I am an extreme novice looking at purchasing my first house. I like the idea of trying to secure a positive cash flow investment property, but i dont own my own home as yet. And so i would be renting whilst owning a rental property.
Can this work, or would i be best focused on securing my own home first?
Hi NCN
That was what I did (after a relationship break up) but I did have enough money to cover costs and deposit. Found it was cheaper sharing a rented unit (rent $65/week) than living in the property I had purchased (someone else was willing to pay $180/week to do that). But you would have to check out the situation with FHOG as to get the benefit you have to live in it for a period of time.
Good Luck in your journey.[thumbsup2]
D.B.
Some extra details may help. Paying $200 p/w renting in brisbane. I earn about $45,000 a year, my wife earns about 25,000, so a combined income of $70,000 approx. Taking into account rent and expenses, we can probably set aside 300 – 350 a week max between us for an investment.
I’m worried that i wouldnt be able to afford the loan repayments if a property wasnt actively being rented. But in all honesty, i dont know for sure what monthly repayments would be like for a home loan of $240-250,000. Any ideas regarding that would be appreciated.
I’m thinking looking at purchasing a property in outlying suburbs around brisbane, or areas close to the city with good public transport.
Hi NCN,
Here are the estimated loan repayments based on $250K @ 6.65%
$1385 per month Interest only repayments
$1604 per month Principle & Interest repaymentsYou may want to look at preserving the original debt if you decide to occupy the property in order to qualify for the FHOG and convert the purchase to an IP at a later stage, Cheers.
Regards
Steven Crane
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
NCN
Now you have to look at your situation and consider such things as:
- How important is the FHOG to me?
- How much reading and research on property investing have I done?
- How much deposit do I have?
- How much research or investigation of the area I want to purchase in?
- What sort of property am I looking for?
- How much +CF do I want?
- Etc.
This list of questions can be quite long so that you can make well informed decisions. Therefore you are able to start your property investing off in the right direction.
Richteddy
D.B.There are expenses you can claim on a rental property that you can’t claim on a PPOR i.e.tax on interest, depreciation, & expenses. So paying rent yourself & renting out (letting) your own home can be a good thing to do if you don’t mind living in a place that is not your own. You can download the relevant items to claim on from the ATO. (or see your accountant) I prefer to read it myself just to make sure I am managing things properly. I have an electronic copy if you need one. Just send me a PM. As for buying CF+ in and around Brisbane you’d be hard pushed to find unless you had a huge deposit.It is more likely to be -ve geared against your income. You would still get ahead quicker by renting it out and claimimg expenses and renting yourself providing you are not living in a mansion.It means that both the rent and some of your income can pay of the loan.
Its not a bad idea, often you can rent a better property than you could afford to live in. As long as you are investing your money somewhere, that is what counts. The only question I would have is where do you expect to purchased positive cashflow property.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
I’m also thinking about renting out PPOR and rent somewhere else but it seems like the rent that I will be able to get is similar to the rent that I will pay if I move into renting.
is that some sort of guide to help one to arrive at a better judgment?
my PPOR is 12 yo…max rent is about $2-90 per week and bought at $335K.
renting elsewhere would be around the $300pw mark.
also i have another investment property… any idea?
[biggrin]
I am about to place my home on the market – never thought I’d sell it – but have realised that in order to access some capital, I have no other option. So the short term plan is to sell my home, rent a place, and use the funds to invest in property. This is a big step but I feel I’m making the right decision. I attended Steve’s Masterclass in Perth last month; it changed my perspective on things, and has made me re-prioritise the things that are truly important to me. Has anyone else taken this step in order to realise some capital? How have things worked out?Annette
annette
I was asked this by a solicitor client of mine recently in Sydney.
He rented a quality home in Sydney worth $800k his rent was $460/wk
to pay the mortgage he would need approximately $1200/wk
This meant that by staying put he would have $740/wk less out if his pocket while throwing as much as possible into his investments.He bought a small investment and has made $20k equity since settling in Jan on a 2 bed unit in Woodridge he bought for $100k.
Now with the additional cash NOT wasted on paying down a PPOR he can peel out $16k of his original $20k invested and cover the rest for his next purchase sooner.
How long paying of a ppor do you think without tax benifits and writeoffs do you think it would take you to have enough equity to reinvest in an additional property??
