Hey guys
Im 22 years old and am in my final semester of a mass communications degree in brisbane. I am very keen to get into the property market…
I have no savings, however my dad passed away last year left a large sum of money to my mother (and for us kids when we finish our degrees).
I want to use the money dad left me for a deposit for a home, and will be working full-time in a couple of months (hopefully earning aover 40,000), so want to buy my first property using my first home-buyers grant.Once I’ve put down a deposit on a home and am paying the mortgage, how hard is it to start sourcing out other properties to invest in? I’m so sorry, I’m just starting to learn about all this stuff, and I do plan on reading as many books as possible on the topic, but if I do start to purchase more property and rent it out, obviously the tenant won’t be able to pay off the full weekly amount (I looked at a 250,000 property – which requires weekly payments of about $400 per week, with an interest rate around 7% over 30 years)…. so if I do start to develop a portfolio of property down the track, will I be paying off my mortgage as well as payments towards all the other properties?
I apologise again if this doesn’t make sense.
Any advice on my situation would be really appreciated.
Katie
[withstupid]The answer to your question is “Yes”. Over time though your wages will increase which will mean your PPOR payments will become less of a burden.
Also consider buying your first house as an IP and renting a place to live in to reduce the cash flow drain.
Hi Katie
Affording the repayments is one thing but remember owning a home also has other comittments like maintainance, rates insurance ete etc.
Whilst you might feel you can pay the loan back you will also need to convince a lender on your income you can service the debt. Each lender has its own way of calculating serviceability and the amount you can actually borrow will vary considerably.
As has been mentioned you could always look to buy an IP as your first home with a 95% interest only loan and then use your deposit down the track to put down on your PPOR. You will still qualify for the FHOG and Stamp Duty concessions in Qld.
Loan structure is important as getting it wrong can be an expensive exercise down the track.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Thanks so much for the replies guys!
What I am actually hoping to do is to buy my first home as an investment with my mum. So I will use the First home Buyers grant, use the money dad left behind as a deposit, and take advantage of a finance option like the one that commonwealth bank released this year, called the Family Equity arrangement. It means for first home buyers, another family member can act as guarantor providing security towards a loan and can also provide assistance with mortgage repayments.
That will ease the burden of my mortgage repayments, and it will also help my chances of securing a loan, even if my salary first year out of uni isn’t that high (as mum owns her home, has a high steady income, and has a lot of money in shares etc)
Do you believe this is a good idea? or do you still think I should hold off buying my first property and instead look at an IP?
Any opinions would be greatly appreciated [biggrin]
btw – this website it so great! Its so nice to be able to talk to real people about these issues and also read about other problems etc.. its so nice to talk to other people that are also so passionate about the world of property investing!
Hi, Katie
It is important to understand why you want to get into property investing at the first place. Has there been a reduction in your sense of security, hence you are viewing property as a potential source of security? (Economic security vs Wealth accumulation?)
With that understanding, have a read of ‘Rich dad, Poor dad’ by Robert Kiyosaki and both of Steve’s books. Just a drive for money alone will not see your passion last for property investing, or any other forms of investing.
For example, if I have a goal of achieving $1 million in income-producing assets by the age of 40, then I would look at property investing as one of my investment vehicles, Income-producing (instead of capital growth) Managed funds and even cash savings in internet accounts are also viable options.
Property investing can be quite a commitment in both time and money. You might also want to see how much time / money you are willing to commit and for how long a time period.
Some food for thought. I hope it helps.
Regards
Daniel [specs]Hi Danielle! Thanks for the reply!
Even since I was 12 I started investigating property and reading up on the market…it’s something I’ve always had an interest in…
My plan is to see a financial advisor at the end of this year i but was just hoping to get some information regarding buying my first home (eg: whether its best to buy my first home straight away with all of the extra payments, or to just start in investment properties, and keep renting and saving myself)
I’ve read the Barefoot Investor and also Rich Dad Poor Dad and a few others, but am hoping to read up a lot more in the next 12 months…..
thanks again!Hi Katie
Not trying to be nit picking but i think you might be confusing yourself.
What I am actually hoping to do is to buy my first home as an investment with my mum. So I will use the First home Buyers grant,
If you purchase the property jointly with your mother and she has aleady purchased a PPOR then you will not be entitled to receive the FHOG. If you purchase it as a investment you will not be entitled to receive the FHOG.
