Hi Guys… I am in a real situation at the moment , the thing is my Mom has just given me 250K to buy my frist home . She doesnt want me to take a Loan out cause she says banks are bad. My mum says that I should buy a 3 bdr house with LAND like a backyard , not far from Melbourne CBD close to all amenities for myself then later on after 12 months rent i2 rooms out , or subdivide the property …
What Im confused is if I go with what my mum says then, the 3 bdr house with big backyard In St Albans is costing around 400k, for that ill have to take a loan out for 150k which will take me around atleast 5 years to pay off with my mums help of course .
Instead If I buy a 2 bdr apartment close to the city costs me 270k, and take loan out for 150k to buy a IP
Or, should I buy the 3bdr with 100-150 k deposit to buy the 3 bdr house and use the remaining 100k to buy 2 IP by depositing 50 k each
Im very confused as to what to choose and what not….. Please if anyone had this sort of sitution can you please tell me what did you do or could someone with experience and knowledge help me . Please…Kind regards
Ash
Ps: my long term goal is to own as many properties as possible and rent em out
If I where you I would put 25,000 into Silver/Gold and put it in a safe
Then i would take the rest and buy a undervalued nice and fairly new 2br apartment close to CBD which has a minimum of 8%+ yield before adding your 225k deposit.
I believe property at the lower price range such as cheap units are a better alternative in the current Melbourne environment as these propertys will generally have a higher yield and being cheaper they will be affected less by falling property prices.
You could leverage yourself much higher then this and buy many property's, But leverage is a double edged sword and can work against you, you are somewhat safer imo by being much less leveraged while your still uneducated. Personally I don't really believe in massive leverage.
Then I would wait for the Melbourne housing market while it continues to deflate.
While this is happening I would take 6 months to educated myself on building wealth/property investing, Books are much better value, You can get a lot of books for $300. Many seminars are more expensive then this…
Some good books:
Anything by Robert Kiyosaki, Start with Rich Dad, Poor Dad
Money Secrets of the Rich: Learn the 7 Secrets to Financial Freedom Steve Mcknights books are fairly good reads.
The richest man in Babylon
Education is more important then anything, You need to educate yourself if you wish to prosper
But that's just my opinion, And others on this site might have a totally different view.
your young and got time on you hand…but the house and land….the unit would not give you a good return in term of capital growth generally speaking.
Land all the way! a great foundation property, my first investment was a place with land—and it has paid off 7 years later; all my Ip now usese this foundation property as it’s “base” for equity release and funding etc…
So really if you can afford land + the repayment is not going to kill you then choose land over unit anyday.
Also note a $150,000 mortgage is going to take longer then 5 years to pay off most of the time, also do you work? and is this place for a IP or PPOr?
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
First take some legal advice. There are a number of strategies you can do to protect the money and some strategies for future tax savings. You can still have access to the money too.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
HI guys thank you so much for replying back … I really appreciate your help and guidance… I spoke to my Mum , and she still wants me to borrow as less i can for my first house or just buy it outright so that we are not paying a lot of interest to the bank ..
But what I want to do is buy a small unit a 2bdr around 250k, with 100k deposit and take 30 year loan , and leave the remaining in a offset account and use it later as I want to buy land in the new estate that will be released in 2014 in Maribyrnong and build my PPOR there and put the first property on rent . DO you guys think what im trying to do is Sensible and a good strategy .. ? this is where me and my mum have an argument at ….
Im 25 single .. got a permanent job for 48k, can borrow upto 250k , no Debt at all .. except for a 5000k credit card .thanks heaps guys .. appreciate you sharing your knowledge and experience
What would happen if you enter into a relationship and then it ends with the other party claiming your mum's gift?
Make sure it is properly documented as a loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What makes sense and to us may not apply to your directly. Every situation is slighty different- Ie if i bought the place and my mum (who gave me the $$$) will be complaining everyday and hate me for it; then i will not go ahead with the purchase even if it makes financial sense.- To me Family first money last….there are more then 1 Strategy to make money- and no matter what you choose it will be a gamble to a point.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Also, if you are going to buy a new PPOR in the future then you will want to make sure you are able to free up as much cash as you can for that purchase. If you place all your cash into this one then you will be worse off with tax.
A way around this, to a certain extent, is to borrow 105% for this one including costs. You could borrow 80% off the bank and then the 25% off your mum. Any extra your mum wants to give you keep in the offset account – make this loan IO too.
Then in 3 years time you can get this house revalued and refinance your the loan you have with your mum and pay her back. The interest on your new increased IO loan for this property should all be deductible as it would all relate to the property.
Then your mum will have the cash to re lend or gift to you to buy the new PPOR.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
HI guys thanks for still looking after me… @hbbehrendorff , I would really want to buy a 2bdr unit not far from cbd… I am currently getting one like 15k from the city for 200k… which I think is a good deal , what do you guys think ,as if I do go ahead with buying it , how much loan and how much deposit should I put… ? Also I dont know why but I cant get my head around this IO loan idea as my understanding says the House will never be mine as I would not be paying any Principal back… Instead cant I do a P+I loan and get a bit of less cash flow but once the loan is paid out start getting a higher cash flow?
@terry , I really want to do what you say in relation to free up as much cash I can for my PPOR.. However My Mum is Adamant on getting a house with a bit on land at the back , anyways …
Do you guys think what Im doing is right like getting a unit f as my First Home around 200k, taking about 100-120 k loan P + I, then putting The remaining money in an offset account for about an year and then get a second unit with around with around 70k deposit which will be my new PPOR for some time, Put my first Unit on rent , then build my PPOR with a deposit of $ 100k… and put the second unit on rent as well…
Is all that Im thinking possible and am I choosing the right path or am I just dreaming that things are just gonna fall in place…
@ terry what do you mean by properly documenting my loan so that my partner doesnt get a peice of my cake if things turn ugly ?
Thanks people… Youve all been very kind…
Hi,
I don't think you are doing it right and you shouldn't proceed until you do a lot more research. If you do it will be ok, but there are so many ways to enhance it to make it much better.
eg if you buy a unit for $200k and have a $100k loan with the bank, you then later buy a PPOR. This would mean you are losing $7,000 in tax deductions per year. Imagine the compounding effect of that over 30 years.
With the loans from mum I would recommend you do it all properly with properly documented loan agreements and direct transfers from her to you so you could prove it as a loan later on if necessary.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Ash, I am late on the scene hear, but the first thing I think you should do is a little reading on property and investing. Books by Steve Mcknight, Jan Summers are of good quality and not written by people trying to flog their own product. Then find a good licenced credit advisor and possibly a property mentor who can guide you through some hurdles. You sound like you are in an enviable position with parents who are willing to help you and you need to maximise this opportunity. Talk to a number of people, listen to different ideas, read some books and then make an educated decision. What is right for one person is not often right for another and given that your parents are helping you then it is important that they are in the end comfortable with your decision, even if that decision is not the exact one they are thinking of now but a sound alternative that is explained and makes them comfortable. To try and answer all your questions on a short forum would be foolish, you need to spend time and invest in some guidance and eduction to help make the right decision.
For every indvidual opinion ther is generally an opposing one, this just proves that one type of investment does not suit every situation and again, your decision needs to be based on YOUR individual situation.
Good luck.
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