Hi everyone.
Hope everyone had a good Xmas.
I need some help again. I have posted a topic similar to this one but the situation have changed somewhat. Basically My wife and I are looking for our first home, but at the same time we would like to get an IP before the price gets too stupidly high oh and a first child too.
Our situation is that at this stage we are both working and our income is average. We are living with some close friends whom we share most things in the house, bills etc. At the moment we are just saving what we earn, and by Feb 2008 we should have about 100k and no debt on our cars etc. The thing is my wife's parents want to help us (double edge sword) by selling us their very old house (2bed weather board) in Box Hill (Melbourne) for a cheap price at say 330k, and they would sub-divide and build next to us.
My wife and I have discussed this and we feel that it could be a good opportunity especially since we are starting out and cannot afford much. But the catch is that it won't be be settled or at least the in Laws won't finish their new house until late 2009 which is quite a long wait.
In the mean time we were talking about this the other night that we should use half the money we have as a deposit and buy a smaller house for under 300k just to live in for a while (2years) and then rent it out later. But I have been thinking that we would be paying about 25k a year in interest alone versus say 12k in rent per year.
My wife argues that it is like killing two birds with one stone, in that we rather pay off our IP house instead of rent. She feels that if we don't buy an IP now then it will be much harder down the track. But I look at the situation as something that should be taken in steps, and paying mortgage on two property at the same time seems extremely tough.
I really don't know what to do as I haven't had any experience, and I feel so ashamed for asking what might seems like an easy answer to you guys.
Am I a chicken?
Anyway hope to hear from you.
Hey mate,
First off I am a young property investor and I am learning the ropes like you so please feel free to add me on msn [email protected] and I would love to chat with you about your situation.
1. How much time have you invested into educating yourself before you think about getting into property investment?
2. Family and business should never mix ( i.e. buying the house of the grandparents)
3. Everything is expensive because people are looking for the easy way out, setting up what we call in NZ LAQC, or looking for negatively geared property hence why the demand for property increases and values keep rising. That is why we have property cycles. If you cant find a good property to purchase spend time learning to how to find them, they are always there but the hard part is learning how to find them and believing you can find them.
My strategy personally is even though I dont have a lot of money, if any at all, i will learn first about property investment, learn the strategies and spend time acquiring an arsenal of strategies I can use in any part of the property cycle, Up, down or flat.
So yeah maybe the best thing you can do is attend a seminar by a property investor that you have read about and you admire and learn.
Robert K saying ” if you thinking education is expensive, try ignorance”
Good luck mate
I wish you all the best and I hope to hear from you soon.
Sean
Hi guys,
Sean, thanks for posting your reply. You seem to have thought through it carefully.
Some further thoughts that I would like to add are:
1. Are there strings attached to the deal your in-laws are offering? For instance, what if you decide to sell soon after moving in to people your in-laws don't like.
2. The 100k would be enough to get into a buy-reno-sell situation, but that can be a lot of hard work if you are planning to do the work yourself. Still, DIY projects are a great way to learn. Things in the eastern suburbs are quite expensive though… If you go down this road then get advice about how to do it in a structure that won't affect your ability to get the FHOG or other incentives.
3. You can always rent for 12 to 18 months while your in-laws property is 'fixed up' for you both to live in.
Box Hill is a good area, and experiences strong demand from a growing Asian culture. I lived in that suburb for 5 or so years and know it well. What street is the house in?
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Get rich
Firstly welcome to the forum and I hope you enjoy your experience.
Whlst i dont intend to comment on the area as i dont own anything presently in Victoria i would comment on the structure and the way in which you shoulkd consider funding a deal like this.
Firstly the initial acquisition is going to be a PPOR at least for the first 12 months and then eventually a IP which you will rent out and claim tax deductble expense against your income. You also mention that a new addition to the family maybe not be too far away.
If this is the case certainly do not put down half of your funds as deposit as once the property becomes an IP only the interest on the outstanding amount will be tax deductible and you are unable to redraw to use as deposit for the PPOR you wll purchase from your inlaws.
Dependant on whether your wife will have time off work once the baby arrives would determine whether you would purchase the first house as Joint Tenants or Tenants in Common. With regards to the loan structure you should be looking to borrow as much as possible (95-100%) should be achievable on an interest only basis with the loan linked to a 100% offset account. You would deposit your funds into the offset account whilst the house is an IP and then use the funds as deposit when you purchase the Box Hill property.
Certainly a little bit of loan structuring will enable you to borrow the maximum amount for your IP and reduce the non tax deductible amount when it comes to your PPOR. Remember getting it right now will help you fr years in the future.
Feel free to drop me an email if you need further help or assistance.
Richard Taylor | Australia's leading private lender
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