G’day there,
I’m 24, Melbourne, and have saved up 98k, and quickly approaching the big 100,000 soon. I’m fortunate enough to be living with parents, but I work quite a casual job that only really pays 45-50k a year, but allows me a lot of free time to pursue my hobbies.
However, instead of having my money saved up in the bank just gaining petty interest, I was thinking of buying an investment property to rent out. A good area seems to be around the west out near Hoppers Crossing and Werribee or even Melton (which has huge rental populations), where I could get something for 300-550k.
The thing is, I don’t really intend on ever fully owning the property, instead opting for short term. I’d simply like to pay off the mortgage for 2-5 years, and after that, sell the house, pay back the remaining payments to the bank, and leave with a considerable profit.
I make on average 1700-2400 a fortnight, and thus, paying a huge mortgage seems like a nightmare that would mean all my wage goes to that. I’d be happy to pay anywhere up to 800 in mortgage payments a month, as that would basically be the equivalent of moving out and paying rent, and even then, rent money is dead money.
I was wondering if anyone could shed any advice onto my situation, as to what areas I should look into, or what even the fatal flaws with my poorly thought out plan are?
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This topic was modified 8 years, 2 months ago by
stevebuscemi1.
Hi Steve
Every investors strategy for wealth creation is different and if you are comfortable with that approach is sounds good.
Many investors prefer merely to pay the interest on their loans and keep the surplus funds in an offset account in case their strategy decision changes or circumstances dictate and they decide not to sell the property after all.
What sounds like the way forward today might not be the case in 3 years time.
As long as you have been casually employed for a while financing the deal shouldn’t be an issue.
Just ensure your buying and selling costs are factored into the deal and the end sale price covers these.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Steve
Every investors strategy for wealth creation is different and if you are comfortable with that approach is sounds good.
Many investors prefer merely to pay the interest on their loans and keep the surplus funds in an offset account in case their strategy decision changes or circumstances dictate and they decide not to sell the property after all.
What sounds like the way forward today might not be the case in <dfn class=”dictionary-of-numbers dictionary-of-numbers-quantity-94608000s dictionary-of-numbers-processed”>3 years</dfn> time.
As long as you have been casually employed for a while financing the deal shouldn’t be an issue.
Just ensure your buying and selling costs are factored into the deal and the end sale price covers these.
Cheers
Yours in FinanceThanks Richard,
I am more so wondering what the potential risks are in my strategy here? If this is the first house I’m buying, and I’m not living in it, I’m aware I have to pay more taxes or something to that effect? Furthermore, I’m uncertain as to how much profit I’d actually be making in the long run – such is the risk with the property market. I mean, ideally, I’d be looking to use the rent money I’d be receiving from the property to cover the large majority of the mortgage, leaving me to only have to pay an additional $100 – $300 or so out of pocket.
In regards to back up funds in case of an emergency or what not, I’m entirely fine on that front as I have a supportive family, and another account with some backed up cash.
cheers
There will be a difference in the amount of Stamp Duty charged on the transaction and in the case you sell the property at a profit less costs you will pay CGT on the difference.
If you took the loan over say a 25 year term and were only paying the rent received and a top up out of your own pocket to cover the repayments you certainly won’t be paying it off in 2-3 years.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
There will be a difference in the amount of Stamp Duty charged on the transaction and in the case you sell the property at a profit less costs you will pay CGT on the difference.
If you took the loan over say a<dfn class=”dictionary-of-numbers”> 25 year term and </dfn>were only paying the rent received and a top up out of your own pocket to cover the repayments you certainly won’t be paying it off in 2<dfn class=”dictionary-of-numbers dictionary-of-numbers-quantity–94608000s dictionary-of-numbers-processed”>-3 years</dfn>.
Cheers
Yours in FinanceWell, see, I wouldn’t be looking to pay off the entirety of the house in 2-3 years. I simply was thinking that over say 2-5 years, the properties value would increase. And then, I could pay back the bank, and have a remainder to make a small profit from the house itself.
Oh ok all noted.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Steve,
Welcome to this place – you will find it is a good place to be, I’m sure.
I was wondering if anyone could shed any advice onto my situation, as to what areas I should look into, or what even the fatal flaws with my poorly thought out plan are?
