Hi Guys,
First I'd have to say what a great forum this is, been googling all day long on forums relating to purchasing first home in australia and nothing beats this one. Okay here's my current situation, I'm 25 and still living at home with me folks, earn 45k gross, have a HECS debt of ~45k and have enough for a 30k deposit. Having lived my folks for so long I'm very interested at the prospect of moving out and buying my first home but I'm not sure whether it's feasible at my age and current financial position (I don't want help from my parents as they are already retired). My question is that has anyone been in my situation (or know of someone who has) and if so what did they end up doing? Also any other advice would be very much appreciated
My goal is to buy a house costing no more than 300k, live in it for ~1 year and then use it as a investment property and rent it out until I break even (i.e. get back all fees and interest paid on loan) and then using it to take out another loan to buy another property, so on and so forth… Feel free to laugh and comment if you reckon I'm a bit ambitious and out of my mind
Kenzel
HI Kenzel and welcome!
No such thing as being too ambitious when it comes to property I think. YOu have done really well to get a $30K deposit and earning $45k gross is most likely plenty to get you started on somethin g under $300K (I bought my first apartment on $28K with a $10000 deposit).
Say you bought a 2-3 bedroom apartment or house – you could rent the other rooms out to help you get ahead in the first year. I did exactly what you are proposing and provided you dont let everyday expenses and credit card/lcar loan etc debts get out of hand once you have the first place with enough equity, I have found dealing with banks much easier when you want to go onto IP #2 and #3 etc…Best of luck!!
Good plan kenzel,
Not a lot of people have done what you are planning to do; especially at your age. It's a bit outside the box for many; you will join the 5% and not the 95% if you take action.
After you move out of the new property you buy and put in tenants, you will be able to continue renting it for up to 6 years before becoming liable for Cap Gains Tax should you ever wish to sell.
Don't forget to take out Landlord's insurance and a good idea is to buy something relatively new (not brand new) so you will be paying fair market price and there will be still excellent depreciation from the building, fixtures and fittings. A Quantity Surveyor is needed to prepare a Depreciation Schedule which you then give to your accountant. The D.S is invaluable when you start off to maximise your cashflow from the property.If you are after your FHOG (first home owners grant) then you will have to check up on the terms and conditions cos i don't think you are supposed to rent out any rooms within the first 12 months. You would probably have to be careful about what you do during that time. You can just do a search on the net and most lending institutes have online calculators that will give you an estimate on how much you can borrow. A mortgage broker would be able to give you more exact details too. Need to figure out what you want to do with the property so that you can get the right sort of loan so that when you want to use the equity you won't be hit with unwanted fees. Good luck with finding somewhere
Hi Kenzal. I don't know your personal circumstances. However, I like to offer the following advice to FHBs:
Are you stretching to buy the most expensive property you can relative to your income. Why? Do you realise that over the long term it will almost certainly be more financially rewarding to buy a slightly cheaper place and pay it off in half the time?
Let’s analyse that more closely. Say you can afford $500pw repayments.
You can:
a) repay a $300,000 loan @ 7.8% over 30 years, 100% financing
b) repay a $230,000 loan @ 7.8% over 15 years, 100% financingFor the same payments you can own outright a $230,000 house in 15 years or you can be still owing over $200,000 on a $300,000 house.
Even if house prices rise 60% over that time, you’d have a fully-owned $368,000 asset instead of $280,000 equity in a $480,000 house.
Please consider NOT over-stretching to buy real-estate.
Cheers, F.
I agree with F about the cheaper property, but not the 100% financing;
many people go for the more expensive, and quite often new, luxury townhouses, apartments etc., thinking it will be a better investment. They are not necessarily so.
Staying well within your means (especially for the first one will quite often be just as good an investment; you can usually get better rent returns with the cheaper properties, there are more renters for that price range and the financial stress (especially to get finance) is less.
