New to PI – Would love your help and expertise!

Hi Chris, welcome to the forum.

There's no wrong or right – it's a matter of different stokes for different folks. As a very generalised comment, negatively geared properties (which are generally in larger, metro settings) cost you money to hold but generally experience decent capital growth. On the flip side, positively geared properties (which are generally on the fringes of metro areas or within regional areas) add to your income but generally experience less capital growth. Please note – this is a huge generalisation and there are always exceptions to the rule.

For your first home, you could get away with a lower deposit. Depending on your state, there might be stamp duty concessions that make the purchase a lot cheaper. A 95% lend with mortgage insurance added on top means you only need a $15k deposit plus costs (remember, you'll also be eligible for the $7k FHOG as well).

A couple of negatively geared properties will reduce your borrowing capacity. On your income, I'd be aiming for something close to neutrally/positively geared. 

As above, negatively geared properties on your income will reduce your borrowing capacity. I wouldn't have thought that this strategy would be best for you.

Good books have been written by Lomas, Somers, Yardney, De Roos and Fitzgerald to name a few. I wouldn't bother with becoming an expert at everything (I'm talking about the REA and broking education) – instead, surround yourself with a team of professionals that are experts in their field.

Chris89 wrote:

I hope I haven't bored you with all my questions, and my apologies at my very very basic understanding of the game. I would love for anyone to point me in the right direction

Not at all – and I hope you take the knowledge you gain and act upon it. All the best with the investing

Cheers

Jamie

Quote:

Thanks for the insight heath .

The reason I said that was because would it not mean I would need a saving of say 120-150k on a 300k property to be neautrally / positively geared? Therefore taking many years to achieve this, if im already paying off a PPOR?

Please let me know if this understanding I have is completely wrong

Oh yeah, I understand now, that makes good sense.
Keep in mind there are other ways to create a postively geared property like buying a house in need of some TLC for a bargin price, renovating to increase the value and then renting it out at a price that achieves a positive cashflow effect.

Chris89 wrote:

Thankyou for your time Jamie, much appreciated . I have a few more questions if thats ok?

No worries at all.

I have a preference towards IO with an offset attached. Any spare savings gets put into the offset account which lowers the repayments. If you ever decide to move out of this property and convert it into an investment, you can withdraw the money from your offset, which boosts your loan back to it's original level – thereby maximising tax benefits.

Personally (and I stress – this is my personal opinion), I'd aim to be more aggressive. Look at buying something that you can add value to. This way, you create equity. This newly created equity can be accessed to purchase your first investment property. This way you don't have to wait a few years for the property to increase in value. However, your income at the time will play a major role in whether the bank will actually lend you money for your first investment.

The minimum deposit is 5% plus purchasing costs (keeping in mind that you may be able to take advantage of stamp duty concessions dependent on the state you live. You'll also receive the $7k FHOG). In terms of how much rent you require to make it neutral/positive, try this spreadsheet – http://www.passgo.com.au/pass-go-investment-property-analysis-tool

Investing purely to minimise tax is not a good strategy. Think about it – you have to make a loss in order to reduce your taxable income. That said, there is absolutely nothing wrong with negatively geared properties providing you suspect that the capital growth they achieve outweighs the ongoing costs of holding the property.

Hi again

A 5% deposit means you spend less time saving for a deposit – which means you can enter the market sooner. It will cost more in lenders mortgage insurance, but some lenders will allow you to add it to the loan.

Personally, I don't have an issue with paying mortgage insurance. It allows me to use more of the banks money rather than my own. Without it, I wouldn't have been able to build my portfolio (saving 20% for each property I purchased when starting out would have been way too burdensome).

What are your plans with your first property? Do you suspect you may convert it into an investment property at some point? The reason I ask is because I see so many people who have paid down a significant portion of the principle on their home and then decide to turn it into an investment property and move into another home. The issue here is that they're generally left with a small loan on the investment property (which is tax deductible) and a large loan on their new home (which isn't deductible). There are ways around this – but they are generally costly.

Don't apologise for being a newb! Your questions are valid and unless you ask them you'll never know.

Cheers

Jamie

If it's going to become an investment property in the future then (and again, my opinion) I'd take out a high LVR loan – either 90% or 95% with IO and offset. When converted to an IP, take all of the cash out of the offset and move it onto your home.

With a P&I loan, the interest repayments will reduce as the principle slowly erodes. However, if this property is turning into an IP in the future, you don't want to erode the principle (as it reduces the loan amount which will become tax deducted once this becomes an IP).

Hope that helps.

Jamie

Derek makes a good point, it's important to read widely – each author will have a different point of view from the next. I'd also check out some Margaret Lomas books as well. I think Nathan Birch will have a book out soon as well – that will be one to add to the list.

Cheers

Jamie