Buy…or invest

or you can’t borrow at all if it is too small.

Be wary of anything smaller than 35 SQM. Avoid anything under 25Sqm

Not saying you may not get some specialist finance, but remember one day you may want to sell, and all the buyers will have the same problem.

Regards
John

Inspired Finance
(02) 9944 7776

[email protected]
http://www.inspiredfinance.com.au

Hi Katie,

Firstly good on you for thinking about the future… From what I gather you’re 22 and looking to purchase your first property.
At the moment, I’m not sure how financially literate you are so for now I can only assume.
(Atleast you sound like you’ve got your head screwed on)

Now, you mentioned that you have around $22-25K to play with. The FHOG will also come in handy for you and I assume a stamp duty exemption also is available in NT (Actually I think you’ll find it will cost $20)
If you were looking to purchase a PPOR (Principle Place of Residence), then the first question I would ask is
“How much rent are you paying now?”

Otherwise an IP may be the way to go ie. you can still claim the FHOG plus stamp duty exemption if you live in the property for 6 consecutive mths commencing anytime within the first 12 mths. Ie. You could move in on day 364 for 6 mths (perhaps you already knew this). You see the year-to-year advantage of have an investment property is that you get tax advantages… You’ve probably heard this before, but it basically means that in your situation, you will probably get a few thousand dollars each year in your tax return if you do it this way.
(I can explain this if you like, but a tax accountant may do a better job)

Anyways, as for studio investment…
Ten years ago people use to say things like land appreciates, buildings depreciate, which from a tax point of view does make sense, but in regards to capital gains, you can still make money on a studio. Investing comes down to supply, demand, uniqueness & creating win-win situations.
Basically the most important thing is… do you like it? If you do, than chances are the next person would… therefore you have created a market. Believe me! I’ve seen 12sqm studios selling for near $200K (I live in sydney)
The thing I already like about the investment is that you say that the view is “to die for”.
That would indicate to me that unless it’s going to be built out, it should hold onto it’s value reasonably well and even in choppy conditions, due to the uniqueness, appreciate a little over time.

In regards to the property, it’s good to ask:
How old is this building?
If it’s brand new, that ofcourse would be ideal,
not just for aesthetic purposes but also great come tax time.
Is it in a good area?
Always better to invest $20K more if it means the area is worth $30K more.
How many square metres?
You may find some lenders will only lend you 80% of the value unless it’s over say 40sqm internal.

In regards to the finances, how much is the property?
Can you pull together 20%?
You see one of the biggest costs when you purchase without equity is what’s called LMI (or Lender’s Mortgage Insurance). Please forgive me if you already knew this.
It’s basically an insurance cost to cover the bank incase things goes wrong…
Basically the more deposit you have the less you pay and after 20%, you don’t pay anything.]

This is roughly how LMI is worked out:
For eg. on a purchase of $220,000…
If you had:
$5,000 LMI might cost you 1.40% of $215,000 = $ 3,010
$10,000 LMI might cost you 1.24% of $210,000 = $ 2,604
$20,000 LMI might cost you 1.11% of $200,000 = $ 2,220
$44,000 LMI would not be applicable ie. $0

Personal level:
Now I would say… if you’re renting at the mmt, and you really like the place… then go for it

However if you’re living at home, then perhaps save as much cash as you can and when something comes up
start and start small. Don’t ever outstretch yourself. Remember (as you hate to hear it)… there are always
good deals out there. A wealthy friend of mine use to say “the deal of a lifetime comes around every month”
You see if you absorb yourself in investing books and material, then I guarentee you will become a wealth of information.
Warren Buffet (Second richest man in world) states “money changes hands”…
that’s especially important to note in socalled uncertain times (as the media portrays).
You see when interest rates go up, 9 out of 10 people think this is a bad thing…
But you see, money does not just dissapear, it simply changes hands.
To make money in a market that is going up or down; that is where the true investor lies.

You have struck a chord with me somewhat…
Which is why I would genuinely love to help.
I think especially because it’s rare to find someone young who’s seriously thinking about financial independance already.
Do you know how much just $2,000 invested in Westfield Holdings in 1960 would equate to in today’s dollars if all dividends were re-invested into the company? I’m not kidding…. $300 million dollars. That’s the power of compound. I’m serious… $300 MIO.
Now imagine today were 2046…. what would you have like to invested in when you were young?
Imagine it were 2016 so on, so on….

I would be more than happy to help out if you have any further questions.

All the best…

Regards,
Anthony.

“There is nothing scarier than ignorance in action”