Hi
I have been putting off and putting off making a decision to purchase a property for years now (and mainly blame the losses in the stockmarket during the GFC) but have been racking my brains the last few weeks reconsidering it.
I am 31, married with a 3yo and now earning $55k a year (reduced from $90k since pursuing a new career path). I nearly have $90,000 in cash saved up and was wondering how I should approach my first property purchase in eastern suburbs Sydney. My wife works part-time also and earns about $25k p.a.
My purchase decision will be based purely on heart as I want to buy something I like to eventually live in. Currently my family and I are living at my mums house paying no rent. Since we have been here for a few years, I really need to get out. I am currently thinking of purchasing a unit on an interest only loan and renting it out for 1 or 2 years to build up an offset account to reduce the amount of interest I will be charged (plus salary is expected to increase also). Or if things go sour here at home, I will move into the property and the interest payments would be no different to paying rent to someone else – at least I will own this place and if I was forced to sell in later years, hopefully capital growth will help me there.
Does this sound like a silly idea?
Is an IP or PPOR treated differently in terms of stamp duty etc? Could I make out that I intend to buy the property purely to live in and as soon as the purchase is made, turn around and rent it out?
With the RBA likely to cut interest rates further and hopefully the banks passing these on, a fixed interest only loan would allow me to know what my costs are going forward whether the property is leased out or I am making the payments.
Hi Luke
How much are you looking to spend?
I know that the eastern burbs of Sydney aren't particularly cheap so you need to get a good idea of what your borrowing capacity is.
If purchased as an investment property, the rent received from the property will help bolster your borrowing capacity.
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 Jamie
I was thinking at looking for 2 bedroom apartments around $450,000 – $550,000 if I can borrow that much. I was also thinking of trying to save more of a deposit. I can always get the oldies to lend me some cash to park in my offset account also.
I know if I was renting out it would allow me to borrow more but I was concerned about extra charges such as stamp duty if this was my original intention. Are all associated charges with a property purchase the same, regardless of the strategy put in place?
Hi Luke
There is a big difference in Stamp Duty in NSW when buying the property as an investment property and buying it as your first home for owner occupation.
You also have to consider if you purchase the property as your first home you will also qualify for the First Home Owners Grant now rather than waiting until you purchase your own home down the track.
I would be borrowing 80% of the purchase price popping the Grant and the balance of your savings in the offset account.
To comply with the terms of the Grant all you have to do is make the property your prime residence for 6 continuos months commencing within 12 months of Settlement and you can then look to rent the property out again.
On a separate note i have to say i wish i had your confidence that the Banks will contiinue to pass on rate cuts should the RBA keep lowering but i think we might have seen the last cut for a while.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:There is a big difference in Stamp Duty in NSW when buying the property as an investment property and buying it as your first home for owner occupation.Do people get around paying less stamp duty by doing what I suggested or is it not possible to get out of paying more for an IP?
In a general sense, what scenario would result in bigger savings:
1. claim FHOG and less stamp duty and a not receive rental income for the first six months?2. rent out immediately, forgoing the FHOG but also paying more stamp duty?
Thanks
Yes you could comply with all of the Grant conditions, put the utilities in your name and for some reason you were not able to sleep there there at night well so be it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
if im not mistaken, remember that the stamp duty concessions and exemptions mainly apply to newly built homes only.
Check out the NSW Office of State Revenue website for more details. They even have a useful calculator to determine the total cost of stamp duty you should be paying
You should also consider the CGT exemption available for first moving in and then out again – the property can be exempt for up to 6 years while you are absent and you still get to claim all the usual expenses.
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
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