It is a smart man who knows his limitations. Yes, there is a bunch to learn, and yes, there are some duties or taxes that apply to an investment that don’t apply to a home. But conversely, there are some Tax benefits that DO apply to an investment, and these DON’T apply to a home. So, lots to learn – but stick around, soak up the information that is free here for the taking, from knowledgeable folk like Richard and many others. The path gets easier as you move along it.
Right off, do have a look here –
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
…. that thread contains many of the early questions, and also some of the answers. Take your time and gradually come to grips with what can be your new reality – as a successful property investor.Benny
As Benny conotated to above it is of vital importance to engage a team of tried and trusted professionals to assist and guide you on your journey.
A good start would be to engage a broker who is familiar with investment property financing. There are a few on here that can assist you and distance isn’t usually an issue with modern technology these days. A good broker who cares about their clients will guide you through the whole process and beyond as we are usually a well connected lot.
Once you have established borrowing capacity which is the first step then you can proceed with an offer on your property subject to finance approval and building and pest inspection reports.
In a nutshell dont go it alone when you have access to good people to make the journey a pleasant and successful one.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Such a short time frame would argue for interest only, given the vast majority of your gains would be driven by any capital moves (rather than “paying off” the mortgage over 2-5 years).
The thread that Benny linked is great, btw.
OscarBravo
http://www.australianpropertyjourney.comSuch a short time frame would argue for interest only, given the vast majority of your gains would be driven by any capital moves (rather than “paying off” the mortgage over 2<dfn class=”dictionary-of-numbers”>-5 years)</dfn>.
The thread that Benny linked is great, btw.Thanks for the reply. What do you mean by capital moves exactly? As I said though, I’m not really aiming to pay off the mortgage over a short period of time.
And agreed, that thread was insightful
As Benny conotated to above it is of vital importance to engage a team of tried and trusted professionals to assist and guide you on your journey.
A good start would be to engage a broker who is familiar with investment property financing. There are a few on here that can assist you and distance isn’t usually an issue with modern technology these days. A good broker who cares about their clients will guide you through the whole process and beyond as we are usually a well connected lot.
Once you have established borrowing capacity which is the first step then you can proceed with an offer on your property subject to finance approval and building and pest inspection reports.
In a nutshell dont go it al<dfn class=”dictionary-of-numbers”>one when you have </dfn>access to good people to make the journey a pleasant and successful one.So, my naivete is quite prevalent here. How would I go about finding a reputable broker, and what kind of payment/fees do a broker usually have?
After doing some preliminary investigation with my family, we’ve discovered a rough borrowing capacity. But, yes, what steps should I take now?
Thank you so much for your reply!
Hi Steve,
How would I go about finding a reputable broker, and what kind of payment/fees do a broker usually have?
Two good ones have already responded to you on this thread. Or, if you preferred “face-to-face”, then you might be wanting a Broker in your city (Melbourne, is it?).
Re payments, “most” brokers will be paid by the lending institute who provides the actual mortgage. e.g. your Broker from here might look at 6 or 8 different lenders, but will choose one over the others for very good reasons. And our blokes are great at SHARING just why they make these decisions. In that way, YOU learn as you go.
In most cases then, the Broker will not impart a cost to you. There can be exceptions though….. just ask away !!
Benny
So, my naivete is quite prevalent here. How would I go about finding a reputable broker, and what kind of payment/fees do a broker usually have?
After doing some preliminary investigation with my family, we’ve discovered a rough borrowing capacity. But, yes, what steps should I take now?
Thank you so much for your reply!
I personally dont charge fees as lender pays me a commission for introducing someone to a new bank or arranging affairs with existing bank, if it suits the clients stated goals, both current and future.
Distance isn’t and issue as I have clients all over Australia and many I have never met face to face. With modern technology these days its very easy if all parties play their part in the process.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Hi Steve I am in the investment property game and the best thing you could do is talk to Colin Rice first about the financing of the property. Then go and select the right property and HOLD, HOLD, HOLD….don’t forget that TIME wins always in property. To buy and sell incurs massive transaction costs that reduce your Return on investment. Hold this baby for every and it will be cashflow positive in no time and allow you to build a property portfolio. Makes this number 1 of 10 properties over next 20 years and by 44 mate you can retire and have a great life….
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This topic was modified 8 years, 2 months ago by
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