Hi all,
Total newbie to this and would appreciate any advice – have the opportunity to purchase a property using the First Home Buyers Grant in the next 6 months, but this grant will be unavailable to me after this period.
Can not afford to buy anything that I could comfortably live in, so my plan is to buy the cheapest unit I can afford, take advantage of the grant, suck up the pain of the first 6 months mortgage plus my rent costs and then either rent the property out or do up and sell on.
Dilemma is offer will be unavailable to me personally in the near future, so should I go ahead and do this now, go ahead and take the grant and do something else or not take up this option at all during this period of possible instability.
Sorry if any of the above is confusing! All advice gratefully received.
Take the grant. Get into the market. The best time to buy real estate was yesterday and the worst is tomorrow. It has been this way since the beginning of time. House prices may come down a little but when it costs over $400K for a modest house and land package, houses aren't going to plummet. There is plenty of doom and gloom. My belief is that the housing market will stagnate for a few years but we won't have widespread cuts in value. The cliche is "time in the market is better than market timing". Property is a vehicle for wealth creation that has been used for time immemorial and most of Australia's richest people made it in real estate. It's a cycle. The good days are over for a while in terms of investing but now is a great time to think about buying your own home. Prices have come down. You can get your own place with some handouts from the government. This is likely to disappear. It's free money. You will have the opportunity to grow a bit of equity so that when the next boom comes, you'll be in the game instead of wishing you'd made that first step 5 years ago. It's always the right time to buy real estate. You have to be smart about it. The deal of a lifetime comes along every day in real estate. You have to put yourself in the position to take advantage of it. Credit will get harder soon. Grab it while you can
Stay out of the property market at all costs. Getting in now will ruin you for life. End of story.
ohricey wrote:Hi all,Total newbie to this and would appreciate any advice – have the opportunity to purchase a property using the First Home Buyers Grant in the next 6 months, but this grant will be unavailable to me after this period.
Can not afford to buy anything that I could comfortably live in, so my plan is to buy the cheapest unit I can afford, take advantage of the grant, suck up the pain of the first 6 months mortgage plus my rent costs and then either rent the property out or do up and sell on.
Dilemma is offer will be unavailable to me personally in the near future, so should I go ahead and do this now, go ahead and take the grant and do something else or not take up this option at all during this period of possible instability.
Sorry if any of the above is confusing! All advice gratefully received.
No, its not confusing. If it was me and I could afford the current repayments I'd look for a few well priced places in well placed locations and put an offer of at least 10% below asking (not all offers at once
) and see how it went. The best time to get buy a bargain is when the sheep are too afraid to buy and sellers are desperate, if rates are falling a few more times the sellers won't be as desperate to get out and you'll have more competition for the available stock. Just work out the numbers realistically and make sure you can afford the repayments and any extra costs involved in holding it until you can rent it out. Good luck.I would take the opposite view of CHIS –
Quote:House prices may come down a little but when it costs over $400K for a modest house and land package, houses aren’t going to plummeti think the fact that a modest land/house package costs 400k shows how overinflated the market really is. think about it in terms of risk/reward. your reward for getting in now is a $7000 FHB grant? The risk is hundreds of thousands of dollars.
If you knew this stuff backwards and forwards it might be doable but as you admit to not knowing much about the housing market, it seems like a very dangerous endeavor and one that could financially ruin you if not done very carefully.
house prices have come down a lot in the past 3-4 months and it seems that Aus is going down the same road as the US, UK and NZ. it might not implode (i think it will), but someone would have to be foolish or lying to say that there is no risk of a significant drop in housing prices. as such i don’t think the benefit of a FHB grant is sufficient to outweigh the very real and large risks in the market today.
I agree with Harb.
Australia has mass immigration. All our capital cities have urban sprawl. WA is being bulldozed for housing. House prices will not plummet because their isn't enough of them. It isn't America. Interest rates came down 1% today. The sooner you get into property the sooner your life gets going. The sheep are scared. The Lions are feeding.
CHIS wrote:Australia has mass immigration. All our capital cities have urban sprawl. WA is being bulldozed for housing. House prices will not plummet because their isn't enough of them. It isn't America. Interest rates came down 1% today. The sooner you get into property the sooner your life gets going. The sheep are scared. The Lions are feeding."This isn't america". Please explain in which way it's not america ( yes , the obvious being that it's a different country ). Australia is EXACTLY like america. Overpriced, loads of properties available, oversupply of properties infact ( there's 900.000 EMPTY properties ). In fact, America was probably in a better state than Australia was.
