How to Buy Your First Investment Property With Less Than 10% Deposit

How to Buy Your First Investment Property With Less Than 10% Deposit

Many aspiring investors assume they need a 20% deposit to buy their first investment property. While a larger deposit offers certain benefits, it’s not the only way to enter the market. With the right approach, it’s possible to invest with less than 10%—without compromising your financial stability.

By understanding your options, knowing what lenders are looking for, and using strategies like rentvesting or family support, you can take your first investment step sooner.

Understanding Deposit Requirements

A 20% deposit is often recommended because it avoids Lenders Mortgage Insurance (LMI) and reduces your overall loan amount. But it’s not a rule. Many first-time investors successfully enter the market with a 10% deposit—and in some cases, even as low as 5%—depending on the lender and your financial profile.

Here’s a general breakdown of how deposit tiers are viewed:

• 20% deposit: No LMI, lower lending risk, more flexibility.

• 10% deposit: Commonly accepted, though LMI will apply.

• 5% deposit: Available through select lenders with tighter criteria and higher LMI.

While your deposit size is important, lenders also assess your ability to service the loan long term. They’ll look at your income, employment history, credit score, and overall financial position. A smaller deposit means a larger loan, so it’s important to factor in future interest rate changes, cash flow needs, and a financial buffer for unexpected costs.

Using Government and Lender Initiatives

Most government schemes are designed for first-home buyers, but there are still options available to help investors reduce the upfront cost of buying a property. These include:

• Low-deposit loans: Some lenders offer investment loans with 5–10% deposits, though LMI will apply.

• Family guarantee loans: A parent or close family member can offer equity in their property as security, allowing you to borrow more and avoid or reduce your deposit.

• Developer incentives: Some off-the-plan or new-build properties offer lower deposit requirements or staged payments.

• Equity release: If you already own a home or investment, you may be able to use built-up equity as your deposit instead of saving from scratch.

These strategies can help you enter the market earlier and start building equity, rather than waiting years to save a full 20%.

Rentvesting: An Alternative Path to Start Sooner

If buying where you want to live isn’t financially feasible right now, rentvesting can be a smart starting point. It involves renting in your preferred location for lifestyle reasons while purchasing an investment property in a more affordable area with better long-term potential.

Rentvesting allows you to build equity, benefit from investment-related tax advantages, and grow your portfolio sooner—without compromising your living standards. It also gives you more flexibility by separating your personal lifestyle from your investment strategy.

Improving Your Borrowing Power

To secure an investment loan with a smaller deposit, your overall financial position needs to be strong. Lenders will assess how reliably you can manage the loan over time, particularly with higher loan-to-value ratios.

You can strengthen your application by:

• Maintaining a good credit score

• Demonstrating stable income or consistent business revenue

• Minimising personal debts and credit card limits

• Showing genuine savings over several months

It’s also worth working with a mortgage broker who understands investment lending and can connect you with lenders that support low-deposit investment strategies.

Avoiding Common Pitfalls

Low-deposit investing can work well when backed by the right research and planning. But it also comes with risks. Common mistakes include overcommitting financially, miscalculating holding costs, or buying in underperforming areas without a clear strategy.

Successful property investing requires careful due diligence, long-term planning, and a financial buffer to handle things like interest rate increases, maintenance costs, or vacancies.

Bringing It All Together

You don’t need a 20% deposit to start investing in property. With expert support, the right loan structure, and a clear investment plan, buying your first investment property with less than 10% is achievable. The key is understanding your options and approaching the process with confidence and clarity.

Thinking about getting started with your first investment property? Book a strategy session with PropVest and let’s plan your entry into the market together.

Disclaimer: This article is for general information only and does not constitute financial, legal, or lending advice. You should seek advice from a qualified professional before making any property or investment decisions.