Hi guys,
let me introduce myself, my name is Nathan, i’m a 23 year old working for the government on approx $50k per year + shift penalties and overtime..
At the moment I am living with my girlfriend who does the same thing and is on the same money.
We are renting a house in Sydney which is $300p p/w.
We are both fed up with renting so are looking to buy in order to live in our own place.
We both want to own multiple homes. This presents the problem I need your advice on:As I said before we are both on a gross salary of approx $50k year. We have a combined debt of $28k (car loans)
We have not yet spoken to any professionals although will be very soon. We are either looking at spending around $350 – $400k on a home or as close to $200k as we can.
For a +$350k loan we would both have to apply for the loan etc, with my very limited knowledge this means we would both use our first home owners grant?
For the $200k loan only one of us could probably get the loan, meaning only one of us gets the 1st home owners grant leaving the other of us to use their 1st home owners grant on another property? correct me if I’m wrong please.Like I said before, we both want to start investing in property, but if we buy a $350k place we won’t be able to afford another property for some time, with the $200k place we probably could?
My question is what am I better off doing? I just want some opinions and points of view on the subject as neither of us has a clue haha. Obviously the more expensive property would be nicer and we would be more comfortable living in it longer, however if we bought the $200k property and then another $200k property within the next 5 years or so we would be in a better place financially?
any feedback is welcome, if I am way off track please let me know. We have only just decided to do this so it is a very steep learning curve.thanks in advance,
NathanNotwithstanding the F.H.O.G, buying a cheaper property may be better for a few reasons;
1. Cheaper properties quite often give better rent returns. The rents don’t necessarily increase with the price of the properties. Better rent returns helps with further purchases as the serviceability on the loan is better from the Bank’s point of view.
2. Having 2 x $200k properties as opposed to 1 x $400k property will spread the risk of vacancy – it is less likely to have both vacant at the same time.
3. Having them in different areas improves your chances of consistent cap growth as one property may not go up in value at the same time as the other, but the other might and vice-versa. If you have 1 x $400k property you only have exposure to cap growth in that one area.
4. The rental pool for cheaper properties is much larger than the pool for more expensive properties (less vacancies).
5. The resale of cheaper (below median) properties has a much larger pool of buyers than more expensive properties.
6. The cheaper properties may be in ‘under-developed’ suburbs that can experience a sudden boom in times of low cap growth.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Not sure on if you would be eligible for two home buyers grants
email [email protected] and ask them if this is possible to be safe. You would have to live in the home to get this grant
see
http://www.osr.nsw.gov.au/pls/portal/docs/page/downloads/other/fhb_factsheet.pdf
and
http://www.osr.nsw.gov.au/portal/page?_pageid=33,63391&_dad=portal&_schema=OSRPTLTDuckster Financial Services
http://www.ducksterfinancial.com
Helping to make the great Australian Dream come true !Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
hi guys thanks for your responses so far,
after reading about the 1st home owners grant it looks like we are only eligible for one, being we will be classed as DeFacto and all. If thats the case we may as well both apply for the loan, no matter which loan we go for?
What I was planning on doing is if we only applied for the $200k loan only I would get the loan in my name, that way her name is clear as far as owning property goes for whatever place we got next. But according to the F.H.O.G info she wouldn’t be eligible anyway, having lived with me who got the grant…. am I reading into that correctly?
Might have to go get some advise I think, if I want to sit down and discuss my options with a professional who would I talk to and how much would I expect to pay?
thanks. [withstupid]Nathan
Why don’t you consider a shared equity loan whereby you can live in a house with a purchase price of say $400K yet only repay the loan on say $300K.
This will give you access to additional monthly income which you can use to start investing. The loan would need to be for a PPOR and you would require a 5% deposit but you would only make repayment on 75% of the purchase price with 20% of the loan requiring no repayments and being charge No interest.
You could either buy where you want and save each month or alternatively buy a better house for the same monthly repayment.
The areas are very post code restrictive and have a maximum loan in each area but might get you into a PPOR as well as IP at the same time.
Let me know a post code you are looking at and I can tell you whether it is ok.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Firstly the best way is always to get a cheap house and pay it down massively.
If you are both on $50k per year you should be able to scape together $750 per week in payments. Don’t even bother looking to invest until you have paid of the house. This is because the investment property will not return more money than that saved by paying off existing debt to avoid interest. Remember the majority of ‘investors’ make $100k on an investment house and end up paying $300k in interest on their own $300k house, which is redicuoulsy stupid since they could have just but the investment money into their own house and paid it off paying just $100k interest.
You should be able to pay off a $200k-$250k house with only $50k in interest paid or even less. Then get an investment house and do the same thing, using its rent to help pay for it. Doing this should knock them over in 4-5 years each, if that. 30 years you should have 6 or 7 houses completely OWNED. Then you can sell half buy a $1million property on the coast somewhere and life off the rental money off the other half and retire. This is way better than interest only investment and getting lump sum payments of $100k etc. every now and then.
Don’t be conned into investing when you have equity. Equity isn’t a reason to invest – not owing money is. Loans are 8% interest, houses are not going to go up in vlaue 8% all the time. Negetive gearing helps but not much. Its rarely more profitable to invest than it is to get yourself out of debt. This is because while in debt every dollar you don’t spend on your loan, means more interest. For example on a 30 year loan, if you buy a $10 movie ticket each week, that is $30 interest you will pay. If instead you put that $10 on your house you would end up saving about $25-$30 per week and cut the life of the loan down hugly.
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