Hi All,
Just like to start by saying, what a great resource! Been reading for a few months now and am very impressed by the knowledge and information shared here.
My partner and I would love to get into the property market, but so far have only $20,000 in savings. Is this enough to establish ourselves? I’m aware that mortgage insurance can be used, however is this required every year or as a once off?
Does anyone have any general opinions about what a solid starting base is for property investment? (not just savings, but income, financial position, etc…)
Also, we are currently renting and expecting to be in this location for the next 12 – 20 months. Would we be better off buying an investment property and continuing to rent, or buying a first home (inc. first home buyers grant) in the area with a view to rent it out after we leave?
Any suggestions/comments would be greatly appreciated.
Regards,
Linden GlenHi Linden,
It really depends on how much you want to spend. For $20k, you can purchase a property for just under $100k (don’t forget closing closts) on an 80% LVR. Mortgage Insurance is a once off payment, normally if you require > 80% LVR. I think 20k is enough to get started!
I will let someone more knowledgeable answer your other questions.
Regards,
Ozig’day
the answer to your question is – it depends!!
if i were you i would read as much as possible about property investing and the philosophy behind the different strategies. steves books are a fantastic start.
then you need to decide where you want to be in 2/5/10 and 20 years time (financially speaking)
the truth is you can do a number of things to get into the property market. which one strategy is the best will depend on your goal.
for example if you decide to buy a home to live in and take out a large mortgage this will affect your ability to make more and more investments. however if you rent ou will have excess cashflow to keep investing (hopefully).
most gurus suggest the best way to make money from investing is to only invest in assets that privide an income.
a home does not fit this description.
but then again you aim/goal maybe to find a nice home to live in asap – then that would eb fair enough also..
so in short – you need to decide where you are going and then how you are gonna get there…
cheers
You have to take into account additional closing costs (stamp duty, solicitors fees, bank loan fees and LMI, etc.) as well as the deposit. Stamp duty is the big one and is different from state-to-state. You can find calculators on the web to estimate these costs for you (major bank websites?), for my (one) property in VIC the total was around 6-7% of the purchase price.
As for a solid starting base, some thoughts…
You need to consider your own circumstances and examine the downside. How much do you think interest rates could go up in the next 5 years (worst case) and would you be forced to sell if that happened? If yes then perhaps you don’t have a solid enough base! Depends on how much you’re willing to lose I guess, but being forced to sell when the market is low is the biggest downside I see.
How secure is your salary income? If you put all your savings into property then you (possibly) no longer have a safety net against loss of earnings, how fast can you make extra payments against your loan to build that safety net back up?
If you decide to buy a property to live in then compare the mortgage repayments to your current rent, also compare your rent against your payments with theoretical maximum interest over the next 5 years, how much additional pressure would this put on you? In my case my repayments after I bought were less than my rent, but that’s because I moved from renting in the inner suburbs to buying in the outer suburbs.Hi Linden,
$20K would get you approx. 2 $100K properties at 95% LVR, LMI capitalized, including purchase costs transfer stamp duty etc.Regards
Steven
Mortgage Broker
Mobile Mortgage Market[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Ph:1800 820 500
VICTORIAPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks all! I suspected I’d get the “it depends” response, but the extra advice has given me something to think about – which is what I was after.
Cheers,
Linden Glen
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