hi. I have received a large cash windfall of $100,000. I have researched and read and am keen to get started investing. I do not own any property and therefore have no equity. I have had conflicting advice on whether it is better to use my cash to start buying investment property straight away or to use the cash to but a house to live in now and use the equity to finance investment property. If I was to buy a property to live in it would be in the $350,000-400,000 range, and be my first home. I have a very decent income and no debt. what do forum members think?
i'm a newbie too, but if i was single with your current specs, eg, 100K cash plus a very decent income, I'd be renting and looking at getting 2-3 properties.
Hello kjun01
In your position, specially if you qualify for the FHOG ( which is a nice 14K this year) , I would buy a property which I would first live in and then rent out after 6/12 months (depending on the state you live in). So even though you will be living in it initially buy it with the criteria you would use to buy an investment property. Also set up the loan structure as you would for an investment property ( i.e. probably IO with 100% offset).
If you can find a property which could use an upgrade you could do this and add value to it while you are living in it.
After the 6/12 months you could go back to renting and this ex PPOR would remain CGT free for up to 6 years.
Cheers
ElkaKjun01,
I agree with the comments made by elkam above. You could take advantage of the $14k/$21k FHOG and also exemption from Stamp Duty (if FH is in NSW).
I have actually written an article with a simple numerical example of how the 6 year CGT exemption rule can potentially save you thousands in Capital Gains Tax. Feel free to shoot me an email if you want me to email you a copy.
Don't buy now, You can get the new government grant untill the end of the financial year, Wait untill property prices have fallen a lot more, Remember Buy Low, Sell High. Most people on this forum will try and convince you somehow that you should buy high.
If your still bullish and don't really care I would reccomend you at least wait untill the RBA lowers interest rates a few more percentage points.
I would wait another six months personally just to find out if and by how much properties may drop. During that six months( It will pass quickly) Do a lot of reasearch on your desired area. Go to open houses and auctions and get a feel for what is actually happening. If you find a desirable place throw in a low ball offer that would reflect any future drop in value.Arm yourself with info both for and against property investing and come to your own conclusion.
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