How does it work?

To get the homebuyers grant, you have to live in the property for a bit before you rent it.  6months I believe.

Back to the matter of getting financially independant… forget about this business of living off the rent in the first year of ownership.  Think more like this: 

– Hold onto the asset until you've paid it off, at which point the rent can supplement your income, or be an addition to your superannuation
or
– Hold onto the asset for a few years till it has gone up in value, ask the bank to revalue it, and the amount by which it has gone up in value (known as "equity" can be used to buy a second property.  This is where your personal wealth starts to get really interesting.  You repeat this process a few times, and then in 10 or 20 years you sell a couple of houses, pay down all the other debt, and bam.  You are debt free and the proud owner of a bunch of houses that pay you rent as an income.  Yay!

By the way, when Jamie mentioned that the tax man helps you make the payments, here is what he meant:

– Let's say the INCOME (ie rent) on the property is say, $10k a year and the COSTS (ie bank interest, council rates, insurance etc) are say, £13k a year.  That's a difference of $3k that you have to fork out until the rents eventually go up to the point where the property "pays for itself".  In the meantime the $3k can be declared on your tax return and you get a refund on a portion of it.  This is referred to as negative gearing.

– Now here's the golden nugget you may not know about.  DEPRECIATION.  The carpets, window coverings (curtains) etc etc will all age with time.  They will depreciate.  A quantity surveyor can write up a depreciation schedule that declares an amount per year you are allowed to put down on your tax return each year.  It could be say $6k in the first year.  This would thus reduce your taxable income and you get some refund from the taxman.  Nice!  Further, if the property was built after 1985, further benefits are available in the way of depreciation of the building itself.

Its not about the 15 dollar profit now, its about what it can become, in five years time that properties income will fuel another and probably double what you pay today. I wished I had the money to do it at 19. Because at 19 I had the foresight you had, i even knew where I wanted to buy if i had the money, but commitments like school / uni etc, but with no money – it was a ball breaker. Today I looked back, had I done so, I can retire before i even hit 30. Sadly I had to start at 24. and now retirement age seems another 10 years further.

I used to study a subject  that talks about what money is worth tomorrow. Simple really, a dollar today is worth more than a dollar tomorrow. Start early…

Yeah, I think my commitments will get in the way too. Uni takes a lot of time, so I can't work full-time. Although I could afford mortgage payments, it'll probably take me a while to get all the money I need for the deposit and added costs. Plus I'm planning on investing in a managed fund soon ($1,500) and going on a trip to Vietnam in December ($4,500). So getting the few thousand for the home loan seems a while off. The sad thing is, by the time I'm in a place to save the money, more commitments will come up and it will be pushed back even further. I wish there was a way I could get started and pay the costs off in installments with the mortgage. It seems like I'll never be able to get there. [/quote]

Sometimes it is travel OR save.  At 19 commitments are less than if you were in a job with 4week off/year and a family /schools etc etc. and so there is merit it living it up and travelling while you can.  The pat answer would be choose between the 2, but like someone said earlier, you are only 19 once.  Perhaps save a set amount each month (eg bank transfer straight into an untouchable savings account) so that after 12 months you have saved a decent amount for your deposit. 

Also it is never too late.  Apart from my PPOR, I started with property investing at 42 (1 year ago) and am not racked with regrets.  I travelled all over the globe and worked all over Oz (mostly while married with 2 kids) before settling down when they started school. Never too late, mate.

Incidentally some things, like your travel airfares can be got cheaper with the aussie dollar the way it is, by purchasing the ticket through an overseas website, eg purchase the tickets through UK can be cheaper than getting from Aust websites.-so I have been told).  If you save on that, put it away.

Just my 2 bob's worth.

Hi everyone,

I’m in a similar situation and thought I’d ask my question here instead of creating a new topic.

My questions are concerned with the process of getting a home loan (or pre-approved at the very least).

Like naledge, I am only 19. I never had a small loan. I also don’t have a credit card. Basically, my credit history would be non-existent(?). Furthermore, I don’t really have any assets.

I was wondering if this would be a hurdle for a lender to pre-approve/approve a home loan. Would it be necessary for me to establish my credit history?

I would also like to confirm whether you would need to show a period of time where you’ve made “genuine savings”. If so, generally how long would this period be?

Are there any other issues that I need to address in order to be successful in getting a home loan pre-approved/approved? Would a lender even consider lending 90-95% of the property’s value to someone like me?

If it helps, I live at home with my mum. So my expenses are fairly low. I should have approximately $400/week after expenses (this amount also considers some property related expenses, such as, council, strata and water rates and insurance). (I guess it’s obvious that units are a suitable entry point for me). However, I’ve only had my current job since November and I’m employed on a casual basis. However, the hours are predictable and consistent.

Finally, I would like to know how you would go about paying mortgage insurance? Is it possible for it to be added onto the loan or would you have to pay upfront or something? Sorry for my ignorance.

Anyway, thanks in advance for your words of wisdom

Hi naledge

We think its great at 19 yrs old you are looking to educate yourself about property investment! Best of luck with your journey