All Topics / Help Needed! / Should I buy Residential or Investment?

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  • Profile photo of hong_unghong_ung
    Member
    @hong_ung
    Join Date: 2006
    Post Count: 5
    July 10, 2007 - 10:53 pm

    Hi All

    Im in a dilemma

    During the course of the year, I will hae about 20-25 K as a deposit for a property.
    As stated in my previous thread, I am actively looking for areas which have capital growth potential.

    However, I am now in a dilemma, Im not sure whether I should buy a Residential property first, take advantage of the FHOG and stamp exemptions for my first home, or If I should buy and investment property.

    If I could find a nice area in Sydney/NSW that would be fine, I would buy it as residential, fix it and rent it out.

    On the other hand, in really interested in the Queensland market, but buying there would mean I would forfeit my FHOG and stamp for when I do buy my residential property.

    Please help me out of this holes guys,

    Have no idea where to start.

    Thanks
    Hong

    Profile photo of BDMBDM
    Participant
    @bdm
    Join Date: 2002
    Post Count: 93
    July 11, 2007 - 12:06 am

    Hi Hong,

    The old "Chicken or the egg" question eh ?

    I guess the answer to your question lies in what your plans are for the next few years… where are you going to live, what are you going to do, careers, studies, friends, partners, goals, lifestyle, etc.  At a guess, only you know the answer.

    Either way, I reckon you should buy something.

    How about buy a 3 or 4 bedroom Principal Place of Residence, you have the main bedroom, and you could rent out the other 2 or 3 in a share house situation ?  That way you get the best of both worlds…

    As far as the FHOG is concerned, I could be wrong, but I don't think you would actually forgo the entire grant.  I'm not 100% sure of the exact details, but if you buy an investment property first, yes you loose some of the FHOG, but not all.  I am in Victoria, and I know that if you buy an IP first, you still qualify for the State component of the FHOG, but yes you do lose the Federal component.  I think it is similar in other states as well.

    I hope this helps,

    Thanks,

    BDM

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    July 11, 2007 - 12:19 am

    A couple of points.

    You don't forgo the FHOG – just the Stamp duty exemption if you buy an IP first.

    You also get a CGT exemption if you buy a home and live in it for 6 months.

    I personally prefer the PPOR route -but your decision!!

    Profile photo of hong_unghong_ung
    Member
    @hong_ung
    Join Date: 2006
    Post Count: 5
    July 11, 2007 - 1:37 am

    Thanks for the replies guys

    I do prefer the PPOR option as a first property aswell – Firstly I could live in it – and get the exemptions (stamp + FHOG)
    In terms of CGT If say I live in it for 12 months, then rent it out, and sell it within 6 years – I would be exempt from paying CGT  correct?

    What would happen to all the repayments – would I be able to treat it as a negatively geared property? Or would it still fall under PPOR and therefore I can't claim enything back on tax

    Hong

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    July 11, 2007 - 3:05 am

    Hong

    The moment the property is available to be rented out the interest can be claimed as a taxable deduction.

    it is therefore very important to ensure that your mortgage broker structures the loan correctly for you from the start knowing your future goals so as to ensure that you obtain the maximum deductions.

    Richard Taylor | Australia's leading private lender

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