My partner and I have never purchased a home let alone an investment property. We currently have $350k and are looking at purchasing our first investment property. We have found a couple of properties and I have put them in a property analyser and looked up stats on realestate.com.au. The rental yield for the area was 5.1% and capital growth was 5.7%. They were both CF+ of around $250-$300 per week after costs.
But what next? What are the steps we should take next in order to make sure we’re not buying something that we may never make money on? Or is there a website that someone can suggest that takes you through the processes you should follow.
Some basic questions I have are.
1. What is the minimum rental returns we should look for? Same with capital growth?
2. Any problem with buying a house currently not leased and then leasing it out? Will the RE be honest with expected rental returns?
3. We currently pay rent where we live of $350 per week. Should we perhaps be buying a PPOR instead to save on rent? (Only problem there is her daughter is in school and we can’t move out of the area and houses there are up over $500k so out of our price range.)
4. If we buy a property that could do with a spruce up should we do this first to increase the rental return?Sorry if I’m asking basic questions and if this forum isn’t for noobs like myself. But if you could point me in the right direction that would be great.
Looks like you’ve done some good research there Troy but how does the properties that you have narrowed down fit within your big picture? Some things to consider is why are you wanting to invest in property? What are you hoping to achieve our of it and what kind of purchases do you need to make to enable you to reach your goals.
In answer to your questions:
1. Short answer is ‘depends’. The minimum rental return for a blue chip inner city property would be different to a regional property. Same with capital growth. If you are willing to accept a low rental return is that being compensated by a high capital growth figure?2. No real problem. You may be faced with a vacancy period but you can start to advertise the property for rent during settlement. RE agent will probably inflate the figure. It’s you who should know how much it will rent for which you will find out during your research. Also worth chatting to property managers in the area
3. Advantage of renting is, like in your situation, you can rent where you can’t afford to live and then invest elsewhere. That way you’re maximising your tax deductions
4. If you do renovations pre tenant vs after letting it out (in between tenants) it is treated differently tax wise so it would be worth getting tax advice on it. It would depend on what state the property is in and how livable it is.
Hope some of this helps.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hiya Troy
How are you structuring your loans? have you talked to a decent finance person about borrowing capacity, structure, etc? $350k is a lot to play with – and could be leveraged quite far with the right plan in place.
Your finance person should also be able to advise on the purchasing process – they should be able to recommend allied professionals too such as a local solicitor and accountant (if needed).
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]
Thank you both for the replies. As far as the loans go we dont need to borrow for this property. Originally we were looking at borrowing $100k and getting something around $400-$450k. And this is where it gets complicated……the settlement money is hers, But my partner cannot get a loan whilst unemployed and on Newstart, and she hasn’t found a job yet. I work and could put my name on the loan but it’s her settlement and things get complicated. My name is on a loan for a property that has Her name on the title.
Until we actually get married we thought it better to keep things seperate.Another option we considered was she buys the investment property in her name and I buy our PPOR in my name as I am eligible for FHOG. Then years down tbe track when we’re married etc we worry about addng each other to the titles of the other house etc.
BTW I’m 46 and she is 50.
Hate to say you wont be eligible for the FHOG as you partner has purchased before.
Won’t make any difference if you buy the PPOR in your name or not.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
But if I brought the PPOR in my name how would they know she even exists. We’re not married or anything. Then a year down the track we would put her name on the title as well.
Doesn’t matter if you are married you mentioned she was your partner.
OSR use a different measure to gauge your suitability but still fraud is fraud doesn’t matter how you spell it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
But we don’t live together. She’s just my girlfriend. We’ve actually broken up before for a few months. Hypothetically Say I was to break up with her then buy a PPOR using FHOG and then We get back together a few months later and she moves in? Surely a partner is defend as either living together or a defacto relationship?
Hm, say you were to get caught for fraudulent claiming of FHOG.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
What I would like to know is how can someone have $350k to buy a property and still be claiming newstart.
That to me sounds fraudulent.I’m not saying I would do it, I’m just asking how do they determine what a partner is? To me if you were living with someone either married or in a defacto then that’s a partner. But they can’t consider a girlfriend that you don’t even live with as a partner? Or do they?
@ Brian..she only just got the money as her settlement, in fact it’s still In trust so she doesn’t have it yet.
She will have to declare it when it’s in her bank account and she has her next centrelink appointment. And from what I’ve read centrelink only adjust your payments based on the interest you earn. And they give you two years to buy a property before they look at the lump sum payment. Otherwise all these single mothers who get divorced and get a settlement would never be able to buy a house if centrelink stopped their payments as soon as they received their settlement. They would have to spend it on living costs and it wouldn’t last long.
So no fraud going on at all.
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