Think you can't afford an investment property? Kate Robertson investigates how much money you'll need to get across the threshold.



If your wage hovers around the $45,000 mark, you might think investing in property is out of your league, but if you have $37,000 in cash or equity in your own home — or less if you are prepared to buy with a friend — you could jump-start an investment portfolio.



According to Peter Rogozik, of Your Buyers Advocate, $37,000 will provide a 10 per cent deposit and buying costs for a quality, $250,000, one-bedroom unit with potential for excellent capital growth in Melbourne's western suburbs.



He says given the choice, you should stick with Yarraville, Seddon, Kingsville or Footscray or, if you're a bit short, Sunshine is a good option.



If you have more to spend, he says the minimum entry price for property in Melbourne's traditional blue-chip suburbs in the south-east is about $380,000, or about $300,000 for the northern suburbs.



While buyers will have to cover the difference between the rental income and loan repayments and other costs for the first few years, Mr Rogozik says those losses are tax-deductible and if they have chosen well, the property should be paying for itself in about seven years through rent rises.

"There's no vacancy rate if you buy the right one; they're absolutely great investments.



"The one-bedroom [flat] is a great option because you are coming in at the lowest price point but, providing you buy the right one, you are coming into the market in a quality way. I call them little nuggets of gold because if you buy something today for about $250,000, in seven years' time it will be worth $500,000.



"How hard do you have to work to make $250,000 in your job? But this is capital growth; you aren't really working, you are taking advantage of market conditions."



Mr Rogozik says it is important investors do not rush into a purchase and are clear on their buying criteria. "People often make errors; they choose the right suburb but the wrong property.

"Preferably, it needs to be in a block of 30 or less. It needs to have car parking on the title — that's a must. It needs to be close to important amenities like a railway station or tram stop and, of course, it needs to be between two to 15 kilometres of the CBD."

Another factor to take into account is the quality of the streetscape; in other words, not too many blocks of flats. Position within the block is also important to ensure your unit does not overlook the bin enclosure or sit next to the car-park entrance. Mr Rogozik also warns investors to steer clear of bedsit or studio apartments.



These guidelines are equally important for those buying a unit to live in, he adds, as home owners need to be mindful of maximising their property's capital gain to give them more upgrade choices down the track.



But if $37,000 is still too much of a stretch, another option is co-ownership. Jeremy Levitt, the director of PodProperty, which helps people seeking to buy property with a co-ownership agreement, says his business had year-on-year growth of 51 per cent last year.



Banks and other lenders are also becoming more open to

co-ownership, with businesses such as Mortgage Choice providing specific mortgage products for that market.



Mr Levitt says co-ownership appeals to first-home buyers who want to purchase property with friends and family. "They can easily get into the market years before they could if they were purchasing by themselves."



Mr Levitt says people often buy as co-owners with a plan of selling within five or 10 years and using the equity as a deposit on their own place. Most inquiries come from two people but he has had groups of more than five people wanting to buy.



However, co-owners need to document what they will do in the event of a disagreement.



"In the best-case scenario, you sign the agreement as part of the insurance policy, put it in your drawer and never look at it again," he says. "But in the worst case ... you've got a contract that stipulates how you deal with all scenarios, [such as] someone defaulting on their mortgage or someone wanting to do a renovation."



Peter Wilson, of Strategic Wealth Management Solutions, says potential investors need to weigh up not only whether they can afford to buy and maintain an investment property but whether it makes financial sense compared with other assets, such as shares.



Mr Wilson urges people to do a "sensitivity analysis" to be clear on how they would cope in a range of situations, such as an interest-rate rise; a flat market; job loss or a rise in living expenses; what impact an investment property would have on their tax situation now and in the future if they sell; and what happens if they decide to travel or have a family.



The numbers

■$37,000 upfront for a deposit plus buying costs

■Loan interest $13,700*

■Expenses $5700**

■Rental income $12,500

■Total annual net loss $6900

(tax-deductible)

■Based on buying a $250,000 unit with 90 per cent loan (which would require mortgage insurance).



*Assuming a 6 per cent interest-only loan.

**Such as rates, property management, body corporate fees, maintenance etc.

Talk to your accountant or financial adviser before making a purchase.



Plan for the future

Maree Kearton was thinking ahead when she bought her one-bedroom flat in St Kilda two years ago.



While the flat was to be her home, she had a strict list of criteria to ensure it would enjoy enough capital growth to give her the option to buy something bigger later on.



With a budget of $250,000, she was determined to buy a flat in a small block within 10 kilometres of the city centre.



"I knew I was going to buy a one-bedroom flat for starters because that's all I could afford ... I wanted it to let in plenty of light and be an easy place for visitors to park," Ms Kearton says.



She says she loves her flat and has been told it is now worth more than $330,000.



"I'm very happy. I haven't looked back," she says.



"That's one of the best things that I could have done.



"I will probably be here for another couple of years. Then I will be looking at renting this out and moving a little bit further out because I will need more than one bedroom. I eventually plan to buy a bigger place."