My personal view is that when beginning investing (or even for experienced investors) if you need to get more than an 80% loan (LVR of 80%) which usually requires Mortgage Insurance as well, then your financial position is heading towards precarious. Life happens and sometimes you need to sell quickly, and if you are over-exposed this can be a disaster.
With a $30k deposit, that puts you in the $150k purchase price category which doesn't buy a lot these days unless you look to country and regional areas.
So you have 2 choices;
1. borrow more (not F's or my preference)
2. keep saving the deposit until you can buy a more expensive property without going over the 80% LVR and have to pay Mortgage Insurance.Some will argue against this, but I would like to see your first plunge a safe one.
Thanks for all your responses
Lucy – Good to hear someone in a similar situation taking the dip and now I'm slight more confident in taking the plunge. When did you buy your first property and how much did it cost you?
LA Aussie – I have no idea what Capital Gains Tax is as yet but I'm sure I'll will find out about all that jazz when I'm in a position to lease
. At the moment my short term goal is to get a loan and buy a propertyTatts – Yes I do intend to get the FHOG which I believe is $7000 at the present time and I'm sure I won't rent it out until I've lived in it for 1 year
Foundation – You are certainly right about getting the cheapest property possible and I don't intend to spend extacly 300k. However I did a little research and found that a 2 bedroom property (~30 mins from CDB) nowadays costs between 250K and 300k. I could opt for a single bedroom one but I don't think that has much resale value because I think most house buyers are either couples or families (correct me if I'm wrong). In regards to 100% financing and LMI I'm certainly intending to avoid that if I can to reduce cost.
By the sound of things so far it looks like I'll have to continue saving until I have 60k to take out a max of 300k loan. I estimate that this will take me to mid July 2008, do you guys think property prices will double by that time? That's what I'm scared off which is why I'm pushing to buy now rather than 1 year later. Are there any other options? If LA Aussie is right then all I can really get that's within 30 mins to the CDB for 125k is a single bedroom apartment/townhouse. Hmmm decisions decisions
Kenzel
After reading this post I thought I might be able to help. Kenzel if you or any potential first home buyer is reading this would like some great information from someone in your position I can help, hard to explain on this post!! Just add to this post and I'll contact you to meet up.
Cheers
Chriskenzel wrote:Tatts – Yes I do intend to get the FHOG which I believe is $7000 at the present time and I'm sure I won't rent it out until I've lived in it for 1 year
Requirement is that you live there for 6 months, starting within the first 12 months.
what about buying an investment. keep living with parents for another year and saving like crazy then use the equity and savings to purchase your own place. you will still get the first home owners grant for your own place as your first purchase would be an investment. just food for thought
Another option would be to buy with a friend or family member …. obviously want to get the terms right though.
Kenzel,
It may pay to consider Here to Learn's suggestion. If you are in a position to stay with you folks a little longer, you could purchase an IP in an area where you could purchase for $150-200K. This obviously requires a great deal of research on your behalf on the potential IP and its future potential. If the property is never used as your PPOR, my understanding is that you still retain your eligibility for the FHOG in the future. A good IP choice may see you even further ahead then just continuing to save the balance you require to be where you want to live. I recall an article in API several months ago about this. I think it may have been titled "Gen Y's" or similar, and was on the cover (picture of a slick dude with sunnies on!). Have a look on the API website for the back issues.
All the best
TammyHi Kenzel,
The one I was refering to is Dec 06 (issue 70), also you may want to look at Feb 05 (issue 48). Whilst I have not yet bought this months API, I see on the website a reference to buyers in their 20's. May also be worth a read.
Cheers
TAmmyHi
If your read the 1st page of the First Home Buyers Grant carefully you will see the questions that you need to answer to fulfill the eligibility criteria.
1. Will this be the first time each applicant ……………could receive a grand under the Act in any State or Territory of Aust.
2. Is each applicant and ………………. a person who has never owned a residential property……………before 1 july 2000
3.
4.
5.
6.If you go to the website – http://www.osr.qld.gov.au – you will be able to read the eligibility criteria completely and see for yourselves
Sharlene
[email protected]
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