How to invest in property as a single parent

We get down to the nuts and bolts of how you can invest in property as a single parent.

Last updated:

It goes without saying that you’ve got your work cut out for you as a single parent. With limited time and financial resources, entering the property market and deciding on an investment approach that will support your family can be daunting.

When it comes to property investing, knowing a few tricks of the trade can go a long way in helping you achieve a cash-flow-positive property that will help you realise your investment goals without harming your financial security.

1. Work out how much you can borrow

Before you invest in property, you should estimate how much you can afford to borrow for the investment. Speak with an accountant, financial planner or mortgage broker to get an idea of how much you need to borrow and what your monthly repayments could be.

You can use our borrowing capacity calculator here.

2. Consider the risks of investing

You need to carefully consider the benefits and drawbacks of property investing and decide whether or not this is suitable for your financial situation and your family. Most importantly, you need to determine the amount of risk that you’re comfortable with when it comes to your investment.

These are some risks you should think about:
single mum 2 kids

  • Initial and ongoing costs: Along with the purchasing costs of an investment property, you need to consider the ongoing fees associated with managing an investment such as insurance, council rates, repairs and maintenance, and water rates.
  • Rent-free periods: As an investor, you run the risk of having rent-free periods, which means you need to have a buffer of funds as a precautionary measure. During times when the property is unoccupied, you’ll forgo rental income, which could make it difficult to meet your mortgage repayments and other ongoing fees. Consider whether your investment property may be subject to changes or fluctuations in demand and think about how you can manage this.
  • Difficult tenants: Tenants could potentially damage your property, refuse to pay rent or vacate the property without giving you adequate notice. You need to form a contingency plan in the event that things go wrong. For example, you can insure your property and contents to mitigate this risk.
  • Property value decline: The property market goes through ebbs and flows with different markets having peaks in property prices and then falling property prices at different times.

Consider how you can mitigate the risks involved when investing in property, such as taking out an insurance policy, researching the area thoroughly, or seeking advice from a mortgage broker.

3. Determine your investment goals

Once you’ve decided that you’d like to enter the property market, you need to clearly define your short-term and long-term investment goals.

Ideally, you should make your goals specific and know exactly what it is you want to achieve from the investment property. For example, in the case study above, if Natalie wants to send her son to childcare next year, she may need at least $150 per week in rent right now, but what rental income will she need from the property in future if she wants to send her son to a private school 10 years from now?

4. Research the market

working dadResources

Familiarise yourself with a range of property-investing resources such as PropertyDATA.com.au, Residex, Real Estate Institutes, realestate.com.au, RP Data and Onthehouse.com.au to learn the ins and outs of the property market, different property types and investment strategies.

Get more information on how to research the property market

Costs and return

Learn about the purchasing costs, holding and maintenance costs, as well as the responsibility of having an income-producing asset, and determine what return you need to cover the expenses of the property. You can do this by conducting a cash flow analysis with a financial planner.

Location and property type

A well-chosen suburb and property type are likely to deliver greater return, not only in the form of capital growth but also in the form of rental income.

If the suburb of the property is well-thought-out, you’ll be more likely to gain higher returns from the property.

The following are some points to consider when selecting the location for the asset;

  • Is the suburb reliant on more than one industry?
  • Is there likely to be population growth in the next 5, 10 and 20 years?
  • What infrastructure plans are in the pipeline that could attract residents to the area?
  • Are residents increasing their income over time?
  • Is the suburb in close proximity to amenities such as the CBD, schools and shops?

When choosing the property type, you should consider the following:

  • Is there sufficient demand for the property type in the area?
  • How appropriate is the property type for the demographic of the area? For example, if the suburb has older residents, perhaps it wouldn’t be wise to purchase an apartment without wheelchair access.

5. Get help from the experts

Reach out to mortgage brokers, lenders, tax specialists, local agents and property managers to broaden your understanding of the investing process and to combine their knowledge and perspectives.

Network with other single parents involved in the property market and listen to guest speakers or influencers that can offer advice.

Need a real estate agent? Start comparing your options

Provider Details Get in touch
OpenAgent

OpenAgent logo

  • Compare 30,000+ real estate agents
  • Find the right agent and maximise your results
  • Get a free property valuation
Go to siteMore info
Commingle

Logo for Commingle

  • Compare proposals from qualified professionals
  • Access over 45,000 real estate agents
  • Free property valuation profile
Enquire nowMore info
Conveyancing Logo

Fill in your details to get free real estate agent proposals with Commingle

Receive a free property valuation, compare agent commissions and fees and choose the best real estate agent for you with Commingle.

  • Save time and money finding the right agent to sell your property.
  • Commingle is a free service that can negotiate on your behalf to get the best deal.
  • All your details will remain confidential.

What upfront and ongoing fees I should consider?

Upfront costs

  • Deposit: You should generally come up with a 20% deposit for an investment property so you can avoid paying lenders mortgage insurance (LMI), however some lenders will allow you to borrow up to 95% of the property value, which may mean you only need a 5% deposit.
  • Establishment fee: Most lenders will charge an establishment fee that covers the administrative costs of setting up your loan, so ensure you have enough funds to cover this.
  • Lenders mortgage insurance (LMI): If your deposit is less than 20% of the property value, you may need to pay LMI, which can either be paid upfront or capitalised into your repayments over the life of your loan.
  • Stamp duty: The amount of stamp duty payable will depend on the purchase price of the property. You should contact your local state office of revenue to get an estimate of the stamp duty tax on your investment.
  • Legal charges: These fees cover the legal transfer of ownership when you purchase the property. This cost is normally determined by an external solicitor or conveyancer.

