Hey guys, I was just hoping for some guidance/opinions on how I should start property investing…
1. I’m 20 years old with 2 years of uni remaining.
2. I have around $15000 saved and can save at around $13000 per year.
3. I live with my parents 30 mins South East of Melbourne and can do so for at least another 3 years if necessary.
4. My net income is around $750 per f/n and I can borrow around $160-$180k.Here what is going through my head at the moment:
1. Should I buy a PPoR, move into it with my partner and pay the thing down as quickly as possible (using FHOG), worrying about IP’s in a few years?
2. Buy a PPoR and live in it for 6 months to claim FHOG, then move back home and rent out?
3. Buy an IP without the FHOG and rent it out immediately, staying at home until I can’t take it any more? [
]I’m leaning towards number three as it seems like a good idea to take advantage of staying at home as long as possible…
I appreciate the responses you guys always take time to give, so if there is anything more you need to know to be able to help me, please ask [
].Thanks in advance,
Steve.(ps: I understand that most of you were probably never in this situation. Thats okay, any comments are welcome.)
“Knowledge is Power”
OK… last post in this batch!
Hi Steve,
Great to hear from you and to learn of your investing plans. What course are you studying?
1. Should I buy a PPoR, move into it with my partner and pay the thing down as quickly as possible (using FHOG), worrying about IP’s in a few years?Well, the first thing I’d say is to avoid confusing buying a home with making an investing decision. Buying a PPoR is a lifestyle choice and is not the same as buying an investment property under commercial circumstances as the emotion is a lot higher.
FYI, what I did was to rent first to save the money to get into property with the goal of building an income for life (delaying gratification) before buying a home. You don’t have to do it this way, but it is very likely that owning a property will be much more expensive than renting and will thus impact on your ability to save.
2. Buy a PPoR and live in it for 6 months to claim FHOG, then move back home and rent out?Hmmm – not a great idea because the stamp duty will be much more than the FHOG. It will probably also be -ve cashflow, so this may place a person in your circumstance under substantial financial pressure.
3. Buy an IP without the FHOG and rent it out immediately, staying at home until I can’t take it any more?Well, you won’t qualify for the FHOG if the property is an IP (unless you live there first). This might be an option provided the reward from investing is more than the pain of staying at home.
Here’s another option… why not rent elsewhere with a few mates, share the burden and continue saving and then using the funds to buy a property?
Go hard and fast for a few years, and then buy a home using your profits at a later date?
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the reply Steve. [
] I’m studying BBus(Bkng&Fin) / BComp. Basically a double degree of banking & finance and computing. Boring, but if all goes to plan it will start me off on my retiring at 45 goal.FYI, what I did was to rent first to save the money to get into property with the goal of building an income for life (delaying gratification) before buying a home. You don’t have to do it this way, but it is very likely that owning a property will be much more expensive than renting and will thus impact on your ability to save.I am thinking very much along the same lines as this. I can deal with living tightly for a couple of years, but the difference is, I can do this without renting. For the time being, I can handle living with my parents for $20 a week board. This would mean that I could potentially start investing from an even better position than yourself (financially at least[:p])
With my idea of buying as a PPoR and renting out for 6 months to claim FHOG, I was thinking that I could avoid some stamp duty by buying off-the-plan in a new estate nearby. This would be negatively geared of course, but my living expenses aren’t going to jump significantly in the near future, and I have a lot of help with ‘what’ to by in this department.
I know I wont qualify for the FHOG if i dont live in the first place I buy, and thats why I was wondering if I should buy an existing place asap which might give me more financial benefit that the FHOG would in the time before I’d be able to buy the estate place.
I think the best idea is the one you suggested. Go hard at it for a while and then buy IP before moving out.
I just get put off by always hearing/reading “Pay off the debt on your PPoR place as it effectively has a better return than most investments due to the non-deductability of the interest repayments” (probably something along the lines of what Noel Whittaker would say). It applies obviously to those who already have a PPoR though, and this makes things confusing for someone without one.
If there is anyone who bought an IP before PPoR i’d love to hear suggestions of which direction I should take to get started?
