Hello everyone,
I need the opinion of some knowledgeable investors. I am currently in the process of deciding whether to buy a house and land package and make it my PPOR (and get the FHOG as I have not had a home before), or whether to invest the money in a property and to rent?
My current situation being that I am still young (21), living with parents, and have around 55K to utilize, any input/advice will be greatly appreciated.Hi scotty8911,
I'll give you an idea of the benefits of using your FHOG. Its a handout designed to make it a little easier to start you on your way. Problem is .. its helped everyone on their way now .. and its boosted house prices. It only really covers the stamp duty component of the property purchase these days.
Couple of years ago when I wanted to buy, this is the scenario that I cooked up. I had 60k of my own money .. and i wanted to take advantage of the FHOG too. And at that stage .. it was possible to get an apartment for around 125k-140k .. so I went hunting for a pair in a block .. total cost 260k, one to be my PPOR .. the other for investment. Total borrowings from the bank around 210k.
The idea being that a 360k per week whack out of the back pocket was a bit too much for me. So .. these properties would be returning roughly 140 per week x 2 = 280 .. which out of a loan of roughly 360 meant 80-100 per week out of my back pocket.
As you might guess .. at the moment there are VERY few places where you could achieve this scenario. Its possible in some outer geelong areas, and possible in some far-off destinations .. Aubury/Wodonga … countryside. But no longer really possible in the metro areas. Avoid student apartments .. it might sound like a great idea if you are running to uni, but they are hard to borrow against and are poor sellers in the market because of that.
Remember the rules .. for a PPOR .. to make it a PPOR you must live in the place for six months AS YOUR REGISTERED PLACE OF RESIDENCE within the first year at least. After that you can be subject to the 6 years you can be away from the place before you need to move back to it. So, if you want to work countryside for six to eight months .. you might be able to work a great deal !
By the way .. the FHOG was used on this deal .. at the time for me it was 14k .. stamp duty was roughly 8k on both of them .. this left 6k that got fed back into the loan. Worked a treat.
Those properties now return me about 25k .. and the capital gain on them has also been good. But they now pay for themselves.
Think of your scenario .. it wont be the same .. but i'm sure you are thinking on similar lines.
Hi Scotty8911,
I too recently faced this decision and started a similar post. See https://www.propertyinvesting.com/forums/property-investing/help-needed/4335319 for a number of the responses.
As you will read, it really does come down to what you want to do at the particular point in time. Have of read of the above thread, and weigh up what is most important to you at this stage
Hope this helpsHi Scotty
One method that I like is purchasing a PPOR at the beginning. Something that can be renovated to add value (it doesn’t need to be a major overhaul) – it’s amazing how much value simple renovations such as new paint/flooring/refaced kitchen can add.
After you’ve carried out some renos – have the property revalued by the lender. If it’s gone up, tap into the equity and use it as a deposit and purchasing costs towards your first IP.
It’s not just the FHOG you’ll be able to benefit from, there’s generally stamp duty concessions for first home buyers in each state as well.
Also, your PPOR won’t attract CGT in the event if you sell. There’s also the stability aspect of owning a PPOR as opposed to renting.
Just my 2 cents. I’m sure others will have varying opinions.
Cheers
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]
Hi Scotty – well done on saving $55K. Most young people dont have that much saved and end up with a 95% loan.
Assuming you are in Victoria and looking for a House/Land PPOR, you will also have a FHOG of $20K in a Melbourne metro area or $26,500 regional. There will also be great stamp duty savings.If you do go down the road of PPOR, there are are lot of turn-key packages available around $400K, just depends on where you want to live.
Getting into the market now with thorough research is fantastic whether it be investment or PPOR so good luck with your decision and future property investing.Regards,
JohnHello everyone.
Thanks to all for the input, all your suggestions and advice have been taken on board. I hope to be making my decision in the near future so I can begin on the investment road.The FHOG provides eligible first home buyers with a $7000 grant. This grant is not means-tested nor is it restricted by the price of the property for contracts entered into prior to 1 January 2010.
Also some states may have a FHOG of their own additional.
When I brought last year NSW had an additional FHOG of $3000.
There is no stamp duty for proprties under $500,000 or $600,000 from memory and you can claim up to the value of $17,999. I didn't pay stamp duty.
That's potenially $30,999 money, saved/ earnt
If you then compare the potenial rental earnings on the property (500 rent per week = $26,000 annually), it is certainly worthn it to live in most properties for the first 6 months.
Depending on how much you earn I would suggest the bank will lend you $300,000, if you are currently on an average income.
Commonwealth and Westpac are the best banks for first home buyers. However staying away from banks may save you some money. Some banks/ lenders will also let you use the FHOG as part of your deposit.
I would stay away from brand new properties for an investment, as you really are paying an extra cost. After it's lived in the value will be the same as the other properties in the area.
I would suggest only to buy a new property if that is what you want as your PPOR and that is only for the purpose of luxury.
Work out the current estimate rental yeild and let this guide you.
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