Hello everyone. It's my first time here and the information so far is invaluable. It's great to read the book and then consolidate the information on this forum.
I wanted to ask you guys your opinion on my situation.
I am 28yo and a full time vet, single and no kids ($100,000 earnings pa) and I am renting a place in NSW. I would love to like many…choose my days when I work and so my plan is to supplement my income with investment properties. However I first need to take the step and get started. Whats holding me back is some decisions on the very first property. Since I am eligable for the FHOG and stamp duty concession I was going to purchase a place with these concessions around the $280,000 – $320,000 mark, searching for a 4 bedroom home in macarthur/ camden area.
First question: To purchase this property it will be in my name right? I can not at this stage purchase with a trust as I am a first home buyer?
Second question: If I plan to live there for 6 months and then rent out. Do I organise an interest only loan from the beginning with a 100% offset account?
Third question: Another scenario I thought was If I lived there for 12 months, renovated, then could I use that equity to purchase my first IP and then rent the PPOR after the first year (assuming it would be enough value)? Would this be a good/ bad idea.
Fourth question: How does a trust structure help you to fund more properties? I have read some responses on these forums but now I am really confused about this point. And how soon should you set up a trust if your aim is to have many properties?
Fifth Qu: When I convert my PPRO to a IP are there any legal issues I need to be aware of, like is it as easy as finding tenants and just getting them to move in (apart from insurace etc)?
Guys…I know these are really basic Qu's probably. But I appreciate any info you can give me.
Thanks so much for your time.
Marta
Hi Marta
Firstly welcome to the forum and I hope you enjoy your time with us.
First question: To purchase this property it will be in my name right? I can not at this stage purchase with a trust as I am a first home buyer?
A) Would always suggest to every client that you take advantage of the concessional Stamp Duty rates and FHOG on at least 1 property and this may wel as be the first one.
Second question: If I plan to live there for 6 months and then rent out. Do I organise an interest only loan from the beginning with a 100% offset account?
A) It is horses for course but we would recommend to clients that even if the home is a PPOR you take out a Interest only loan with 100% offset account. Some lenders allow upto 10 years even 15 years interest only.
Third question: Another scenario I thought was If I lived there for 12 months, renovated, then could I use that equity to purchase my first IP and then rent the PPOR after the first year (assuming it would be enough value)? Would this be a good/ bad idea.
A) Yes this is normal practice for clients wishing to build equity.
Fourth question: How does a trust structure help you to fund more properties? I have read some responses on these forums but now I am really confused about this point. And how soon should you set up a trust if your aim is to have many properties?
A) It doesnt. I think this point in Steve's book has been taken out of context.
Fifth Qu: When I convert my PPRO to a IP are there any legal issues I need to be aware of, like is it as easy as finding tenants and just getting them to move in (apart from insurace etc)?
A) Yes simple as that. Probably a good idea to get a Depreciation Schedule done at the same time so you can lodge your 221D Tax amendment as soon as possible.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thank you so much for your thorough and speedy reply. I really appreciate it.
Can I just ask one more question as I can not find it covered anywhere. Why do you recommend taking out the loan as interest only from the beginning. What are the advantages?
Thank you so much
Marta
When you move out of the property and rent it out you want to have the flexibility of maximising yout interest deductions.
If you have started paying P & I then the amount of interest is reduced.
Interest only gives you choice and this is important for structuring an investment portfolio.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
