Hi There All
I’m a 30 year old teacher and am finally getting off my butt and starting to think about buying some property. I am still renting and am looking at buying an investment property. I have an endless list of questions that I am hoping you guys might be able to help me with over time. So I’ll throw a few questions at you and see what advice you can offer. I am open to conflicting views so I have different alternatives to consider .. Anyhow, here goes …
(1). Loans – I have spoken to a few banks and mortgage brokers .. they have come up with rates in the vicinity of 6.5% … however, a work colleague put me onto homepath.com.au which is linked in someway to the commonwealth bank .. they offer 6.15% p.a. variable … Does anyone know anything about homepath and whether i should have any reservations (seems too good to be true if you know what i mean)
(2). Another issue burning in my head at the moment … I currently have $8000 saved up .. I am looking at buying a house in the $200K – $250K range … Clearly this is not enough to start me on my way yet … I have read many things on the forums here .. a lot of people suggest saving a minimum of 20% to avoid mortgage insurance … Is it perhaps better to jump into the market sooner or is it really that good an idea to wait for 3 years until i have $40 000 (though by that time .. that may only form 5% of the propertys values) … The other alternative I have is that a broker suggested that I could use my parent’s home as equity and this would eliminate the need to pay Mortgage insurance .. can anyone confirm this for me … also will my parents names be part owners of the property or not ???
(3) .. Finally (for now) .. I’m currently trying to make a wise choice about where to buy … Again, reading a lot of comments on the forums confuses me … I have been looking at areas of Hobart (purely emotive reasons .. not sure if it’s a good idea as an investment) and Ipswich (a broker suggested i look into this area) … Can anyone give me feedback on these areas or make suggestions as to areas i should perhaps consider (as i said .. i am looking at 200 – 250 K houses) … I know a lot of people say you have to research places but apart from checking out prices and exploring the area in person i’m not sure how else one can gain insight into the potential of an area …
So if you can answer any of these questions or point me in the right direction i would be highly appreciative … Many thanks and good luck to you in your own pursuit of property !!
Dereksam,
1. Don’t get too focused on interest rates for investment properties. Find out through a mortgage broker who will lend you the most…Ultimately that is more important when investing (in my opinion). Interest rates are tax deductible.
2.Your parents equity doesn’t necessarily mean that they have to go on title. They could gift the money to you and you can have an arrangement with them privately to pay them back or if they want they can be an unregistered 2nd mortgage for the property. The name on title will be still be you.
3. Mortgage insurance – I have no issue with paying it, because it allows me to reduce my outlay into my next IP. It also allows me to have extra cash available for other things ie next IP purchase or general emergency fund. Of course, the mortgage insurers will usually want to see 6 months saving history. Make sure you can show this…
4. As to area, I would look at the Gold Coast (I have recently bought there – I live in Melbourne). Internet is a good start, contacting agents in the area.
Educating yourself with respect to property investing would be advantageous. Do a search on this site under resources. There are many books reviewed.
With regards to location selection, and some great information on Australia population shifts & lifestyle changes backed by statistics, I would recommend ‘The Big Shift’ by Bernard Salt. (Might give you second thoughts about Tasmania)Trust this starts/continues the cranial property investment juices for you.
James
First of all the difference between %6.5 and %10 is big ,the differnce between %6.15 and %6.50 is nothing and if you borrow an IP, interest only its even smaller.
Second why on earth buy at $200k to 250K this is negatively geared.Im sure you can find something at a lower price range as you seem to be just starting out.
Thirdly i live in queensland and i like the warmer weather thats just my perogative, its your choice where you want to buy the property so you can enjoy a holiday with the tax mans blessing.And these opinions have nothing to do with the four cans of burbon i just drank.
Cheers Dom[upsidedown]dereksam,
Congrats on saving up $8k- it’s a start [thumbsupanim] If you buy an investment property, you won’t be entitled to the FHOG, so your 8K will be it. I am not a fan of Lenders’ Mortgage Insurance- dead money, in my opinion.
[thumbsdownanim}In terns of searching, check out realestate.come.au Go the the Qld map, click on the Ipswich link (for example) and leave the “show surrounding areas” tick on. Then you can click on “show cheapest (<) price.” That’s the way I do my checks. I find the net fantastic for checking out areas, and realestate.com.au is a really good search engine. Of course, it ain;t the last word on finding out about everythingto do with RE, but it is a good start.
