im 30 and my gf is much youger with no savings, i have about 110k savings and wondering wat u guys thinki should do and wat advice u guys can give me, i plan to marry in 2yrs, we both have avg job earing after tax around 40k, any help would be great esp is it worth investing in a house or buying one myself to live in.
dellas, the first important thing is any property you get .. put it in your name. I know the situation may be perfect now, but I was warned off doing it the first time i got property, and the 'perfect relationship' lasted another 9 months. So first part, stick any property in your name. If you start doing larger scale investments .. head to a holding company .. but for a small folio .. just run it under your name. Its all around the tax situation, but thats another question.
Smartest thing you can do if you intend to marry and live happy 2 yrs down the track .. would be to purchase your first IP now. If you have an investment that you arent living in and its paying its own way .. when you turn around two years down the track and are ready for your big move .. you will either have equity on sale which makes for a good deposit .. or both income from the property AND equity .. which means the banks will lend you more based on your existing income PLUS your properties income. So regardles of which way you go, it'll put you in a better deal 2 years down the track.
Investing in a house for PPOR is sketchy for two very good reasons at the moment and i'll explain why. If you are riding a down market (which we are at the moment) then any value you have in the property can be lost as the market falls. So not only can you be paying the full price while living in the property .. you can lose your initial investment because the value drops. The second factor is a sharp upspike in interest rates (again not only possible but likely) at which point the near neutral or affordable gearing you had on the place becomes a sharp debt with the possibility of not being able to make payments.
Investing in an IP for starters has two welcome and immediate benefits. You have someone paying your mortgage WITH you and for you. You have reduced exposure to the loan thanks to this. This means that as long as you budget well for the loan .. two years down the track you should have already started to make money on the property. With the extra you can always add to reducing the existing loan.
With a 40k job and paying rent you should be able to borrow a little over 200k from the banks. With your existing savings you should be able to purchase something about the 300-350 mark (depending on your mortgage broker) including what you need to pay for stamp duty and transfers.
Hi Dellas
Congrats on saving such a large deposit – that's certainly no easy feat.
What would I do? Personally (and I stress – this is my opinion), I wouldn't put all of that money into the one property. I'd be inclined to take out a loan around the 90% mark (sure you'll have to pay some LMI but it can be added to the loan). I'd then drop the remaining portion of your savings into an offset account attached to the loan for future opportunities/contingencies. This is one way of mitigating risks
Xdrew makes some valid points above – and it is important that you carefully consider how the ownership will be divvied up if your contributing all of the savings.
In regards to buying a PPOR or an IP first. Personally, I'd opt for a PPOR – and preferably something you can add value to. This way, you're not waiting on the capital growth to kick in – you're creating it. You can then have the PPOR revalued and depending on your borrowing capacity and other factors, look to access this newly found equity and purchase your first IP.
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]
I agree. PPOR. The government will give you the first home owner grant which will help a little with your stamp duty costs.
Personally, I'd buy a sturdy brick residence that structurally is rock solid, but aesthetically challenged inside. You can pretty it up slowly in your spare time with paint and so forth.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hey Dellas,
Good job on saving $110K, that must’ve taken a lot of discipline – very impressive.
With $110k in savings, you can easily take out a mortgage of over $400K. Potentially up to $550K if the property generates positive cashflow (assuming you use the $110K as the deposit on an 80% LVR basis).
It depends on your goals in life. Property investment is a long-term game and worth the investment to a better life for your wife and yourself in the long term. If you can invest in a high yielding property today, pay the mortgage off as soon as you can, the rent could be your income stream for life. Imagine $500 in your pocket per week when you’re 50 for no effort.
Alternatively, you invest in a high yielding property today, invest in another high yielding second property in a year’s time. After 5 years, it’s not impossible that one of your two properties may have benefited from good capital growth. Combined with the deposit and the capital growth in one of your two properties, you can potentially pay off both mortgages early from selling one property. You can live off the rental stream of the other property and be financially free earlier than you imagined!
The above scenarios are examples of the benefits of investing in property. Obviously you’ll need to consider your current situation given that you probably want to settle down at some point, which may mean that you may want to move into your own home. Furthermore, you’ll need to make Smart Investment decisions, which is often harder than you think. There are plenty of resources out there these days – take advantage of them!
Good luck. Feel free to msg me if you want to sound out any ideas with me.
Cheers,
Jasethanks for the advice guys, i'm a novice at this game still so im still undecided on of i should continue to save and buy a home when i get married in 2-3yrs or buy an ip now, ill get ill do some more research nd speak to some professionals b4 i make any decisions.
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