MCRE Blog  – First‑Time Investor – A How‑To Guide: How, What & Where to Buy

I still remember the day I decided to buy my first investment property, I was 19 years old, dressed in a suit attending my first auction. 

I was out of my depth, but I had a passion for property, I did my research but I still missed some key details I’d never been mentored on. So here are some things I wish someone had told me and what I do now following years of property investing. Just so you can learn from my missteps and see how simple it really can be.

The Overwhelm:

When I first started, I jumped into open homes without a budget… I knew what I wanted, but I nearly fell for these rookie mistakes:

• Chasing “hot” suburbs without understanding rental demand or infrastructure projects
• Skipping pre-approval, then wasting time on properties I couldn’t afford, I changed this quickly!
• Ignoring inspection checklists, which cost me thousands in minor repairs later.
• Thinking off‑the‑plan deals are always cheaper, only to see construction delays push my settlement back. Your average punter doesn’t want this.

Now as a mature investor I do things very differently. Here’s what I do now, I hope it helps you secure your first investment to help you build a great portfolio over your lifetime.

1. How to Start: Laying the Foundation

1. Define Your Goals
   
   • Capital growth vs. income yield?
   • Short‑term flip or long‑term hold?
   • Risk tolerance and time horizon.
2. Understand Your Budget
   
   • Check borrowing capacity with a mortgage broker.
   • Factor in stamp duty, legal fees, inspections, and a maintenance buffer.
3. Get Pre‑Approval
   
   • Secure an indicative loan amount.
   • Gives you confidence and credibility with sellers.
4. Build Your Team
   
   • Mortgage broker, buyer’s agent (optional), conveyancer, accountant, property manager.

What to Buy: Choosing Property Types

Depending on your risk appetite and goals there are different types of properties you can invest in.

1. Standalone Houses
   
   • Why: Strong capital growth, stable tenancy.
   • Watch for: Higher entry price, maintenance responsibilities.
2. Units & Apartments
   
   • Why: Lower cost, tax‑friendly depreciation.
   • Watch for: Body corporate fees, inner‑city oversupply.
3. Specialist Dwellings
   
   • Specialist Disability Accommodation (SDA): Government‑backed rents under NDIS.
   • Rooming Houses/Coliving: Room‑by‑room rent, high gross yields.
4. Off‑the‑Plan vs. Established
   
   • Off‑the‑Plan: Lock in price; may include incentives, high growth areas.
   • Established: Immediate rental income; known cash‑flow attributes.

Where to Buy: Top Starter Markets – Check out our Ultimate Guide to property investing in Australia

Due Diligence: Research & Analysis

This is a critical part of property investing. When I was young, I made the mistake of trusting someone else’s opinion without doing my own due diligence. I would never do it again. 

Here are some of the key elements I research when finding locations that are good for investment. 

1. Market Trends
   
   • CoreLogic Home Value Index, auction clearance rates, rent‑to‑price ratios.
2. Infrastructure Pipeline
   
   • Key public transport, health‑care or education projects.
3. Rental Demand & Vacancy
   
   • Look for areas with sub‑2% vacancy rates; check with local council and research property manager data.
4. Comparable Sales & Rents
   
   • Research recent sales and rental listings within 1 km.
5. Inspect In Person
   
   • Attend open homes; note condition, neighbourhood appeal, and likely tenant profile.

Making the Offer & Financing

1. Offer Strategy
   
   • Assess potential for negotiation,  strengthen with pre‑approval and minimal conditions.  Ask for incentives if off the plan.
2. Loan Structure
   
   • Interest‑only vs. principal & interest; fixed vs. variable mix. Partner with a good independent Mortgage Broker who can offer you a wider range of options at no cost.
3. Tax Planning
   
   • Engage your accountant early, claimable depreciation, negative gearing implications.
4. Exchange & Deposit
   
   • Typically 10% deposit; ensure you have funds cleared by settlement, note that deposits below 20% you will need to consider Lenders Mortgage Insurance

What is Lenders Mortgage Insurance?

In Australia, “mortgage insurance” most often refers to Lenders Mortgage Insurance (LMI) a one‑off premium that protects the lender (not you) if you default and your home sale doesn’t cover the outstanding loan balance. Here’s what you need to know:

1. When LMI Applies
   
   • If your deposit is less than 20% of the property’s purchase price (i.e. loan‑to‑value ratio above 80%), most lenders will require LMI.
   • It’s compulsory on standard home loans with high LVRs (Loan Value Ratio), whether you’re a first‑timer or an investor.
2. How Much It Costs
   
   • LMI premiums typically range from 1% to 3% of your total loan, depending on your LVR and loan size.
   • E.g., on a $500,000 loan at 90% LVR you might pay around $10,000–$12,000 in LMI.
3. How It’s Paid
   
   • You can either pay the premium upfront from your deposit or add it to your loan balance.
   • Rolling it into your loan increases your principal and long‑term interest costs.
4. How to Avoid or Reduce LMI
   
   • Save a 20% deposit (plus fees) so you meet the lender’s 80% LVR threshold.
   • Use a guarantor (e.g., parents) who pledges a portion of equity in their home, reducing your LVR.
   • Seek first‑home‑buyer grants or shared‑equity schemes in your state/territory to boost your deposit.
5. Alternatives & Extras
   
   • Mortgage Protection Insurance (MPI): A separate life, income‑protection, and/or trauma cover that helps you keep up repayments if illness, injury, or death strikes. MPI is optional (and insures you, not the lender).
   • Lender‑paid LMI: Some lenders will cover your LMI in exchange for a slightly higher interest rate, check the long‑term cost comparison.
     
     

Settlement & Beyond

Make sure you’re ready for these, it’ll help make your life a lot easier. Especially finding a good rental agent. I’ve had good and bad ones in my time. Make sure you find someone on the ball, you’ll need it as your portfolio grows.

1. Insurance & Utilities
   
   • Landlord insurance, building insurance, and changeover of utilities.
2. Property Management
   
   • Choose a responsive agent; agree on market rent, lease terms, and inspection schedules.
3. Portfolio Monitoring
   
   • Regularly review rental returns, valuations, and cash‑flow forecasts.
4. Growth & Reinvestment
   
   • As equity builds, consider refinancing or using your SMSF to fund further acquisitions.

Key Takeaways for First‑Time Investors

• Plan Ahead: Clear goals, realistic budget, and strong team.
• Research Deeply: Location fundamentals and verified infrastructure.
• Diversify Wisely: Blend metro fringe growth with regional yield.
• Act Confidently: Pre‑approval and market knowledge give you negotiating power.
• Stay Engaged: Proactive management ensures returns and positions you for your next buy.

With a step‑by‑step approach, knowing how to prepare, what to target, and where to find the best opportunities, you’ll turn your first property purchase into a rewarding investment journey.

If you’re keen to take your first step and want to be sure you’re guided along the way from research to building your team, book a no obligation free consultation with our team.