Hi All,
I have read a few books, including 0-130 properties in 3.5 years, and I now want to get my feet wet, so to speak.
The scenario
I'm in my 30's and have never owned a house under my name, due to our family business always having a house to use.
I'm in a small town(pop. about 3500) in SA about 2 hours from Adelaide. Situated near the river the local industry is fruit growing. Which due to the current drought isn't going so well for many.
Capital growth isn't great in this area, although it exists. Having said that my mother's house according to the council evaluation has actually gone backwards from $240K to $230K in the last year. To indicate the type of growth, she paid $177 for it 4 years ago.
I am looking at purchasing a house for around $120k less about $18k for FHOG. So say around $110k after stamp duty etc.
The house is situated in town, near the school and hospital with 3 Bdrooms. Its an old weatherboard style house.Live in it for 6 months, and put all my income into the loan repayments for this time. Then rent it out after for hopefully $135-$150pw. I could afford to repay $5000 of my own money per month, plus around $30k of available savings.
I realise its not the best deal in the world, but in order to take advantage of the FHOG I need to buy in my local area.
I'm really looking for some opinions on this idea. I feel confident I could make it work, and it would keep me in my comfort zone for my first purchase.
Cheers
Sounds like a good way to get a foot in the property market. You just need to be aware that capital growth may not occur and look at reducing the loan amount as fast as possible to create a positive cash flow investment as you can't rely on capital growth.
You might want to consider setting up an offset account linked to your loan.
and put your $30,000 savings and your wage and future rental income into the offset account and make a repayment of approx. $200 per week or whatever the minimum repayment is.
This will reduce the interest charged on your loan by reducing the loan balance by the offset balance for the interest calculation by the bank. (make sure – ask bank if the offset account functions this way as some do not)
If you need the cash later or want to pay the loan off later you can just take it out of the offset account.You might have to hurry as the extra boost FHOG may be not be extended past 30 JUNE 2009
Hi duckster, thanks for your reply.
Yes I was going to do what you have suggested with the $30K. Especially as I won't be receiving rent for the first 6 months. I really want to keep the interest down. By the time I go to rent it should be quite easy to get positive cash flow.
I am very aware that the FHOG ends soon, thats the main reason I want to do something. I feel a little rushed, because of it. Not to mention I am going overseas next month! ……
Cheers
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