Thanks again,
Steve.“Knowledge is Power”
Originally posted by YoungInvestor:If there is anyone who bought an IP before PPoR i’d love to hear suggestions of which direction I should take to get started?
Power”Hi Steve – I’m a fan of buying IPs before PPOR.
Why not look at something as close to cf positive as possible in as big a regional centre as possible. If you set a figure of $80-100k, then it should be possible to buy two properties with your borrowing limit.
Your saving record is impressive! You are close to being able to afford #1 now, but unless you get something very cheap ($40-50k) you’d still need to borrow 90% rather than 80%. You’ll be up for LMI and it will be harder to find + cf. But no doubt you’ll get there!
As for No 2, this should be possible in 1-2 years, unless you get growth in #1 and can use some of the equity as a deposit so can buy it sooner.
Regards, Peter
Guys!!
Whats PPoR? and LMI?
FHOG = First Home Owner Grant?
What exactly do you get in this?I’m 19 yrs old and I’m ashamed to say that I have no savings >.<.
I’ve been given a wake up call after I read Rich Dad Poor Dad book and Steve’s book.
Thanx for the help.
P.S. Hey YoungInvestor, wanna get in touch through email or something? your circumstances are very similar to mine (except for the savings bit and the state).
Penguin,
I had no savings at 19 either. Don’t worry about it but address it now. The sooner you build your wealth position the better off you will be when you are older.
PPOR = Principal Place of Residence = Home
LMI is an insurance payable when a loan is over 80% of the security property’s value. It can be quite expensive but does allow you to buy with a smaller deposit.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
YoungInvestor, I have 8 IPs and never owned a PPOR. Penguin Jr I did have savings at 19, but didn’t use them to buy my first IP. My parents let me use their place as security (I don’t think any of us knew what we were getting into, we were well and truly two tier marketed – but it was a good learning experience).
I’ve moved back home now, and am definitely on a winner with my folks![^]
Of note, if you buy your first IP now, or in 6-24 months etc., and you never live in it, you are still eligible to recieve the FHOG when you do buy a house to live in [^]
I think your savings record is awesome, and not dissimilar to what I put in place when I first started work. However the most I had in the bank was $8K, and that ended up going towards a car[^] that lasted me for the next 8 years[^]. Ever since I throw about half my pay into my LOC, which is effectively my ‘savings’ but also reduces the loans to enable further purchases. I don’t draw on this money except for investments.
You will definitely get there, but take it slowly, and do lots of research to work out what you want to buy, and how to pay etc.
Cheers
MelOriginally posted by SteveMcKnight:OK… last post in this batch!
lol… i thought i read this wrong, but lol, this post definetly got my attention… [
][][^].… just the opening line did… lol
Cheers,
sishi young investor. i have 2 investment properties and still rent. for the reasons steve, rk have outlined. for me its all about cashflow, good debt vs bad debt and as steve said delaying gratification. after alot of work ive managed to convince myself that its the journey that is most of the fun. i reckon i will rememeber the sacrifices we (my wife and i) have made down the traqck and think it wasnt all that bad.
although must admit my 11 year old car is really giving me the s…ts[:o)]. oh for a nice new car..
Hi YoungInvestor,
I am currently in the same situation as you.. trying to decide whether to buy an IP or a PPOR. I guess its all about personal choice and what you can and can’t hack. After discussing it with my other half, we have decided to stay living with my parents (as long as both of us can hack it [
]) and invest our savings into positvely cashflowed properties. We decided this so that while we are still young (I’m 22 and she’s 21) we can create the platform for our road to financial freedom… Good luck to you and make the decision that you will not regret.Cheers,
Jay
**********************************
You must stay pOsitive
…then the cAsHfl0w will come!
**********************************Don’t kids leave home when they are 18? (tee hee)[:o)]
how many rooms do your parents have at $20 per week…… sounds like a real bargain….You could buy a PPOR and rent rooms to other uni students, then move back home after 12 months…. which ever you can put up with the longest.
Mopsy
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