A Family Guarantee type loan is not quiet the same. This type of loan provides the lender with additional security by way of a limited guarantee usually on the parents PPOR and enables the borrower to borrow additional funds than maybe originally avaialble due to lack of deposit. From what you have stated deposit does not appear to be a problem.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Katie,
If you plan on seeing a FP then make sure you do so with your eyes open. Maybe see a few.
Few FPs will recommend property. They generally don’t invest in it themselves and their business is selling managed funds, insurances and saving plans to you. That is how most make their money. One that charges a fee for service and rebates the comissions may be more impartial but I still doubt their experience with IPs.
I think they should be renamed managed fund brokers rather than financial advisors [suave2]
Do some more reading and start researching properties. Aim at looking at a lot of properties. I would rather see you buy the 50th property you see than the first. You will be better able to get a good grasp of value that way.
All the best,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Richard
Not trying to be nit picking but i think you might be confusing yourself.
Your not nit picking at all! I love, and appreciate the advice more than anything!
After talking to a few more people, I think I may look at renting next year and just research the property market more and try and save up as much as I can.
That way I can get a better grip on how the market is traveling, and from what I can tell at the moment up in Darwin, it doesnt’ seem a great time to be buying anyway.Simon – thanks so much for the tip! A lot of people have told me to be careful when it comes to FP’s.. [hmm]
My dad has given me an amazing opportunity to have a great kickstart financially, and I would want him to be proud with the way I invest the money he has left to me….
Thanks again guys…[wink2]
Originally posted by Katiebaby84:Simon – thanks so much for the tip! A lot of people have told me to be careful when it comes to FP’s.. [hmm]
I’d second that, but add don’t take financial advice from Real Estate Agents or Mortgage Brokers either. [wink]
F. [cowboy2]
Originally posted by foundation:Originally posted by Katiebaby84:Simon – thanks so much for the tip! A lot of people have told me to be careful when it comes to FP’s.. [hmm]
I’d second that, but add don’t take financial advice from Real Estate Agents or Mortgage Brokers either. [wink]
F. [cowboy2]
Absolutely – neither of whom are licensed or insured to give advice.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
lol, was there a hint of sarcasm in that Mortgage Hunter??
im not experienced in property investing but i have met a fair few FP’s, Mort. Brokers etc as i work in an accounting office, and from what ive seen a good one can be worth their weight in gold. The hard bit is finding a good one. You may have friends who could recommend people to you.
No not at all.
Whilst I might suggest things to consider or even give some generalised tips I would never consider writing a financial plan for a client nor make any recomendations for what a client should be buying.
I just help set up the finance.
As a fellow investor I sometimes chat about what I do …..
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Simon, again you are spot on when you say most FP’s arent worth talking too. I am passionate for property and have a reasonable portfolio myself. What i cringe at is someone going to a bank and being disuaded from property investing and into managed funds, bonds and other asset classes which will gain for them a much lower return and get the FP a great many $$thousands in fees, both upfront and as trail.
I have done my FP course and have my diploma. However I do not suggest for one minute that I would do a fin plan for anyone. I suggest go to a mortgage broker and see what your financial borrowing power is, then determine yourself what you wish these funds directed to.
Richard unfortunately gets offended when I post anything in here and for that Richard I appologise. I will never however, appologise for agreeing with someone when I believe strongly that they are right.
Ask a banks financial planner and 90% of what they recommend are from the banks perspective not yours, ask an insurance financial planner and guess what, you get thier spin on where your money should go. In a class of 43, 38 were mortgage brokers just complying with requirements and looking for the extra commission hit for the Financial Plan.
All im saying is be cautious with everyone you deal with and ask where their loyalty lies.
You can see what I do so im not making any outrageous claims here.
Good Luck with YOUR decisions.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!You need to work out what your end goal is. If you live in the house you will get a capital gains exemption as a PPOR where as a rental property investment will incur capital gains tax.
( when will you be selling it in the future)
An investment property can be paid off a lot quicker than a PPOR home and expenses incurred are tax deductible where as PPOR doesn’t allow anything to be claimed. You may wish to consider starting off buying a cheaper investment like a unit and trying to pay it off or at least get it paid off to a point where it is positively geared as soon as possible. Once the investment is not costing you to hold on to it you can then buy another one and do the same thing. PPOR stands for Principal place of residence. If you can stay at home until you have achieved a positive situation you would be financially better off. (be aware of maintance costs that can occur suddenly)This is general advice rather than financial advice as I do not know your goals, risk adversion, and financial situation and I do not have a licence to give financial advice even though I have done financial planning at University as part of my Bachelor of Commerce degree..
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