Hi all,
I’ve finally decided to take the plunge and start building my property investment portfolio. I have a number of options which I’d like to discuss, as I know there are a lot of successful people in this forum who have probably dealt with similar alternatives.
To provide some background, I’ll be purchasing my first property which means that I’ll qualify for the first home owners grant and will be exempt from stamp duty should I buy a property as an owner/occupier. I have approximately $35000 – $40000 as a deposit/investment capital. Should I purchase as an owner/occupier I’ll prefer the location of Sydney, otherwise the location could be anywhere, including New Zealand.
My options, as I see them, are as follows.
1. Purchase a property (2 bedroom at least) as an owner/occupier at take advantage of the first home owner’s grant and exemption from stamp duty. Use the full deposit amount of approximately $40000. Rent the property for a period (10-11 months) within the first year of purchase to tenants. Prior to the expiry of the first year move into the property to comply with the first home owner’s requirement of occupying the property in the first 12 months. Once occupying the property rent the second (or more) rooms out to receive a small portion of income. Once I have built equity in my first home use that to finance the purchase of other properties.2. Same as option 1 but don’t use the full deposit amount and potentially borrow 100%. Use the $40000 as capital to purchase other properties.
3. Forget taking advantage of the first home owner’s grant and stamp duty exemption and use the $40000 as capital to purchase one or more investment properties.
Option 1 appeals to me more at the present time as it appears that I could save many thousand of dollars from the grant and exemptions. However, I don’t believe that the purchase would be a positive cashflow opportunity. In that respect Option 3 appears to be a more sound alternative should I purchase property with a view to ‘provide a solution’ and sell soon after, hopefully at a higher sell price.
I have so many more questions but feel that I should clarify my starting point first, by selecting one of the above alternatives.
Any help, advice, opinions or suggestions will be appreciated.
Hey Xon,
I think the key question you should be asking yourself is why am I investing?
1. Is it too build a cash flow positive propeerty portfolio and replace work time with cash fro your properties.2. Do you want too take advantage of FHOG, build equity and then develop more cash flow later?
Whats are your goals in property?
With $40,000.00 cash you can definitely make in roads too building cash flow positive property?
When I first started investing I like yourself had a substancial deposit and put it all into the one property? That property has since gone up I sold it and bought four more. Looking back I would have not have put it all into the one property when I started out? Depending on which
market you look at and what deals are available you may be able too purchase some nice little cash +ive earners.
The one question is why are you investing? For me investing is aking money from day one?All the best in your search. If you need any info on NZ Im happy too help.
Gerard
Hi Gerald
Firstly thanks for your reply.
In response to your point number 1, within the next 5-10 years my investment objective will not be to replace work time with income from positive cash flow. Believe it or not I’m quite interested in and passionate about my present career, so much so, that I intend to keep doing it for a while. Ask me the same question in 10 years time and I might provide a different answer mind you.
In response to point number 2, I would like to take advantage of the FHOG, however I am unsure if the FHOG is a good enough reason to purchase a owner/occupier property at this stage. Particularly given Sydney’s current property climate. I would like to think that the money I save through being provided a stamp duty exemption and the FHOG would be substantial enough to warrant considering this option. My basic question is this: is the FHOG and stamp duty exemption a good enough proposition to purchase a owner/occupier property?
I have to start somewhere and is this a good starting point?As for properties in New Zealand, a friend of mine is going over there to search for property soon. Any information that you have as for locations, contacts etc would be appreciated.
Thanks
How longs a piece of string xon?
Some people are passionate about owning their very own place and some people forgo ownership and sign up for multiple Ips and rent the place they live in. It all works in the end.
I personally like the idea of buying my PPOR first then invest second therefore your option 1 appeals to me.
I would purchase a PPOR using the first homeowners grant and the stamp duty exemption. I would then live in it long enough to be classified as your PPOR.
You could continue to pay down as much of the mortgage as possible and later on draw on the equity to fund IP purchases.
Or move out and rent it out. You would be entitled to CGT exception for 6 years. In the meantime if it goes up in value you can sell it without CGT (in the 6 year period).If it was the lead up to a boom I’d forgo a PPOR and buy as many IP’s as possible but we are on the other side of the boom and personally wouldn’t buy IP’s at this time because further price corrections and / or weak CG’s might follow.
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