Hi everyone! .. New member here and hoping to get some advice on what would probably be best for my situation. I'm from Adelaide, take this how you will but I've recently turned 28 and at the moment living at home. Have not always lived here of course, I did a stint in the Army, have rented elsewhere, but due to personal reasons, just here at the moment.
I want to move out asap and have been considering buying a place. A bit about my finances, at the moment I have around $80-$100k which I can use as a deposit. I am self employed and at a minimum should be making around $80k+ per annum (up to around $120-140k in future years). It's very hard for me to say exactly how much because being self employed, things do change depending on the state of the economy, but I would be confident in saying I won't be making any less than that.
I'm moving out but don't want to buy a 'home', but rather somewhere I can just live for just 2-3 years and than re-evaluate anything. And I would love to get into the property market.
The options I have been thinking is:
1) Buy a 2 bedroom CBD (or surrounding) apartment/unit for around $300-350k. Temporarily live in there with a house mate and pay off as soon as possible. After being paid off, I would look at renting the entire space and move elsewhere.
2) Buy a similar property, but instead of living there just renting the entire place. Then I would rent/live elsewhere for myself. Not sure if this is easier than above option?
3) Considering the good amount of money I have saved, go for a larger loan and buy at about $500k?
4) Buy a run down place $300-400k surrounding area in city, live and renovate in spare time over the next few years for resell.
5) OtherSo what I'm really doing is trying to get started in this industry and set myself up for the future, but not sure on the best way to go about it.
With 1, don't pay it off but use an IO loan with 100% offset. Paying it off will tie up your money and will result in more tax
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
Agree with Terry definately dont pay the loan down if you are thinking you will be moving out.
Just on your income i will assume you have been self employed for 2 years +.
Lenders will in most cases require your last 2 years Individual Tax Returns if you are a sole trader and some will average your income out between those 2 years. Others work on a 20% rule from the prior year and take this figure rather than you actual net income.
Some addback Depreciation and negative gearing (Not applicable for the first deal but could well be when the first property becomes an IP) others do not so it is a matter of seeing how to spread your income as wide as possible.
Also remember we are in Dec and although you will have lodged 1 BAS this Financial Year going to still have to work off June 2011 Tax Return figures.
Without more hard data it is hard to further assess but there is plenty of traps for self employed to fall into with the wrong lender.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry for delay in responding. I've been self employed for 7 years so I can provide my tax returns. Last 2 years have been fairly good, so my income average will be good enough to get a decent loan.
So the best way for investment, is long term loan at lowest interes as possible.
I may actually have the opportunity to purchase a small 3 bedroom city appartment place for $275k which is already tenated at $535 per week. Taking into consideration the high council rates, this still sounds pretty good doesnt it?
Its a good yield, but whether it is a good buy or not will depend on a lot of factors.
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
Hi again Aaron
Most lenders only require last 2 year Tax Returns so subject to satisfactory income that wont be a hurdle.
Depending on the lvr you are looking at circa 6.35% – 6.45% no applic, valuation ongoing fees, no early repayment fees or charges.
Certainly yield looks good on paper just want to check out the Body Corporate fees and factor those into your calculations.
Other than that if the rental demand is high looks like a good starter.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
So having looked at around 15 properties in my favoring suburbs, there is one which I looked at today which really stood out. On paper it sounds really good so at the opening today there was a lot of interest. And I was just interested in some opinions..
First, it is a lot more than what I was originally looking at spending. The asking price is $550k-595k which would be close to the maximum I would be allowed to get on a loan. And the home loan repayments for a $500k loan will be around $800/week… ouch!
It is a 2008 property on the nicest street of land in the suburb (not a main road). In the neighboring suburb, about 8-10 minute walk, they are building a new urban village. This area is doing major developments everywhere with really nice new townhouses.
The house has 5 bedrooms, but 1 should be left more of a study area, and currently the bedrooms in the house are being individually leased to students. Three smaller bedrooms are being rented at $150/week and the much larger bedroom (big bedroom, retreat, ensuite) at $300 week. This means a current return of $750. The other bedroom/study could potential be rented at another $150 for a return of $900 week. The house is quite big (220sqm), but that would still be a lot of people.
How difficult would it be trying to keep up in individually renting each room? Just renting the whole house by itself would be much easier, but I would expect the rate to be much lower.
An idea of other prices around the area, new 3 bedroom townhouses are being asked for around 500k at a 450k per week rent.
Hi Anon
All I can Say is that if you stretch yourself, you may put yourself in a position where you have to sell in a bad market.
You need to take into consideration the fee’s and unexpected problems that can arise.
Also you cut out alot off first home buyers when you buy at that level, this can effect resale value.
At the moment some people are loosing upwards of 80k on 400k properties this would be around 110k on the 595k.
I’ve heard it said that you make you’re money when you buy.
I’d steer away from properties that attract alot of attention, these properties usually sell on the money and in today’s market you are less likely to get a deal.
Look for properties that have been listed for a while, visit some auctions and if no-one bids then show some interest.
Also there is a better chance for it to be CF+ with a lower price, as the Interest only payments will be less.
Hope this helps
Thanks Zimby, definitely a lot to consider. If this was something I was going to go for, I would only offer the lowest amount $550k or perhaps even a lower offer , and if someone offers more, so be it.
Hi Anon
I'm a big believer, especially if your single, in renting where you want to live and buy where you can make money.
Structuring your investment purchase to be as cash flow neutral as you can is a great way to still maintain your quality of life, yet still be in the market and making money.
Another thing to be careful of is not buying something because it's close to home, or that it might become a home one day. You either buy for investment or to live in, if you merge the 2 you will probably compromise your growth opportunity for the investment.
Just buy where you can make money, then when you REALLY have to buy to live in, then sell the investment and you'll be cashed up to buy what you REALLY want to buy, in the meantime, live a good life that is not effected by your investment.
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