The debt levels certainly are a lot lower in America than in Australia.
Please explain…CHIS wrote:Australia has mass immigration. All our capital cities have urban sprawl. WA is being bulldozed for housing. House prices will not plummet because their isn't enough of them. It isn't America. Interest rates came down 1% today. The sooner you get into property the sooner your life gets going. The sheep are scared. The Lions are feeding.No the Govt is scared, the people are still clueless, and the banks are praying there isn't a run on them.There is a lag effect from what happens on the share market today to what happens to property in the future.
The US rates are almost 0% as is, and that did not help them. And don't you wonder why the RBA had to drop the cash rate so drastically? This is about money not flowing around the financial system and credit locking up. Not to mention the massive amount of toxic debt out there. Things are not rosy and people will go to cash before they go to property. I'd wait a little longer before buying.
Ohricey,
You appear to be thinking in the right direction.
Look at the bottom end of the market that is within your price range.
If property values do drop then it is normally the bottom end that doesn't drop as much in real figures.I don't understand why others are mentioning this figure of 400K when it was stated in the beginning that the bottom end was where this future investor is looking. One of my favorite properties is a 2 BR unit picked up for 72K (2002) situated in not the best part of town. Everyone said I was crazy for buying as tenants were from low socio economic groups and places were frequently trashed. The place was trashed twice and insurance covered everything but that same property now is over 200K and debt free. In the beginning it was costing me around $100 month to help cover costs but now it is all paid for and a nice little cash cow. Same tenant has been there for nearly 4 years.
The point is you don't need to put your self in to financial hardships by over borrowing. Start small and work upwards.
Scamp,
If done the right way there is no reason why investing in property should ruin a life. The key is due diligence and investing wisely. Yes there are some who have tried to jump in the deep end and over borrowed but this appears not to be the case here as we are talking the bottom end of the market. If Ohricey finds something that suits his purpose for around the 150K mark I don't think any major crashes are going to affect him that dramatically. If the market does go up he won't make the big dollars but he will make some and have gained some valuable experience.
You appear to have knowledge in certain areas so why not use that knowledge to help people attain their goals rather than the fear and doom approach. Point out where problems could occur so they can be aware rather than just saying the sky is falling and being negative about property investing. I bought my first property in 86 when interest rates were 16% first loan and 24% bridging. Survived the 89 recession we had to have and the 96-2002 slump. This span of 20 years has seen the property go from approx 75K to over 300K. I could have easily listen to people like yourself who were all doom and gloom about interest rates and done nothing but instead I counted my pennies took the risk and hung on for the ride.
Do you think this place will crash to pre 86 prices and I will be ruined for life?
C2 : Before 2000 property wasn't overpriced. 16% ? wow.. but you bought at 3 times wages , so you can't compare with today. The problem is that wage to property price is out of sync. This is the first time ever that it happened, and it will be the first time even that it crashes ( see US / UK / Ireland / Spain / New Zealand / France / Australia )
Please explain this : Why should he buy now at 150K when he can buy it for 100K in a year ?
And why should he buy at 100K in a year when he can buy at 75K in 2 years ?If he starts saving money now while renting he can safely afford to buy in 2 years.
Anyone who says "be afraid, you will miss the boat" has no idea what they're talking about.
Noone will miss the boat, there's no boat going for at least a year.Thanks for all the different views – very interesting debate.
C2 – am definitely starting at the bottom of the market. As I have just had a baby and am on maternity leave I don't want to overextend my self as we will have to pay double rent/mortgage for at least 6 months.
Missing the boat for me would be in terms of the grant – I guess technically I'm probably not entitled to it now, but I definitely won't be soon as I am getting married early next year (I know it's naughty but it doesn't seem fair!).
I would hate to miss out – it's not just the $7K but also the savings on stamp duty.
My only worry is it's a bit of a rush and I guess I was looking for some validation, which I did get here! My aim is to sink all my equity in it, and after 6 months rent it out, build up equity and look for something bigger and keep building up.
If I don't profit my gamble is I at least won't lose money on it (falling prices).
Cheers all
Quote:As I have just had a baby and am on maternity leave I don't want to overextend my self as we will have to pay double rent/mortgage for at least 6 months.Missing the boat for me would be in terms of the grant – I guess technically I'm probably not entitled to it now, but I definitely won't be soon as I am getting married early next year (I know it's naughty but it doesn't seem fair!).
It's not "naughty", it's outright fraud.
