24 year old first property

Hi Matt

I agree with your friend. A complex of 60 means you will always be competing against several other properties that are the same as yours, whether you be trying to rent or sell your property. That means your property will have no point of difference, which tends to result in discounting.

Capital growth is important as it helps you leapfrog into additional properties sooner through equity release to fund deposits on the next property, and the next. However if you cannot afford to hang onto property number 1 (due to low yields or lots of vacancy) then you may not be able to afford to hang on while hoping for the growth.

So ensure you can afford to hang on for the ride. If this will not be the case in the suburb you are looking at, then you either save a bigger deposit, find a huge bargain, or hunt in a different suburb.

Remove the words “hope” and “hoping” from your plan and deal with cold hard known facts instead.

The anxiety you are feeling might not actually be anxiety, but a discomfort with reconciling with the fact that academically, you know that the plan you are considering does not stack up. Revert to facts and let them guide you.

The $20k won’t be enough to fund a 5% deposit and stamp duty and solicitor fees and building and pest inspection, so take a look at what these fees are likely to be to understand your goalposts. WA stamp duty rates are here: http://www.finance.wa.gov.au/cms/State_Revenue/Duties/Rates/Rates_of_Duty.aspx

Hi Matt,

The reason why I’m thinking of paying Principle and Interest is because I want to have an LVR of 80%, then change to interest only.

In that link I added last post, DO be sure to read the reference to Offset Accounts as well as the Do I pay PandI or IO?

See, Offset Accounts can have you effectively “paying off 20% of your Principal” without actually paying it off !!! It is neat, and is a very important concept to be familiar with.

Happy reading,
Benny

Hi Matt,

As mentioned, on a $350k property you’ll need a larger deposit. The stamp duty in WA will be $11125 if you’re going to rent it out, but is only $390 if you use your FHB, so that will make it worthwhile to look at.

Buying costs can be around $3000 for legals and inspections so you’ll need to budget for that too.

You’ll need a minimum of 5% of the purchase price as well, but I would recommend saving at least 7% as it opens up many more lenders. At 5% you have a choice of 2 lenders and you’ll need everything to be perfect to qualify.

Also, make sure you look at all the other costs involved with apartments (and houses too for that matter), like body corporate, insurances, rates etc. These things can add a huge cost and ruin what you thought was good cashflow.

Matt wrote:

Regarding your view on the large complex, if the flat is renovated with a newer kitchen etc, would this be more advantageous in your opinion if you were searching for a tenant?

Not necessarily. In a complex of 60, you won’t be the only one with a newer kitchen. Also sometimes tenants prefer a lower priced rent even if it means a brown kitchen. In this regard some times it is harder to rent out shiny new things.

Matt wrote:

When it comes to looking for a suburb to look in, so there an industry technique or standard that good investors tend to use to find it, then once they’ve found it, what’s best? A Unit or a house?

It depends on your local tenant market and what it wants.

Matt wrote:

If I move into the property for 12 months as a first home buyer, will this remove the fee’s you mentioned before? (I’m trying to understand the tax implications that might have at this stage also.

You can never get out of paying solicitors and building and pest guys. As to whether stamp duty would be payable or would be discounted to you would depend on the legislation (at time of purchase) in the state in which the property is located.