Hi everyone, Just thought i’d introduce myself, My names Damon i’m 29 , single and live in the Booming Mackay.
I’m looking to buy my first home in the next couple of months, This property will be for me to live in and i’m going to have to have a tennant or two in to help with repayments.
My question is, Is there a good structure to help me with my first home and the sircumstances?
I’m living with my parents at the moment so i could rent it out for a while and stay here for say 6 to 12 months
I earn approx $42k a year and i’ll be looking to borrow about$300k-$340k as the average price of a 3 bed fixxer upper is in this price range, I’m a carpenter/Joiner by trade so i can do all the renovations at cost of material which i can get at a very good price from being in the trade and the marvelous ebay has many great deals.
I have $13k saved so with $7000 first home buyer will be $20k.
I’d also like to purchase more properties as soon as my finances allow me.
Has anyone been in the same situation or have any insightfull information on my first home? Any info would be much appreciated.
Regards Damon.
Hi Damon, welcome to the forum.
A good Mortgage Broker (there are few on this forum) can help with the correct loan structure; especially if you are going to keep investing long term.
As far as renting out/living in the I.P; you may do better if you can live in it for a while as your PPoR first then move out and rent it. This way, when you move out you can rent it for up to 6 years without incurring any cap gains tax if you decide to sell in the future. After 6 years you are liable for cgt, but it is pro-rated on how long you use it as an I.P.
Another factor to consider when looking for finance is your serviceability of the loan. In days gone past, Banks would only let people use up to around 30 – 35% of their income for loan repayments. It was a safety mechanism to stop people from over-extending themselves.
Of course, these days are different and the lending criteria has relaxed an awful lot. To this conservative investor the current trend is putting many people in financial danger I believe, as lending institutions allow people to repay on loans up to 50% and more of their income. Very dangerous – especially when they borrow more than 80% of the property’s value. Look at what is happening in the USA right now.
Based on your income (and my old school beliefs), (and not including any rent which does factor into your serviceability thankfully) you may be stretching to cover holding costs on a property of $340k. Don’t forget that approx 6% of the purchase price needs to be added on for purchase costs – $20k roughly.
After the rent is factored in (most banks will let you factor in up to 70% of the rent – some up to 80%) your equation changes luckily, but this old bird likes to see you younger guys starting out do it safely and surely.
You also have to find the funds for the renos as well, so it may be better to go a bit cheaper and get more cashflow through a bigger deposit in my opinion.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Now thats some great information, that would have taken me months of research.
I had no idea about the capitol gains 6 year avoidance. I’m totaly amazed of the wealth of information i can find on here.
I’m also so greatfull that you guys can share with us less knowledgable and less experienced property enthusiests.About 6 months ago i went to a loan broker to just out of curiosity find out how much i could borrow, and was a little dissapointed but just of late i’v been getting more work and some pay rises so now i can borrow more, but am deffinately not going to purchase a house over $320k
I had no idea banks would factor in me having renters living there too so thats a bit of a relief. And up to %70!!I’v heard by a couple of people say that there’s going to be an interest hike also raise in the first home buyers grant to 14k or as high as 20k!!! , thats a very good incentive for me to hold off untill then.
Has anyone heard about this?
Hi Damon
There's properties in mackay to do up at great prices i found one 4 bedroom for $275 000 in milton st and 5 weeks ago i put a contract on a 4 bedrroom unit, 2 bedrrom unit and a 1 bedsitter for $385000 returning $660 a week.
Thanks Rob
Hi Rob,
I think I saw the 4bdrm property your talking about but the one I saw was right beside the airport.
I am only a speculator at this stage, but isn't that a bad place to buy. I was looking at buying something in Mackay but everytime I check it out on Realestate.com.au the house prices have doubled.
But I guess the house prices aren't going to slow down anytime soon with the new mines opening up.
Cheers
TomHi Damon,
It is great to see a broker to get structured properly but I would take a step back and find an accountant first (that invests himself is a must) that could structure correctly from the start depending on what you wanted to achieve through investing eg company and trust set up esp if you want to then sell All this ground work first will save you down the track.
In regards to buying in Mackay and it is booming as you said do your figures first buy a dump to do up and have a market in mind on who will buy your property when it is renovated.
If things are getting too hot in Mackay with people snapping up properties look at surrounding areas such as Rockhampton or Serina as things will take off there as well with new roads etc happening.
If I was you I would buy a place with your parents for the first reno and use their equity in their home for the reno (doesn't hurt to ask) then go halves in the profit after you then revalue your property and then rent it out. Use the money from the revaluation to purchase your next property.
Just my thoughts I am not qualified to offer advise that is why you surround yourself with people who are qualified!
Good luck
Jenny
Hi Tom
I live oppsite the airport and never worried me but i've lived there all my life it is close to town only 5mins drive and the closes 4 bedder i could find on the south side of town was around $350 000. Thats just my opion theres a good deal every week even in mackay.
Thanks Rob
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