Hi Everyone my name is Nathan. I am currently about to buy my first investment property ( first property at all actually ) and have a couple of questions for you more experienced investors. First of all a little info about myself. I am 20yo and still live at home with my parents and will be for a while if i can. I am very new to property investing but also very interested and have found myself getting lost for hours on the net researching and learning. I have worked hard and saved up 70K in the last few years and my thoughts and plans are to simply buy as many investment properties as possible as young as i can. My questions are:
1. Would you recommend borrowing 80% for the first house or 95%? ( Ive been getting mixed answers about this, some say yes borrowing 80% at first will help you when purchasing your second and third house etc. While others say spend the least you can and borrow it all as you are an investor? )
2. For the first house is it better to buy a house for the maximum that i can borrow ( approx $350k ) therefore receiving more in rent etc allowing me to borrow more next time, or only spend say $250k leaving me with that little bit left over for the next property?
3. Simply what do you guys think of my idea's for the future and are there any success stories etc? Are there any faults with my plans, something i am forgetting about, am i thinking to far ahead, or even should i spread my eggs a bit more and learn about more ways to invest? As i said i am only young and new to this, but i am also very serious about it and appreciate any help or opinions at all, good or negative.
Thanks in advance, Nathan.Hi Nathan
Firstly welcome to the forum and I hope you enjoy your time with us.
Congratulations on having saved so much it is a rare trait for someone so young.
Now going forward the first question i would ask is does it have to be an IP.
If the area you are looking at is close to you then have you considered buying the property as a PPOR claiming the FHOG and Stamp Duty Concessions (Which depending on which State you are in may not be available 2nd time around) satisfying the qualifying criteria and then moving back home renting the property out and claiming the relevant deductions.
Again depending on the State you are buying in the savings could be considerable and a lot more than 6 months rental income.
Structure the loan correctly and you will be able to have the best of both worlds.
Secondly you will have one property which you can claim as a PPOR and preserve the CGT status for 6 years subject to not buying a second PPOR.
As far as working out what lvr you should consider this will boil down to a few things. One being serviceability,
There is no point in taking out a 95% lvr on your first place only to find that you can service even with rent a 2nd IP and that you ahev to sit and wait for a few years whilst you save up or your income increases.
Without actual figures and details on yoru expenditure it is difficult to provide further structured information.
Richard Taylor | Australia's leading private lender
Hey Richard sorry i should of explained myself a bit better, but that is exactly my plans. I currently live in Parramatta Sydney, and im looking to buy around the Blacktown/Mt Druitt region, so it is nice and close for me to move in for 6 months claim the FHOG then switch it over to an IP and move back home.
"Secondly you will have one property which you can claim as a PPOR and preserve the CGT status for 6 years subject to not buying a second PPOR." Will this be effected if i buy a second IP aswell or just a PPOR?
They were my thoughts regarding which lvr aswell, i think it is a far better idea to pay the 20% and work up from there, and hopefully allowing me to buy a second IP when i move back home.
Thankyou for the help Richard i will certainly let you no how i go with everything.
Nathan.You can only have one PPOR at any one time, but if you were to get another property later you can change which one you class as the PPOR – and the first could be the main residence up to that point and be CGT exempt.
I think it might be better to get a high LVR loan initially and then put the spare cash in the offset account. This will result in the same interest, (but will cost you LMI). as values grow LMI forked out will become insignificant. It will also keep more cash available for emergencies.
I think there are some bargins out there. my mate sold a property in Whalan recently, 3 bedroom house rented for $290 pw – sold for $210,000 (because of illness). Its a bad area, but i feel that prices have to rise in future because all the surrounding areas are going up so high. Just make sure you get landlord's insurance.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:I think it might be better to get a high LVR loan initially and then put the spare cash in the offset account. This will result in the same interest, (but will cost you LMI). as values grow LMI forked out will become insignificant. It will also keep more cash available for emergencies.
Agree with Terry – also makes it easier to access cash if another deal comes up in the near future.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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