Hi all,
This is my first post, though i have been reading them for quite a while!
Everyone on the site seems to come up with some great advice, so I am after some ideas myself.
I have read Steve’s book, and most of the articles/posts about investment strategies etc, but I think my situation is a bit different to most on this site.
My partner has just finished her uni degree and has been working for 10 months, and I am 3 weeks from final uni exams. What we would like to know, is some ideas regarding saving for a deposit for our first home, versus buying and holding an IP (cheaper, less deposit needed) to build up some much needed equity.
Our genearl details are: partner gross salary-42K, my gross salary (commencing Jan 06)-50K, savings at present-10K, first PPOR wanted 330-350K.
If anybody has any suggestions/life experiences they would like to share it would be much appreciated. As all of you have already presumably purchased your first homes and IP you have infinitely more experience than ourselves.Many thanks, Chris
My advice is to live off one wage and to save the other. This is how my husband and I did it. Firstly we did it to pay for our wedding/honeymoon. Then we did it to pay cash for our first car. Then we did it to save for a deposit on a house. We bought a house using only one income. True we could have bought a bigger place in a nicer area but having the extra income made it easier to add payments and also if one of us lost a job the result would be a lot less stressful. Finally we saved so that I could stay home with our kids. If you need any budgeting help I would be glad to help.
Thanks tgavin,
We do have a regular savings plan and are pretty well budgeted. I guess what I was trying to get at, is that we will obviuosly save the required deposit for a 170K IP a lot sooner than for a 350K house we would like to live in.
We are both are keen to get stuck into property investing but also need a PPOR (renting at the moment). Just wanting some general ides of which order to purchase the properties in??Any ideas/suggestions are great, it gives us more to research and investigate.
Thanks,
ChrisHi Chris,
The wife and I were going through this exact thing back in ’95. We decided to buy the residential IP’s first and keep renting. The IP’s were as expensive as we could possibly afford at the time.
In ’98 with two IP’s under our belt, we bought our 3rd house which was a small 3×1 brick and tile house on a decent sized block in a pretty dodgy area. The kids were so small they didn’t really associate too much with the dross in the suburb…so we didn’t care about that.
The PPoR was about 1/3rd the cost of the IP’s, and hence we paid it off real quick.
My biggest tip would be to not hock yourself up with a fairly large non-tax deductible debt on your PPoR. The wife and I decided to be modest with our first PPoR and that made all of the difference. We have friends who bought at the same time, but they bought a snazzy 4×2 with all of the mod cons. They have another 15 years to go to pay their NTDD off.
Economically, this will likely be a massive fork in the road to wealth. Only you and your partner can decide which path you wish to travel down.
My personal experience on the matter is a majority (not all) of young women today get together, have a natter amongst themselves and then want the latest and greatest in a suburb similar to that which they have just left that their parents strove 30 years to achieve.
$330-350k[blink]
Why so expensive for you first house?
Then factor in all the other costs associated with a home..
I agree with Dazzling in that you will be hocking yourselves to the eyeballs for NTDD..
and you may have to forget about investing for a while.
The brokers here will be able to give you an indication of how much you can borrow, but I’m sure there are better ways to approach the starting point.
Have you read any of the posts/books on trusts at all?
CG is still going great in WA as you know and buying an IP, maybe value adding as well may be an idea as well?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi guys,
Thanks for your insights and experiences. The 330K-350K was only ballpark, based on a very conservative estimate of our borrowing capacity (assuming 10% deposit), though I can understand the issue with NTDD. We are just fairly keen to get into the market as soon as we can, CG is great… but only if you are already in the market!! As u know median price in Perth recently went through 300K, predicted to reach 350 next year.
Dazzling I was really interested in your 2 IP’s before your first home. Does anyone else have any experiences of buying IP before their first home, or things to watch out for (asside from the usual)??Thanks everyone, these forums are really helpful[cap]
Hi Chris,
My wife and I were in a similar position to you. We first bought our PPOR which was a small 3 bedroom weatherboard. We had saved up a small deposit, borrowed some money off both our parents at 0% interest with the guarantee that we would pay them back each week $200 into their bank acounts. These measures were to ensure that our loan from the bank would be the smallest it could be.This allowed us to pour all our money into the PPOR so as we could own it quickly.It also allowed us to go looking for investment properties and made it easier for us to obtain more finance.If you go spending $330000 for a PPOR your repayments are going to be approx at 7% on $330000 $445 pw which will be almost one wage. Your situation is really not much different from anyone elses out there we all had to start somewhere it is up to you on how to take the first step and trust me the first one is very important and will either assist you on the springboard of propertyinvesting or delay the process.Good luck with whatever you decide.Martin[biggrin]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.My advice is look for a more modest PPOR. There are plenty of nice homes around Perth for a lot less than $350K. You can then pay off this mortagage quicker to build up equity to finance your IP’s. Remember most IP’s are negatively geared which means you’ll have to pick up the shortfall in the mortgage. You’ll find it hard if you already have a big mortgage to service on your PPOR. Another thing that we’ve often seen friends and family overlook is that the bigger the house you buy, the more furniture you’ll require to fill it. I’m guessing since you’re both just starting out that you probably don’t have much in the way of furniture/whitegoods etc and like most people your age, much of what you do have is probably of the mix and match type. So ask yourself this – once you’ve got your PPOR for $350K can you then afford to service the mortgage whilst at the same time set up a comfortable home, save towards your IP and then service the shortfall on a IP mortgage/rates etc?
My first property was an IP, we even lived in a caravan for a year or so; also lived in a shed (fun times).
I think i was paying around 13-14% interest back then, however the property cost me about $69,500 and rented for $95-100p/wk -wish i still had it ;o)
At the end of the day it gets dark..so you have to do what best suits your’personal’ situation and strategy…
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorhi Chris,
I have found my investing portfolio accelerates dramatically if you keep your living expenses as low as possible (tolerable) and put as much extra cash into the portfolio as possible.I still rent as it is heaps cheaper. Remember 7.5% interest on $350,000 means that over $500 PER WEEK will fly off to the banks vaults. This is not deductible and has no income (rent).
If you fall into the mind-trap of wanting to own and enjoy and show-off your own home and revel in all the luxuries you can possibly buy BEFORE investing then you will walk a much slower path to wealth.
Rent or buy a cheap home, and this little sacrifice (combined with a disciplined budget) will pay off ten-fold later on.[biggrin]
Live, Learn and GrowLifexperience
Hi Chris
We are in a similar dilemma of our own at the moment, trying to work out which way to go, first home or investment property.
If you are still around on the forum, I would be interested to know what you ended up deciding to do. We are thinking of going to see a financial planner to help us decide what would be best.
Thanks
Wow, I’d forgotten I posted this last year!!
Well, actually a lot has changed since this was first posted Lobby.
My partner and I did end up buying a PPOR (technically anyway), but it was bought much more with investment in mind.We ended up getting a place for 368K with a loan of 350 (95% LVR). We saved up 34K oursleves but stamp duty and fees eat most of that up[confused2]
Anyway, the house is 3×2, on a very small proportion of a 947sqm block. Not in the best nick, but very liveable for us. The land is zoned R40, and can easily be developed with another 2 townhouse / villas. Either that, or 10K on subdivision costs yields a block worth conservatively 240K. We plan do do this, and refinance the extra equity to buy again. Same style property, but a bit closer to where we want to end up living.
Servicability on the loan is no problem, even with the recent rate rise. We are DINKS, so no dependants to worry about and two salaries paying into a LOC about $700 month extra repayments.
We are pretty happy with the decision we made, if you want to know anything else just post again or PM me.
Best wishes
Chris
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