I had just finished watching a rather interesting episode of Insight (it was a re-run) called Under The Hammer. It opened my eyes up to how much people are paying in home loans and what-not. Basically, alot of people are going for 100% home loans and/or longer term loans because either the deposit that they have saved will be chewed up by the 'hidden' costs of purchasing and owning a home (esp. in the first year) and/or they just don't have the money at that point in time for the deposit.
Not only that, most people are definately paying waaay above the "affordibility" percentage of income in re home loans… no one was paying 30%… the majority of people easily was putting 50% or more (even 80%) of their income into their home loan.. and not even touching the principle.. just paying off a shitload of interest.
I'm having to move out of the place I'm renting privately for $225 per week by August. I'm not about to go ahead and purchase my first PPoR as not only do I not have a deposit saved… I'm tossing up a few ideas and so forth.
In your experience and/or opinion,
would it be better for me to stay in the rental market where I pay between $150-200 per week for a place (one bed place or low end of the market 2 bed place) thus I am paying in rent 30% of my income for the next two years or so while I save up $30,000 (hopefully more of course as I want to be able to cover all those 'hidden' costs easily) to go buy my first PPoR
OR
stay in the rental market as explained above and go for a loan (100% or low doc) to INVEST in property thus be a property investor yet a renter at the same time then in a few years time use my CF+ IP as a way to fund my PPoR
????
Also … I know buying a house is best ultimately … how about units? Do units de-value quicker and gain value slower than houses?
I know I will have to rent when I move out by August. I just am trying to figure out my next step after it.
My work pretty much will allow me the flexibility to move elsewhere in the country… so I'm not just restricted to the South East Queensland market.
Oh.. and I'm self employed so some weeks I'm only earning $500 … and other weeks I'm earning over a grand so I base my 30% on the minimum lowest amount of money I generally earn which is $500… 30% of $500 = $150. Granted I don't have too many low earning weeks just that they do happen for whatever reason…. After all my business expenses, my taxable income is usually around or under 30,000… and I like to keep it that way so I minimise the tax I'm paying.. I earn just under or over 50,000 per year.
Wishing everyone prosperity!| http://www.goldcoastgirl.biz | http://www.VanessaStacy.com | http://www.goldcoastgirl.info
Hey goldcoast girl,
i would personally stay a renter and buy an investment property at the same time,(as soon as you have saved 10 or 15%dep)
so u are saving up equity as you go.
otherwise what happens is (with many people) there is always something that will get in the way of buying a
property as things never run fully to plan in life
so find a property in a growth area for around 150 to 200K and renting it out
while you stay living ,renting in areasonably priced rental area and get the best of both worlds!Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Yeah, GCG,
To buy an I.P and stay a renter is, for most people, the best thing to do financially; especially if the I.P has very good on-paper deductions and other tax deductions. These are the icing on the cake and can really accelerate your wealth plans.
The problem is, everyone is conditioned to follow the Australian Dream of owning your own home and living in it from day one, so they resist this strategy and just jump into a PPoR as soon as possible; quite often whether they can REALLY afford it or not. It seems that these days lenders aren't too concerned about that.
If you can get your head around living in a rental (and a budget one at that) for a few years instead of a PPoR, you can accelerate your wealth amazingly. Most people don't want to make this sacrifice.
Personally, I don't like to see people going for 100% finance loans, unless they are already financially educated, financially secure and experienced in property buying and investing. I like to see people go for the traditional, safe route of the 20% or more deposit with repayments under 35% of nett income. A bit old fashioned these days, but keeps people in their homes and out of bankruptcy courts.
Having said that, if you can 100% finance an I.P, and after factoring the worst-case scenario figures (20% of rent per year eaten up in holding costs and vacancy factors) find that your loan repayments would not go above 35% of your nett income before you get a tax return, then I would go for it. This is a fairly safe level of exposure for you. Of course; your tax return gets re-invested straight back into the loan, accelerating your returns and your wealth creation, not to mention your all-important cashflow.
The trick is going to be to find a property that fits the above criteria in price and rent return etc. It doesn't really matter if it is a unit or a house – they all go up in value eventually, but you want to buy the best quality property in the area and price you select. Land content is important, so units or townhouses with yards do better usually.
In a few years you will be able to fund a PPoR quite easily if you want, but keep in mind if you borrow equity from an I.P to buy a PPoR, the interest on that part of your loan is not tax deductible.
I didn't realise being a renter and investing in property would be the right way to go.
I can totally do that as renting has been what I have been doing for years and years and years….so….. in a way, I'm used to being a renter.
Quote:If you can get your head around living in a rental (and a budget one at that) for a few years instead of a PPoR, you can accelerate your wealth amazingly. Most people don't want to make this sacrifice.I don't even have to live in a budget one.. or well not to me.. I could easily live in a shared house situation as that is what I'm doing currently… and it is working for me. So I'm guessing even if I can find a decent "home" be it for myself and/or to share with another person/people so then I am paying less than $200 per week in rent (easily) then I would be in a good position to start saving that 20% (actually I would rather try to save 25% due to those 'hidden' costs).
Quote:In a few years you will be able to fund a PPoR quite easily if you want, but keep in mind if you borrow equity from an I.P to buy a PPoR, the interest on that part of your loan is not tax deductible.No problems. I would hope I'm in a position with the other IPs that having just the one IP not be deductible in a way wouldn't really affect me too much if you get my drift?
Thanks again for the responses. I guess I shall continue to rent whilst "hunting" for IPs.
I'm looking in Darwin (for IPs) as I have gotten to know the area over visiting for work purposes over the course of a year or so therefore I know which suburbs are 'yes', 'has potential', 'hell no' etc.
Thanks again. Now I can formulate a "plan of attack" as such.
Go for it Girl!
Wishing everyone prosperity!
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