I am with the rather imbibed daaj- why not start off small in your investment choice? The purpose of looking at places like Ipswich is that properties there are cheaper than in some of the rest of Australia. As you have a small deposit, start off cheaper. Ya don’t wanna be struggling with a VBM (very big mortgage) all your life for one IP. The smaller you start, the more you can get
Here’s an article written in the last couple of days about why the Ipswich market might still be good value:
http://www.propertyreview.com.au/archives/2004/17032004/reviewed/17022004003.html
kay henry
((I am not a fan of Lenders’ Mortgage Insurance- dead money, in my opinion.))
Well yes I agree but if you can use it to your advantage
.A few years ago I could purchase 2 Esplanade Apartments only if I took out that dead money insurance—-without it no deal.Cost $2K+ I paid it with a smile on my face–Its tax deductable too.
Today the increased equity on that deal.
400K the smile is now perminent!Dead money?
John
techa,
I can see that LMI worked for you- that’s great
dereksam did ask for opinions, even this:
“I am open to conflicting views so I have different alternatives to consider .. “
… and so, I gave him my opinion on LMI. I think it’s also an important factor that derek is new to RE, and he’s soming in at a time when CG is probably going to be much less than when others might have gotten in.
As such, I would be factoring LMI onto any deal I bought.
Just different perspectives on the same issue
kay henry
Hmmm.
By giving my opinion I seem to have offended you!
My apologies.Ill be sure to check the number of Stars against a poster before answering.
Seems newbies with experienced opinions are not tolerated well with those(some)who post Prolifically.
Hi dereksam,
As you alluded to in your initial post – you will get conflicting comments. Most of the ‘conflict’ arises because there are many different ways to invest in property and as such different strategies may need different techniques.
In saying that – in you situation I would wear the costs and pay LMI as it means you either have to save less or ‘borrow’ less from your parents.
Using your $200K example (and allow a further $14K for purchasing and borrowing costs and a little extra for a buffer) means you will only have to find $34K instead of $54K. I for one would more comfortable being indebted to my folks for $34K than I would for $54K.
Do not forget the LMI fee is tax deductible over 5 years or the length of the loan whichever comes sooner. So the final cost is less than it first appears to be.
In my case we chose to pay LMI for the last two properties and have gained enormously by having two, rather than one, extra property. For us the additional costs were well and truly outweighed by the benefits.
I would also keep your $8K and put it in an offset account so that you still have acess to it should you need the additional funds in an emergency.
There is little to be gained by using this towards the purchase of this property and it will provide you with greater sleep at night.
Whether or not you start investing now is ultimately up to you. However you do have time on your side provided you make some conscious decisions (save more, educate myself, more research etc) to really work towards your goal as opposed to continually ‘going getting around to it tomorrow.’
Why Hobart? – If it is because you have thoroughly researched the market and the signs are right or you have found a good deal then that is OK. Most investors get seduced into buying property in their local area when the ‘local area’ is not necessarily a good investment decision.
Investing in property is all about making money and as such you need to utilise different selection criteria to that used by home buyers.
Similarly do not buy interstate based on the mistaken belief that you will have an annual tax payer funded holiday.
Any travel and accommodation expenses incurred will be apportioned based on the amount of time spent doing investment related work. In this regard the ATO will expect some justification for two nights accommodation and airfares when in reality a property inspection is a one or two hour event. The need to make required repairs can extend your ‘holiday’ – but proff may be required.
And finally – a trip interstate to buy is not tax deductible – this would be considered a capital cost and can used to offset any CGT liabilities should you sell futher down the track.
Derek
Derek- what a comprehensive reply! :o)
I think it’s ok to have differing views about the same issue. It’s the way we phrase those views that can upset people. It’s healthy to disagree- not so healthy to be uncivil.
kay henry
Lots of advice.Great to read all the differing opinions on here.thats what makes it an interesting site.I havent started investing yetbut from all the reading and research i,ve done so farI would be inclined to agree with those who say start small.You have to crawl before you walk.And if its an IP then u dont need to buy something that u like as u wont be the one living there.+CF is definately the only way to go in my opinion.Make money from day 1.And then keep on making money.Dont tie all your money up on one big property when u can have lots of little +CF things happening.
Russ.
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