I've saved $20,000 and wondering what to do with it. I have it in an ING account at the moment. I am renting, studying/working part-time, 30years old. My partner is working full time, we have a kid on the way, combined income will drop to around $50K p.a. for a few years, so we need to get ahead somehow.
Any suggestions on how to make 20K work for us?
Would it be worth buying a place in St Arnaud?
For example, this one has sold already, but to do the maths (quickly and roughly), have a look:
http://www.realestate.com.au/property-house-vic-st+arnaud-104794172Say I pick one like this up for $100K. I put down $20K deposit, but we stay living in Melb and renting (so no first home grant for us). The standard variable rate on my loan of $80K over 30 years is: 7.81%. The weekly repayments are: $145 per week.
The rent collected on that joint above claims to be $125pw, so I'm only putting in $20pw, maybe $50 if the interest-rate rises a bit. And I guess general rates would be $1-2K per year?
Maybe in a few years, I can move out bush and live there. But even if I never do, maybe the rent will start to cover the mortgage, and in 30years my kid can have a home? Is this worth doing? It seems pretty great to me. But are there massive pot-holes in my thinking? Or are there better, much better, options I'm overlooking? PS: I'm looking for security as opposed to massive wealth. Just to provide for my family (sure massive wealth would be great, but I'd like to think I'm some what of a realist, or at least admit I'm a pessimist).
Lets play a better scenario for you, long term.
Try this one out for size.
http://www.realestate.com.au/property-unit-nsw-lavington-104851762
Its a set of two units in a four unit block. Price is 245k (that would mean you would need at least a 40k income to support it or a joint 50k). Out of that you will have two incomes (currently $140 per unit but 2BR unit price in the area is now pushing 160) so, assuming you can borrow around the 8% mark that would be an outlay of roughly 320pw to support it. But .. hold on .. incomes are $140 x 2 that sounds like GASP .. a gross income of $280 vs outlay of $320 (p/w). How does owning 2 units for a mere $40 before expenses sound?
Now i did say BEFORE expenses in that last sentence. There would be 3 sets of bills you'd need to outlay for the long term as landlord, which would be .. water connection (NOT usage), council rates, and any community (body corp) bills. I'll use rough figures lets say $600 for the rates $800 for the community and about $500 again for the water connection bill. Summed up thats a total of $1900 or .. as a weekly figure, lets call it 36 bucks a week. Double it for two and its 72 Bucks. Now add the initial $40 a week to that figure and you get to own TWO properties for 112 bucks a week? Scandalous !
But heres the great bit .. as two properties .. every $5 rise in rents .. is $10 overall. So it would only take a $20 rise for your gross ownership for the property to be annulled. And only a 36 dollar rise over that for the property to be paying itself.
Sounds like a lot? Sounds like its going to take time? Remember that the prices are already under market. This doesnt mean you rush out and dump the tenants as fast as possible. Just .. next time one leaves .. you raise the price to market. Never forget the value of someone else paying your bills.
Its also double growth. Its two properties growing at the same time. So a 25k move in price = $50k equity.
Oh .. did i mention that if you got the loan as interest only .. its fully tax deductable? (the interest component).
This situation exists out there already. And I know of it. Its only ONE example of if you think a little you can make a workable deal.
Prob for you would be the banks would be asking for a full 20% .. Thats about 49k on this (plus about 8-12k for stamp duty)
If i was a smart 25 yr old again, I would be asking around for the difference .. because of what deal i could make from it.
But what it would mean for you long term is the equivalent of 15k you'd never have to work for again. You can borrow again using it as extra income (it would mean you could afford to get a better place) and you can sell it if you want to retrieve built up equity.
Thats a deal. Thats money making magic. I've supplied ONE example. I even know of others where you can use just your 20k deposit and get it working for you.
Ask me how sometime. As i said in a separate post, when you are ready to put your foot on the property ladder, there are deals waiting for you.
xdrew that does sound inviting but hopefully people read it don't jump in thinking it's a too good t pass up offer. There are thousands of these properties in that area and more springing up every week. Seems developers everywhere there are buying old houses and knocking them down to build these things.
Vacancy rates aren't that low either. Buy at the wrong time and yo can wait months for a tenant.
Pays to do your due diligence.
Catalyst .. the due dilligence has well and truly been done on this property. And its in a depreciated area, but its in a compact block of 4 right behind the local Centro shopping centre.
To validate your point, there are sites in the vicinity (i'm thinking about certain sites on Kaitlers or Prune St) where you have the large blocks (up to 24) of poorly built units with shoddy accomodation and as a result .. tenancies from hell. But this site is small block, well built, good facilities close to shopping CENTRE and transport. It fits the requirements for a good deal.
The example pointed out was only one of the existing better value deals that exist on the market at the moment. They are not necessarily in the places you'd expect, they DO require the due dilligence, and they can provide better value for someone who is looking for an investment that will provide both CG and income. The point I was making to Wynyard is that he needs to investigate a little bit more to find the deals that will provide both for him. They still exist and they are out there.
Agreed xdrew, there is a glut of properties on the market @ the moment in the area but if you buy right having done your due diligence you should be right. There are parts of lavington that you would avoid.
Another option would be to seek out a syndicate investing in larger properties (ie apartments, commercial, etc) and partner with them. Apartment deals in the USA are particularly cashflow positive just now. Send me a private message if you are interested in more information.
Martha
A couple of nights out, a holiday, lots of beer and a nice bike?????? Ok, probably not what you wanted to hear….
Invest cautiously…
Why don't you consider investing in a positive income property in the USA. For example, I personally purchased one property for $13,500 put $5000 into it and it has been producing an income of $750 per month consistently for some time now.
AmandaJust a little bit of advice you may not need.
Once your baby is born you will have a dependent which will cut the amount you can borrow quite a bit.
You should probably get your house and mortgage sorted before he/she is bornHi Wynyard,
Perhaps a house with a granny flat you can rent out? It doesn’t hurt to have help with the mortgage.
Good luck and I hope the bub comes out happy and healthy.
Take care
Angel
A couple of really good examples, particularly at the top of the convo about your options. Just remember; the deal of the decade comes along about once a week
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