Ongoing costs

  • Insurance: You’ll need to pay building and landlord insurance, which will protect you from any unforeseen circumstances (such as fires or floods) or if a tenant refuses to pay rent.
  • Account-keeping fees: Your investment home loan may incur ongoing account or maintenance fees, so make sure you check this when comparing different investment home loans. Opt for a lender that charges minimal ongoing fees.
  • Council rates: As the landlord, you’ll be liable for council rates, which will be set by the local authority.
  • Mortgage repayments: Although your rental income from the investment property may cover most of your repayments, you may need to cover a shortfall.
  • Utilities: You’ll be responsible for the bills of any utilities that are not directly associated with the tenant’s use of the property, such as sewerage charges.
  • Repairs and maintenance: You’ll need a buffer of funds to cover unexpected repairs and maintenance required on the property.

Single dad sold signHow do you improve your chance of being approved by a lender?

As an unconventional borrower, you need to show the lender that you have the ability to repay the mortgage comfortably. It’s important that you do your research, carefully consider your investment strategy and manage your personal finances before applying for an investment loan.

Here are some ways that you can improve your chance of getting the “OK” from the lender.

  • Reduce existing debt: The lender will review your credit file and any existing debt that you have against your name, so it’s important that you minimise any outstanding debt that you have to boost your desirability as a borrower.
  • Build savings and deposit: Try to get into the habit of making regular deposits into a savings or transaction account to demonstrate your ability to budget. Ideally, you’ll want to complete a 20% deposit to avoid paying LMI, so you need to start saving early. If saving up a deposit isn’t realistic, consider alternative options such as a guarantor loan or equity home loan.
  • Research your options: Compare competitive investor loans with minimal ongoing fees and competitive interest.

What government benefits are accepted as a source of income by lenders?

Each lender has different eligibility and serviceability criteria for investment loans. However, the following Centrelink benefits are generally recognised as a source of income by Australian lenders:

  • Child support. You will need to provide documentation including bank statements showing your deposit history of the benefit, as well as a letter from your solicitor and Child Support Agency (CSA) confirming the status of the benefit.
  • Family tax benefit. If you receive Family Tax Benefit part A and B, lenders will consider the age of your children or dependents before they decide whether this is an adequate source of income for your investment loan.
  • Foster care allowance. Generally, this benefit type is accepted, but only as a secondary income source, so you’ll need to prove that you have another source of income within your application.

How can I protect my family from financial loss arising from the investment?

Building and landlord insurance is strongly advised, which can help protect you and your family in an unexpected situation (such as theft, fires or floods) or tenant issues (if a tenant vacates the premises without issuing adequate notice, for example).

Compare property insurance quotes here.

What items can I claim for depreciation?

You can claim depreciation on newly purchased items, and you can deduct depreciation on plant and equipment items as well as building allowance items. You can also claim for building allowances for the construction costs of the property, such as concrete or structural work. Learn more about the tax benefits of property depreciation.

Compare the latest investor mortgage rates

Rates last updated November 12th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.19%
3.21%
$0
$0 p.a.
80%
A competitive variable investor rate for borrowers with 20% deposits. Low fees, redraw facilities and repayment flexibility.
3.24%
3.24%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.09%
3.09%
$0
$0 p.a.
80%
This low variable rate loan comes with a free redraw account and no ongoing fees, as well as flexible repayments.
3.12%
3.32%
$599
$10 monthly ($120 p.a.)
80%
This is a competitive, flexible variable rate suitable for borrowers with a good credit history. Borrow up to 80%.
2.89%
3.84%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.39%
3.39%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
3.49%
3.96%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
3.65%
3.66%
$500 (if over 80% LVR)
$0 p.a.
80%
A variable investment mortgage with flexible repayments and an optional redraw facility.
3.49%
3.82%
$0
$299 p.a.
80%
Investors can enjoy a 100% offset account, a redraw facility and flexible repayments.
3.44%
3.58%
$0
$10 monthly ($120 p.a.)
80%
A flexible variable loan for investors. No application fee. Earn Velocity Frequent Flyer Points at settlement, monthly and every three years, plus extra bonus points for a limited time.
3.54%
4.44%
$600
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
3.59%
3.79%
$599
$10 monthly ($120 p.a.)
55%
A competitive rate home loan with an offset facility for self-employed borrowers.
2.84%
3.59%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
3.70%
3.71%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. Eligible borrowers can earn Velocity Frequent Flyer Points with this mortgage, and extra bonus points for a limited time.

Compare up to 4 providers

Aussie Home Loans Logo

Start your home loan application with expert help from Aussie.

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2019 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

An Aussie mortgage broker can find the right home loan for you.

  • FREE Suburb and Property Report with every appointment.
  • Access 3,000+ loans from over 20 lenders.
  • Get expert help with your loan application, including paperwork and eligibility.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 7 years running (2013-2019)

Images: Shutterstock

Was this content helpful to you? No  Yes

Related Posts

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site