Hi All,
My partner and i have just saved our deposit (30k) to either buy our own property in Sydney ($500K) to live as a first home buyer or to invest the money in a positively geared investment property in a rural area with a high rental yield (initial property around $150K).
We are both very keen to start our investing, although would like to know if we should continue renting or buy our first home to get the first home owners grant as well as having our money go into our pocket not paying rent.
On the other hand, we don't mind renting and would love to get the investment portfolio starting sooner rather than later, and in a few years we could build up a nice deposit for our own home.
My question is purely financial, what would be the first right step to make. I understand there is no 1 answer given you dont all know our exact financial position – but looking forward to hearing how other people have decided which route to take and why.
Thanks
LizHi Liz
Welcome to the forum.
My preference has always been to purchase the PPOR first and then use it as a stepping stone towards your first IP.
How? Look to purchase something that can do with a cosmetic renovation. Nothing structural/difficult – just simple stuff that will add immediate value such as new paint, flooring, ect.
After that, have the property revalued. Hopefully it's gone up and you can access this newly found equity to use as the deposit/stamp duty on your first IP.
Just my two cents – others will have a different take on things.
Cheers
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]
Hey Liz,
I'd also prefer to buy the PPOR, rather than rent.
Then, like mentioned above, use the PPOR as the stepping stone for an IP. This is what I'm actually doing at the moment.Hi Liz,
Are you stretching yourself too much?
According to your post you have managed to save $30K and in a subsequent statement you talk about buying somethign at $500K.
At a 95% lend you will consume $25K of your savings on teh deposit alone. Now I know FHOG and stamp duty discounts may apply here but it seems, to me, you may be strecthing yourself a little.
Things to consider – interest only on a loan of $470K is about $2600/month and then there are rates etc to pay without even considering food, power, water, phone etc
Derek's got a good point – $30k won't be enough for a $500k PPOR in Syd.
Cheers
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]
Hi all,
Thanks for your help!
Jamie – I like your advise on making a lump some gain first and then reinvesting this into an IP down the track. A question I have though, would it be better to get a interest only loan and save extra on the side or get a principle and interest loan? We intend on living in the PPOR for approx 18 months and then sell after renovations.
Derek, yes I think we might need to save a little more, how much would you say would be a comfortable amount to have set aside for a 500k loan? I think one thing I didn’t mention was how much rent we pay at the moment.We pay $2,400 a month in rent and as a household earn over 200k a year so repayments aren’t that much of an issue. But, I’d like to have some backup funds in case anything turns sour for any reason
Mattsta, thanks for your comment aswell.
Love to hear more feedback.
Liz
Geez – I had some typos in that post didn't I.
Given your relatively low deposit savings I would be angling towards a 95% loan.
On this basis you will need the following:
Deposit – $25K
LMI – $10K (estimated)
Solicitors fee – $2K
Miscellaneous – $2KTotal $40K
Clearly you are close.
Note I have assumed you will qualify for stamp duty discount for FHO in NSW – someone more familiar with NSW purchases at the moment can confim whether or not their is such an incentive available to people such as yourself. If there is no such incentive in place you will need the following;
Deposit $25K
LMI $10K
Purchsing Costs $25KTotal $60K
As an aside you may benefit from a move to 'cheaper' rental accommodation. This will speed the saving process up and move you closer to your goal.
One decision you probably need to make is, "are we planning to have kids, and when?". Once they are of schooling age, it'd be a nuisance to be renting because where you reside dictates the school the kids can go to. Many schools only let the child attend if you live within a certain radius of the school itself. So if you landlord kicks you out and you can't find another rental in the same district, then the child will have to move schools, re-make friends etc. And then there is the hassle of moving itself, which I presume is huge when you've got kids in tow.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
ohh yeah the potentiality of "kids" are a consideration as well for you. Don't forget that, as it may have implications now on whether you get the PPOR or IP
Yes, the kids equation does come into it. But for us, that is about 5 or so years away. The aim would be to have a few IP's and a nice PPOR by then.
The question i keep asking myself is if i look back from 5 years.
What would be the best financial position and how did i get there? i think the first steps are crucial, worse not making any at all.
I keep coming back to investing now and NOT getting into a PPOR until i can afford one that is worth spending the money to move into.
if i invest my savings now into the PPOR – i am out of action till i save another deposit for an IP.
Has anyone else done it the other way around? Buy a few IP's before getting buying the PPOR?
Thanks
LizElizabethKruze wrote:i think the first steps are crucial, worse not making any at all.Yep, that's the number one point – and it doesn't just apply to investing.
Cheers
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]
ElizabethKruze wrote:Has anyone else done it the other way around? Buy a few IP's before getting buying the PPOR?
Hi Liz,
I am aware of a few people who have gone down the IP first route and they wouldn't have it any other way. Similarly I know people who have gone the PPOR first route and wouldn't have it any other way.
Our story:
Wife and I were teaching in the WA bush and decided to buy a house to rent out just so our money was going into 'something'> as we were in the bush at the time we rented this property out for two years before moving back into it when we returned to Perth.Lived in the place for two years before career promotions took us 'bush' again. This time our 'bush' appointment was 13 years (no, I didn't do anything wrong). During our time of absence we continue to own and rent the house we had bought and at one stage even managed 12 months leave without pay with the house paying for itself at this time.
About 11 years ago I was appointed to a locality of choice in WA, sold the house and ploughed the considerable profits into our own home. The profits made significant inroads into our mortgage and gave us a healthy equity position.
We then restarted our investment journey and used the equity in our new home to leverage off again and bought multiple properties in the last 11 years.
We are now at the stage of downsizing (anyone want to buy a large home?) and will sell this place, move into another dream location and if necessary sell another IP or two to ensure there is no non-deductible on our books.
Not sure if the story helps – but maybe you can distill something useful from it.
Hi Derek,
Thanks so much, these are the stories that i am after. On how others have done it.
There is a HUGE amount of overwhelming information out there and sometimes if your looking for something hard enough you will find it. In other words, my research can prove to be biaised sometimes
thats why i have started to ask to get different opinions and real life scenarios
Thanks
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