Hi all,
Just wanting to get your slant on what a 40yo female should do with her limited savings (about $80k). I would like to get into the property market for two major reasons:
1.to stop renting and have my own place
2. continue to imporve my assest base!
I find the whole scene rather daunting on my own – does anyone have any ideas on whether to make the jump or just continue to play the stock market etc…
My major concern is being able to cover a mortgage without having to live in poverty. Income is around $62K p/a.
Feed back would be greatly appreciated!
Cheers!!
SREHey SRE,
I am biased, but a)you can’t live in your shares,
b)can’t add value to them, c)pay tax on your profits, and d)will find it pretty hard to get a flatmate to help you buy them..Depends where you live and what your R/E market is doing re timing your purchase, but try working out the diff between what you pay in rent and what it would cost to own (interest, rates,etc) if you buy something you can afford and still have a life..
Your own place IS a good thing for the most part –
paying someone else’s mortgage generally isn’t..theloanarranger
sre,
62k and 80k deposit ain’t a bad start! I see you live in victoria- well, you’ll be able to buy yourself a pretty good home with that kind of deposit – I say go for it!!
And your age has not much to do with it- in 2004, 40 is the new 30!
I doubt you’ll be living in poverty with a mortgage. Start off smallish if you’re worried. Then upgrade if your home goes up in value :o)))
kay henry
Hi sre,
You are well placed to move into property if that is what you want.
One of the real advantages property has over shares is the capacity for greater leverage – in other words your capacity to make your money work harder for you is better with property than it is with shares.
Derek
$80,000 is an excellent start. Basically most lenders will charge you with Mortgage Insurance if you have less than 20% of the value of the property (this can be as little as 5% but it is not the norm) in cash or a form of deposit on the property.
You will need to realise (which I believe you do) that rent is not as high as what it would normally cost a person to pay off a mortgage with rates and everything else coming on top. Of course rent is purely a loss which means you gain nothing but a roof over your head for a very short period of time.
There is a certain sence of satisfaction in owning your own home and being able to do what you like (within reason) to it.
Here is something you can do (or anyone for that matter). Just imagine your rent over say the last 20 years was your mortgage repayments and see how much money you lost.
There is nothing wrong with renting!! In fact, it is more cost effective to rent (read: lease!!) than buy a property & pour your money into loan interest.
Keep leasing & buy property. I cannot believe some peoples’ suggestion to own-your-own home. Refer sizzling duck’s comment: “…Just imagine your rent over say the last 20 years was your mortgage repayments and see how much money you lost…” (Meatloaf’s song ‘Took The Words Right Out My Mouth’ comes to mind).
A ligitimate reason for buying your own property is to renovate it & on-sell for a tidy profit & avoiding capital gains tax.I think your argument would be more in the eye of the beholder.
Currently my repayments on my loan are about $930 per month, rent for the same sized property and location would be about $240 per week. So of course if I had been renting the property instead of paying it off then I would be more than paying the minimum amount off for the owner correct?
Since I built before the big rise in the housing market I have that advantage. At this point in many areas the rent has not caught up to the increase in home value, in many ways Ozboy is correct, yet in others Ozboy didn’t look at the whole picture.
Ultimately it is your choice SRE, to get the advantage of the FHOG (First Home Owners Grant) you have to live in the abode for at least 6 of the first 12 months as explained in the feb edition of the mag. After that you could use it as a stepping stone to creating a investment property portfolio.
Ozboy,
The original question related to sre wondering if she should buy her own home. That’s why people probably encouraged her to do so. We answered er question without having our own agenda- to fit in with her question. If she has asked should she buy a PPOR or an IP, people would have had different responses.
kay henry
I can only speak from experience….
Are you the kind of person who is happier renting or purchasing? I wanted to get into my own home as quickly as possible and bought in Sept 2001. With hindsight, I should have had a bigger deposit and found out more about closing costs. Lesson learnt.
Sounds like you are now in a highly enviable position; a sizable deposit with a good income. Over the last couple of years, prices have generally been rising (peaked? who can say?) to the point where if I were looking for my first home now, I could not afford the place that I purchased.
Bottom line. What do you want to do? It’s not a mistake to keep renting, nor is it a mistake to buy your own home. Either way, you’re going to lose paying the bank’s interest or your landlord. It’s what you do after your own accomodation matters are resolved that you can decide what to do next.
Mikey
We answered er question without having our own agenda- to fit in with her question.My apologies. Next time I’ll avoid thinking laterally…..
Hey readers. Thanks so much for your advice! I will digest it and then make a move!
Cheers
SREdepending on what you like a big house with a big mortgage , a small house with not much room and unable or unwilling to share the space if you at some time find you need help in paying the repayments…a Duplex live in one side rent the other side to help you pay the mortgage, a flat mate with out having a flat mate …I had a boy friend once I called him “clayton” He was the boy friend I had when I didn’t have a boy friend[evil4]Seriously its what you want not what we think.our suggestions are just thoughts for you to look at and discarde or use as you please.try to use no more than 20% of your own money as deposit so you always have play money you can sit your extra money in the loan with a redraw facility
I’m EzyWhat you do depends on what is more important – early financial independence or owning your own home. However you should be able to have both in time.
I would sit down and do some sums.
If you’re paying rent in a capital city (especially inner-city) you might be better off to keep renting and buy a couple IPs.
The IPs will give you a good asset base. This is also quite tax effective (noting that you’re on a fairly high rate) for you to claim deductions for costs that you wouldn’t be able to if living in it.
If it were me, I’d start off with buying two solid IPs in well-researched regional towns for approx $100k each and returning an average maybe $150pw rent. You will need approx $25k each (assuming 20% deposit + costs).
These properties should close to pay for themselves with minimal input from you. Thus your tenants would be effectively paying the mortgage on these IPs.
The remainder $30k could be invested and added to to form the start of the deposit for your own home. Depending on your time horizon you might even want to consider shares, managed funds or fixed interest. Assuming you can save $15-20k per year, you’ll have a reasonable deposit for your own home in 2-3 years.
So in under 5 years you could be living in your own home and have two IPs! But OTOH if you wanted to get more IPs you might want to keep renting for a while longer.
How does that fit in with your goals?
Regards, Peter
You must be logged in to reply to this topic. If you don't have an account, you can register here.
