Hello everyone,
I'm a noob at all this but here goes. I would like some tips and hints or even what you might do if you were in my situation. Any ideas would be greatly appreciated.I want to buy a property, i don't no if i should buy a PPOR or an IP, and what the best type of loan for my circumstances is IO or P&I and how much i should/could borrow safely with rates at around 9-10%
Alittle info about me to help you out! I'm 26, I live on the south coast of NSW, i have a stable job getting 50-60k a year.
I have 50k saved and can get the 7k government FHOG and another 10k FHOG through my job and there is no stamp duty. I can live off about $500 a fortnight give or take alittle, I'm debt free, no CC or car loan.
My father is a builder and i have alittle bit of experience in the building field with doing labouring for afew years so any renovations i think could be done relatively cheap.
My thoughts are that i should buy a PPOR to utilise all the FHOG i can get live in it for 6-12 months while renovating it alittle bit and maybe trying to get a workmate to move in with me. Then move out and rent while having that rented out. I don't want a loan for more then 300k but that's up to debate as i'm not really 100% sure how much i could borrow safely, i have used them bank calculators but they dont seem to factor in bills and what not.
Thanks alot for reading, and any tips and hints will be much appreciated.
Cheers.
Hi Beefz
Welcome to the forum.
It sounds like you're in a decent position and I personally like the idea of purchasing an owner occupied property first.
As you alluded to – you can take advantage of the Govt. concessions which will save you some money. You can also spend some time renovating the property whilst you live in it which effectively adds value immediately as opposed to waiting for the growth to kick in.
If you went down this path, I'd strongly recommend that you set-up the loan as IO with offset. Any spare savings you have, you place in the offset. When it turns into an IP, you remove these funds from the offset which increases the loan back to it's original level. I say this because that loan (which will then be securing an investment property) is tax deductible – for that reason, you want to jack it up back to it's original level (which enables you to claim the most amount of tax possible).
Hope that helps.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hello Beefz,
I am sorry Jamie that my idea is just opposite to yours. pls don't mind me.
Beefz, You said you are 26 now. I believe you agree that for most young people, a lot of things in their life still uncertain, such like career, residential location, life style, etc. If you think that might happen to you, IP would be the best way to start out. You will be only paying interest and gaining the equity as time passes by. After everything is settled down later on and you've built up a good size of your IP portfolio, you then free to use those accumulated usable equity to buy a home that you see yourself most happily live in.
It's really good that you have already though about IP. Lots of others quite often follow a usual pattern only – buying a home, and then be the monkey making machine to feed the hungry mortgage among the best years in their life. IP is definitely fundamental for building a much better financial future. Just make sure you don't stop after the first one. There's not much point if one just want to invest one or two and hoping to sell them later on to reap the rewards. IP doesn't work that way, but unfortunately a high percentage of investors stopped after one or two. As for myself, I invest to make money, I use the GOOD DEBT to make money and let it roll like a snow ball. One good advice is unless you are the professional in the IP industry, try to use someone specialize in IP to help you make a plan according your individual situation. Time is too precious to be wasted in IP DIY, because time will COST you dearly!G'day beefz,
Nice to read about a 26yo who has their financial house in order. People our age (I'm 29) have this rep for being money wasters, but it's a generalisation.
I see you're on an info-gathering mission, so I hope the following info is relevant and helpful.
If you are planning to do the FHOG and move out strategy (which is a common one) there are capital gains tax advantages. You can rent your former main residence for up to 6 years and still call it your main residence for CGT purposes.
That means there is no capital gains tax when you sell, so your take home profit (after tax profit) is up to 23% higher than if you had to pay tax.
The catch is that.if you move out and buy another main residence you can't claim the main residence exemption on both.
The ATO is a great resource, and they have a page on this question: http://www.ato.gov.au/content/36887.htm
Also, check out our site and download the free fact sheet for property investors (in case you choose the investment property option). It's written in plain English (I hope).http://www.beyondaccountancy.com.au/?p=345
Hope that helps.
Hi Beefz
Good advice from Jamie above, also by renovating you are adding value straight away so a revalue of the property once you decide to move on from the PPoR situation can release more funds, if required, for your next purchase. The original loan would also go up to the new value, so take that into account with regard to your returns and liability, but if extra funds are needed, they can be acquired this way.
Definitely get friends in for the year to help with the mortgage payments. Really takes the stress out of owning a house. Be sure though that whoever you get in realizes that you will be renovating. Living in the house you are renovating can be quite stressful, especially if it's not planned properly and worse, underfunded.
You're definitely on the right track and congratulations for getting into property investing AND getting on this forum. Keep asking questions about what you don't know. There are many people here that can help and your education in prop. investing never stops.
Love your work.Ian
http://theblockblog.com
Free Property Investment Info, Tools & Resources for Investors With A Sense Of HumourThanks alot for all this information and ideas, gives me some food for thought.
Cheers.
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