Hi everyone,
I am new here, am young and just want abit of advice. I am currently in a stable job earning 43k before tax, but have not saved up much money due to my spending habits, though have been trying to be a tight ass. Anyhow I have been very keen to invest and try to get positive cashflow, but I have no idea where to start. Please advise on this idea, I live in sydney and am in the defence force. We are entitled to a $13000 first time buyer grant on top of the normal $7000. So all up if I buy a house in sydney I should get $20000.
I saw a fairly decent 3brm brick house 30mins drive to the city going for $239000 in the ad. The rent around this area should be $220-230, and that is just a guess. So if I use STEVE’s formula. lets say its 220, I should buy this house at $110000 for it to be positive cashflow? Please advice. Or didnt I read and understand the book properly. At current I have nil in the bank, I was thinking of borrow money from parents for deposit if I need? Buy the house get the grant and hold it for a few years then sell if the price go up and I think it should considering the price of house in sydney. Please advice on what I should really do, am really confuse. Thanks alot.
Regard,[biggrin]
Richard.
The ’11 Second Solution” is for a 10.4% yield. Positive Cashflow property is one where all incoming ie rent is more than outgoing ie rates, body corp fees etc.
This applies to all property regardless of price.
If you do get help from your parents you will have to let the bank know about it.They would probably like to see at least 3 months savings as well. A common tactic is to have 10% of your gross wage put away ( I use ING ) into an account. It has worked wonders for me.
I am assuming that as you are in the Defence Force you have accomodation? You can rent out the property but if you don’t live in it you will not be eligible for the standard first home buyer’s grant ( don’t know about the Defence Force’s ).
Spend less on “doodad’s”, save 10%, and keep reading and asking questions here on the forum and you are on the right track.
Cheers
“Looking forward to the day when I can tell the boss where to go”
I think it is very important to get some of your own money involved so I feel it is vital that you save some of your own cash before buying. Having sacrificed to accumulate some cash will help in future investments. First Home owners, Defense force funds and money from the parents make it all too easy. It is all too easy to spend other peoples money but you develop a much keener attitude when it is your own!
Hi,
The 11 second solution, as was said, a way to determine 10.4% gross yield which should make a property positive cashflow. However a lower yield may also be positive and worthwhile.Consider:
$50,000 property (probably a car park!)
$5,000 deposit
$45,000 loan at 6.64% (for arguments sake)Monthly loan repayments (P+I) = $288
So if you can get more than $288 / month in rent for that property you will be cashflow positive.
That equates to $75/week = $325 /month
Gross yield = 7.8% (much lower than the 1 second solution)Anyway, in general it is difficult to get cashflow positive property above the $100k price as at the point the required rent is way too high. (like you point out $110,000 prop needs $220 for 10.4% yield)
Rather than concerning yourself overly with the 11 second solution I think you should be concerned with making money. As long as you are making money (however you do it) it is an investment. [biggrin]
Yes it would be possible to buy a house using a deposit from your family. Generally you would need around 10% deposit if you do not have genuine savings.
There are still cheap houses in Sydney. One of my clients is purchasing a 3 bedroom place for $210,000 – a house. The rent probably won’t make it positively geared, but after tax deductions, and depreciation is should come close.
I would think that it would be better to buy something like this in Sydney then some small little house in a mining town, just because it would be positive geared.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
if you rent out the house you may find the first home buyers grant will no longer apply and you will have to pay it back. I remember a news story of a service man who was posted overseas and rented the house out and got into trouble with the first home grant. Would be a good idea to check if this condition exists .
hi again,
thanks for the replies. What I am looking to do is buy a property get the grants and sell it a year or 2 afterwards depending on the housing market.
Terry when you talk about
There are still cheap houses in Sydney. One of my clients is purchasing a 3 bedroom place for $210,000 – a house. The rent probably won’t make it positively geared, but after tax deductions, and depreciation is should come close.
I dont quiet understand what you mean by tax deuctions and depreciation that goes with owing a property.
Also I would like advice not related to investment, last week I joined a pyramid scheme…a new telephone company launched into sydney..and I joined, to think twice, I wish I didnt now. But I did so I guess I have to make the most of it. I had to get a ABN number for the business, does this affect my tax in anyway? like affect my normal job tax return? Am I doing the wrong thing?
Regard.
DLE
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