It would be fairly easy for the PTB to discover that you were faking a single life while living a de-facto one. Little things like… oh, I don't know, THE BABY!?! And it would be pretty easy for them to check and find you were engaged…
The illegal bit aside, how much would it cost you in interest/insurance/maintenance/etcetera to hold the property for 6 months? Then add in the selling costs. If this totals to more than $7k, then you'd be behind, not ahead. Stamp duty is irrelevant as you don't get it back at sale. You can't even add it to your capital base because you will have bought as a PPOR.
Cheers,
F.[cowboy2]
F has a point. The governement is a slow, beurocratic beast (i should know) but it always catches up with those who defraud it.
Scamp wrote:CHIS wrote:Australia has mass immigration. All our capital cities have urban sprawl. WA is being bulldozed for housing. House prices will not plummet because their isn't enough of them. It isn't America. Interest rates came down 1% today. The sooner you get into property the sooner your life gets going. The sheep are scared. The Lions are feeding."This isn't america". Please explain in which way it's not america ( yes , the obvious being that it's a different country ). Australia is EXACTLY like america. Overpriced, loads of properties available, oversupply of properties infact ( there's 900.000 EMPTY properties ). In fact, America was probably in a better state than Australia was.
The debt levels certainly are a lot lower in America than in Australia.
Please explain…We aren't spending billions every week on a war in Iraq
Our banks are the most profitable in the world
Our raw materials are being bought by the millions of tons every week………..and will be for many years
Our population is growing
Immigration is at an all time high
Our country has a massive budget surplus that our government can spend on infrastructure to stimulate the economy if needed.
America is bankrupt. We aren't
Australia doesn't have to spend 700 billion dollars to bale out the mickey mouse banks that lent billions of dollars to people who couldn't repay the debts.
Chalk and cheese.It's the time of champions
This is the market to make moneyCHIS wrote:We aren't spending billions every week on a war in Iraq
Our banks are the most profitable in the world
Our raw materials are being bought by the millions of tons every week………..and will be for many years
Our population is growing
Immigration is at an all time high
Our country has a massive budget surplus that our government can spend on infrastructure to stimulate the economy if needed.
America is bankrupt. We aren't
Australia doesn't have to spend 700 billion dollars to bale out the mickey mouse banks that lent billions of dollars to people who couldn't repay the debts.
Chalk and cheese.Makes you wonder why everyone is fleeing our dollar today if things are so good. We have had massive drops these last few days so it seems the rest of the world think we are a risk not a safe haven. All it takes is a run on the banks and the whole thing goes up the $hiter. To say that its a good time to spend money in this climate could be dangerous. All those things you mentioned are not set in stone. Sit and wait a bit to get a better direction of where things are heading is a safer bet. Not to mention being cashed up even though our dollar is going down the drain.
SCAMP,
Very easy to go backwards and forwards with this discussion. The only difference between us is I'm putting actual figures and situations where at the moment yours is mainly theory. Where are you getting these figures of 150K down to 100K down to 75K from. Put the theory into practical figures with proof to substantiate what you are claiming, otherwise your posts have no credibility. BTW the wage I was living on back then was around a 5th of what the price of the house was. My risk of wage 1/5th plus rates of 16 and 24% was very real and high.
Ohricey,
I'm not up to date on requirements for grants etc but if you are in doubt about the legality of your grant then check it out first before doing anything else. As mentioned by others check the cost factors again and I would advise against using all your equity unless you have cash reserves or other items you can off load if you need cash.
Lots of negative commetns when market is diving…
but if you look back 3-4 years ago in this forum…. lots of buying activity…
Why everyone get scared when market is diving?? I m more afraid when market hits its highCHIS wrote:It's the time of champions
This is the market to make moneyScamp wrote:Stay out of the property market at all costs. Getting in now will ruin you for life. End of story.There is no right or wrong time to invest because the right time can only be based upon your own specific circumstances.
At the moment no one can predict with any certainty what will happen, therefore to speculate is to gamble and as they say, only gamble with what you can afford to lose i.e. consider a worst case scenarios or ask yourself if you can live with it.
What happens if you have a sustained period of vacancy?
What happens interest rates go back up (stagflation is a possibility)?
What happens if you lose your job?
At the moment these are all very real prospects, so you need to at least consider a contingency or what you might lose if you end up having to sell quickly.
) and see how it went. The best time to get buy a bargain is when the sheep are too afraid to buy and sellers are desperate, if rates are falling a few more times the sellers won't be as desperate to get out and you'll have more competition for the available stock. Just work out the numbers realistically and make sure you can afford the repayments and any extra costs involved in holding it until you can rent it out. Good luck.
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