How much do you actually need to start? A straight answer.

It’s the first question on nearly every strategy call, and the honest answer has two parts: a number, and a buffer.

Most people ask this question a year or two later than they needed to, because they assumed the answer was “more than I’ve got”. Sometimes it is. Often it isn’t. So let’s just put the numbers on the table.

The floor

As a rough minimum, you’d want around $70,000 in savings or usable equity and a household income of $70,000 or more. Those two numbers are where a purchase at the bottom of our range starts to work without you living on the edge.

Here’s where they come from. Take a $300,000 purchase, the entry point of what we buy:

• Deposit at 20%: $60,000. You can go lower and pay lenders mortgage insurance, and plenty of people do, but let’s be conservative.
• Purchase costs, about 6%: roughly $18,000 for stamp duty, conveyancing, building and pest, insurance and the odds and ends. It varies a fair bit by state.
• A kitty: a few thousand set aside so the first repair bill doesn’t go on a credit card.

Add it up and you’re nearer $80,000 all in. That’s why I call $70,000 the floor rather than the comfortable number. It’s where the conversation becomes worth having, not where it becomes easy.

The income side matters because a lender has to be satisfied you can service the loan, and I have to be satisfied you can service it at a rate a couple of percent above today’s. The rent helps, but rent doesn’t cover everything, and it shouldn’t need to.

If you already own a home

A lot of the couples we work with are in their forties, own a place in Melbourne or Sydney, and are sitting on more usable equity than they realise. The quick version: take 80% of what your home is worth, subtract what you still owe, and the difference is roughly what a lender may let you draw on as a deposit for the next purchase.

Own a $1.1 million home with $600,000 owing? 80% of $1.1 million is $880,000, less $600,000 leaves about $280,000 of usable equity. That is more than enough to fund a deposit and costs, and often two. Whether you should is a serviceability and risk question, which is exactly what we pressure test in the first call.

If you don’t

Plenty of our clients started in their late twenties with savings, a good income and no property at all, renting where they want to live and buying where the numbers work. Some had a parent go guarantor, which can replace part of the deposit. If you’re in that camp and you’re short of the floor, we’ll tell you plainly what the gap is and roughly how long it might take to close it. That’s a better conversation than pretending, on either side.

Now pressure test it

The number gets you to the table. The buffer keeps you there. So before you commit to anything, run the position through the worst year you can reasonably imagine:

1. Interest rates go up 1.5%. What’s the weekly shortfall now?
2. The tenant leaves and it takes four weeks to find another one. Where does that month come from?
3. The hot water system dies. Call it $3,000. Is that in the kitty, or on the card?
4. All three happen in the same year. Because at some point, they will.

If you can get through that year without selling, you can hold. And holding, six years at a minimum, is where nearly all the return comes from. One of the biggest mistakes I see investors make isn’t buying the wrong property; it’s buying a fine property with no buffer and being forced out of it in year two.

You can run all of this yourself in the MOGL calculator; it’s built to model the conservative case, not the brochure case.

The fear is normal

If reading this makes your stomach tighten a little, good. That’s the right response to borrowing several hundred thousand dollars. Have you heard of fear setting? Instead of carrying the worry around as a vague cloud, you write the specific fears down and deal with them one at a time. “Rates go up” becomes a number. “I lose my job” becomes a question about how many months of buffer you hold. Named fears are much easier to plan for than unnamed ones.

And honestly, if you’ve saved $70,000 on a normal income, you’ve already done the hard part. Most people never get there. Don’t let the last step feel bigger than it is.

Next step

Bring your three numbers to a free strategy call: borrowing power, savings or equity, and what you actually want the property to do. We’ll model it conservatively, tell you straight whether you’re ready, and if you’re not, what the gap is. No hard sell either way.

This article is general in nature and does not constitute licensed financial, tax or credit advice. The figures are illustrative; lending criteria, stamp duty and costs vary by lender, state and your circumstances. Please talk to your broker and accountant before acting on anything here.