. It may also mean taking a second job, side hustle or secondary source of income to boost your savings ability. In other words, sacrifice and discipline.

Little things add up. TV Subscriptions? Memberships you don’t use? Eating out when you could eat in? Meal prep? Settling for a cheaper car/car loan? Not having the last iPhone? Clothes and accessories you don’t need? Most people could instantly save $500-$1000 per month if they got ruthless with their spending habits. Throw in a side hustle or after-hours earning activity that could net you $1000 extra a month?

Minimum deposit required: 5%.

$600,000 (where most first home buyer benefits are limited to) needs $30k. If you are able to cut back on $1000 of spending a month, plus hustle together the other $1000, you would be there in 15 months.

Now here comes the really controversial bit.

Who said your first home is your last home? Do you need something brand new with 4 bedrooms??? Go to realestate.com.au, search 20kms of your CBD, $550,000 or under. There will definitely be properties there. Having a property is better than having nothing at all.

Not everyone is lucky or blessed enough to have generational wealth from their parents or grandparents manifesting as a gift or guarantee to get them into their first property (although these are still perfectly acceptable ways to get into the market, just not mainstream!)

But it is possible to START the process of creating generational wealth in your lifetime, by getting into property with a bit of discipline, sacrifice and accountability. Look out for part 2, where we talk about the next steps after you’ve gotten together your deposit.

- Tony van de Kerkhof