I am currently 23 years old and still living at home, working part time and saving whatever I can. I'm hoping to have my career set by the end of the year and will hopefully be lucky enough to be earning $70k – $150k per year depending on what opportunities come up but I'm being optimistic
I'll also be buying with my girlfriend who is on $70-75k per annum.Ultimately my ideal plan would be this; buy our dream home which will be ~$600k judging by current prices in the suburbs I'm hoping to live and work in, as we aren't married I will hopefully be able to get the first home buyers grant and we'll be approved to purchase the property, both sharing the mortgage 50/50. Then after maybe a year when we'd saved a bit more money maybe buy a property in my girlfriends name (an apartment lets say) which would be ~$300k and rent it out for $400 per week – again judging by the current suburb(s) and rental prices that we've seen.
So what do I need to do to begin? If I find my dream home what do I need to have prepared besides a stable income? I am hoping to build a portfolio of properties as time goes on and maintain them, rent them out and hope that property values increase but my first property would ideally be the home we settled in while we built our portfolio around it. Thanks!
you need to save up for a deposit first, also for potential stamp duty (which ahs now been reintroduced). talk to mortgage brokers, and go house hunting to get a feel of the market – researching on the internet is also good
i would also read alot of investing books to increase education and confidence in investing
How would I figure out what would need to be saved for a property that was $600k? Or is it 10% of whatever the property costs? Are you able to recommend any books? Thanks for the reply!
Hi IDV8
Best to speak with a mortgage broker that deals with investment properties.
You could potentially have the best of both worlds by buying the right property as your first home and adding some value through cosmetic renovations. If the property is valued higher than what you purchased it for – you may be able to tap into the newly created equity and purchase your first IP sooner than you think. Sure beats saving the money
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]
Sorry to put a dampener on you but you don’t mention your risk profile. You are looking at going from zero debt to around $800k in no time, no mention of kids which will reduce your g/f income.
Although many would say go for it, I’d be looking at one thing at a time. PPOR, you would probably want least risk here, so a 20% + deposit is warranted, which still means a $500k mortgage + furnishing + ongoing costs.
IP 1 may be a little way off yet.
Remember, it has taken years for your parents to get into their current situation, so don’t expect everything overnight.
IDV8
I agree with IP Freely,
Why is there such a need to buy your dream home know????
im only 27 and i have allready almost paid my own PPOR off and sold my other investments as well.Plus when you first move out your first year there are so much out goings its not even funny at all.
so take into account the bills, living expenses and plus what if you can get a job that pays so much in these tough economic times?
cheers
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
A couple of the other people responding on this thread have touched on it already, but my first concern reading your post was your desire for your first purchase to be your dream home…
If you can honestly picture yourself living in this "dream home" until you retire, then go for it – I sincerely wish you all the best. On the other hand, if you can't see yourself living there for 30 years or so and would like to generate wealth, then cast that dream to the back of your mind for a while and focus on buying IP's with ZERO emotional attachment for a few years. Becoming financially free (i.e. waking up one day and being able to afford to quit your 9-5 job if you'd like to) requires delayed gratification.
Stay patient – Rome wasn't built in a day.
I'd recommend Steve's books, also Kyosaki's, as well as Margaret Lomas' books.
Steve and Lomas are more geared for the Australian investor.Also check out this list of suggested investing resources which I recently came across.
Thanks for your replies. Definitely taken a lot into consideration and thought about it a bit more, think the smartest move for me to do would be to aim for an apartment for my first buy then spend a year doing bits and pieces to it to increase value even if its just installing another aircon, new carpet or floor boards would be great and some DIY painting to hopefully give it some character. Hopefully after then I could rent it out successfully at a good price I'm happy with, either buy a house, townhouse or even another apartment and do the same thing until I'm in a more comfortable and secure situation where I can buy my dream home.
Thanks again!
Your’re on the Money now
The key is not to over extend yourself!IDV8, you're on a much better train of thought now! Zimby has hit the nail on the head – don't over extend yourself. If you qualify for a $600k loan, you don't necessarily have to take it, and don't let the banks talk you into it. Of course they want you paying interest on $600k, but if you find the right property at $300 or $400k that just needs a few cosmetic repairs and a quality tenant, you stand to learn just as much first time around with a lower risk profile.
Great to hear
So should my goal be to make the place pay itself off? I mean if I live in it for a year and my mortgage repayments are $400 a week and thats the only amount I can rent it out for, is that how I should look at it? I guess the overall thing I'd like is to be able to pay off my own home comfortably and earn extra income by building a portfolio.If you subscribe to the thinking that capital gains on dream home over the next few years will be low – which from the general description of dream home likely location is probably the case….
.
Then
– Forget about 1st home owners grant
– rent in desired area (at such a young age, and just starting in career – who knows where job / girlfriend will take you)
– buy IPs in area forecast for captial growth (with Int only period for as long as possible)…with at worst neutral cash flow
– place all savings into offset account (DO Not pay down princpal)
– when the time is right empty all offset accounts and buy "Dream home"Why
– Interest on an IP is tax deductible.
– PPOR capital gain exemption is only useful if you actually get some capital growth !! Which may not be where your dream home is.
– To young to be certain about where you want to settle down – for ever. Also In and Out costs are high. If you end up moving, then the PPOR is either sold for very little net gain. OR kept as a sub-par investment propertyAt such a young age you have a couple of choices
1) Delay gratification and spend 15 years (or so) investing, until financially set-up. And then buy dream home – comfortably. With a huge range of life-style choices at that time.
2) Buy dream home, have kids. Face debts etc. for 20 years. Finally pay off home after 20 years, and then be in a position to begin your investing career. With by then good equity in your home, and a good income – but no actual savings (besides home equity)
3) Try to combine options 1 and 2 above. Results will be dependant on IP value vs PPOR value.What you are trying to weigh up is
– Capital gain in area you are looking to buy….If you think it will be good then PPOR Dream home could be a good choice
– vs non-tax deductabilty of interest on PPOR
Also
Rent + Buy IP (Options and flexabilty) VS
Buy (less flexible)Just my 2 cents worth.
Of course a whole range of other personal / lifestyle factors come into play!
Mmm I see where you're coming from – it just seems like paying rent is money down the drain. If I could save the down payment this year then buy something at a desired price range I'll be paying off my mortgage like I would rent anyway except I'd own the place. Like the place that expected $380 a week for rent, I had a quick look at the numbers and it would be possible that my mortgage would be just that much.
My girlfriend and I would want to rent somewhere nice too so we'd be looking at a weekly $500-$600 between us paying someone elses mortgage off. Speaking of which, another question I wanted to ask.. lets say I purchased this place: http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/NSW/Liverpool/?adid=2009455942
Purely an example, how would I make money off of it? Or is it simply rent it out and HOPE you can get more than your mortgages monthly payments for it?
For PPOR compare rent to Interest on loan + Insurance + Rates + Maintenance……If numbers are close then buying PPOR will make more sense. Still pay into offset account – INCASE this house becomes a rental later.
I'll also be buying with my girlfriend who is on $70-75k per annum.
So should my goal be to make the place pay itself off? I mean if I live in it for a year and my mortgage repayments are $400 a week and thats the only amount I can rent it out for, is that how I should look at it? I guess the overall thing I'd like is to be able to pay off my own home comfortably and earn extra income by building a portfolio.
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