Hi,
My partner and I are looking to buy our first home early to mid next year and are after some basic advice.
Some details about our current situation are :
-we are saving $600 per week for a deposit and will have $40,000 by April 2014
-we are also paying $380 per week in rent
-our combined income is $130,000
-we have no debt and have had no previous loans in Australia
My goal is to start investing in property and slowly build a portfolio of rentals aswell as live in a home of our own.
The main questions I have for you all are:
1) Is it best to approach our banks(Commonwealth & NAB) for finance? Or go through a mortgage broker?
2) Are we able to buy our first home, do some renovations and then rent it out and buy a 2nd house within 2 years? Or will it be difficult to get approved for finance on the 2nd house this soon?
3) Are we best to have an interest only with offset account for the rental so we avoid taxes?
4) Is it beneficial for us to set up the first home buyers savings account where the Government matches interest up to $5000?
5) should we consider buying a small apartment in a body corporate as an investment or are there too many risks?
6) If we aim to own several investment properties in the future is what are the benefits of starting a family trust?
I know these may be difficult to answer without knowing more details about our situation but any advice would be much appreciated.
Thanks, Lyndon
Hi Lydon
Welcome aboard
1. It will sound biased but a broker with experience in multiple property ownership would be your best bet in my opinion. Branch bankers are restricted to the products that their bank offers – most of them aren't experienced when it comes to the intricacies of structuring finances for investors. I know you're asking about your first home – but you need to get it right from the start.
2. It could be possible depending on the amount of equity you're able to access in the first home and your borrowing capacity at the time. It's important to set your first loan up properly in order to maximise future tax deductions.
3. Interest only with an offset is the way to go. I'd actually apply this structure to your first PPOR. However, there's no tax avoidance with this approach – I'm not sure what you meant here.
4. Look into this carefully. Some of these accounts are quite restrictive. You don't want to be in a postilion where you're ready to buy but can't access your cash.
5. Nothing wrong with apartments. It all comes down to what suits your investment strategy. If going down this path – try and avoid apartments in large complexes and be very careful with off the plan properties.
6. Talk to an accountant/solicitor about this. There's too much to cover – and the advice would be different for everyone.
Hope that helps.
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]
Thanks for the reply and advice Jamie.
In regard to question 3 I was meaning if we pay principal and interest off the loan and over time the rental income exceeds the repayments, we will be taxed on the profitable rental income? If the loan is kept as interest only would we purely be relying on the price increase of the house to make any profit as capital gain?
I guess I want to know if it would be better to aim to have the property positively geared in the future and have a rental income + capital…or have it interest only with an offset account and only profit if the house price increases?
Sorry I am an amattuer at this game
Hi Lyndon
No worries at all. Interest only with offset provides the most flexibility. If you're disciplined with money I'd be inclined to keep all loans as interest only with an offset attached to your main residence.
I wrote this article for API magazine that explains the concept further.
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]
Thanks Jamie,
That article has clarified things nicely. I will be getting my partner to read it when she arrives home.
Thanks again
No worries at all – glad it helped.
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]
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