Hmmm, I think I would rent there and buy IP’s for a while.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!Yeah…I think the strata mgt fee is killing me slowly..it has increased quite dramatically over the last 2 yrs. Sell up and rent? Possible strategy.
I think that Renting and investing in property is a great idea. After posting several similar q’s on this site i decided to buy a property to renovate. The plan is to buy it spend 6 months renovating so i can get the FHOG, then rent it out and go back to renting. I have done a bit of number crunching and this looks like it will work out. Espesialy when the property is renovated because i will be able to ask higher rent for it.
In my case if i brought the same house and lived in it it would cost me about $320 per week and if i rented it out for $185 and then rented some where myself for $185. Then the overall cost works out to be about $280 after tax deduction which leaves more cash to invest.
I agree with most of the people here. I had a friend that did what you’re proposing – kept renting and acquired her first property. She’s now up to no. 3 and has her own place as well – but didn’t buy it until after no. 2. The first was cashflow neutral for the first year but then positive. She found that her rent was much cheaper then a mortgage would be, thus giving her cashflow to put into investments.
She’s 50 years old and, never thought she’d own her own home. Just 3 years on, she’s benefitted from the capital growth, she now has 4 Including her own home) and is as happy as a pig in mud. She agrees that she probably wouldn’t have been able to do this had she bought her own place first.
Good luck!
Megan
I totally support investing while renting. It is usually cheaper!
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteHi,
We ae doing a similar thing, bought our first property and moved into it, got FHOG and paid no stamp duty, are renovating like mad and will rent it out asap and either rent ourselves or move into the next one.
By doing this it only cost $5,400 of our own money to buy a $206,000 house which meant we had more $ for reno, so could get it done quicker.
Accountant has also advised that for a period of 6(? can’t remember exactly) years we will still be able to get CGT discount if we decide to sell because we lived in it first.
I’m definately considering renting ourselves again as it’s cheaper and means we can live closer to the city.Katie
Ironhide
I am glad to hear from someone who has done the same. Unfortunatly i am from Victoria so i dont think i can get away with paying no stamp duty it would be fantastic if i could would save up to $7K.
I am very interested about not having to pay CGT. I have never heard of this being the case befor but it would be fantasic if it was the case.
Can i ask what sort of property you purchased and what sort of reno’s are you doing?
I am glad to hear that it is working out for you just hope i have the same luck.
Yeah, it is a 6 year CGT exemption if you don’t move into another property you own. You have to live in it for 6 months though to not lose the FHOG entitlements.
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteI would NEVER live in a property I own unless my lifestyle demanded it (children , fussy wife etc j/k).
MY G/F, best friend and I rent a nice big 4×2 for $185/week (total bargain!).So our share is about $120/wk.
Now I do own a small unit with a tiny mortgage on it of only $75,000, which works out to less than 100/wk in interest.
The thing is that it makes $140/wk in rent – which more than covers the mortgage, and $20 more than we pay in rent. On top of this I can cliam water/council/strata rates and the interest, none of which I could do if I live there.
Not to mention while it is an investment I can jazz it up with airconditioning etc which is tax deductable for any work done – but not if I lived there. I could then move in again later and enjoy the benefits of the upgrades.
===In a nutshell – I you can afford it and it wont adversely affect your L/Style then go for it.
I would go with one of the above suggestions, move into a place for 6 mopnths – do it up then rent it out at a higher rate while you get yourself somewhere else cheap to live. Remenber due to the tax advantages the rent of where you live has to be a fair bit higher than what you make to offset the perks.
<KS>
Is it about the money?
DAMN STRAIGHT IT IS!
TMA
I assume that if you dont move into another house you own then the government is not exactly calling your property an IP and this is why you get the CGT exemption. So yau are saying that if i brought another place to move into then i will have to pay the CGT? because it will efectivly be and IP.
I don’t think of it that deeply. The rule merely states that if you can only have one PPOR. If you are currently renting after moving out of a PPOR, you can still call that property a PPOR for 6 years. If you move into a new home that you own, that is your new PPOR and the 6 years will apply to it if you move out to rent again.
TMA
http://www.email4money.info
Investor Links
First Home Buyer Website
You must be logged in to reply to this topic. If you don't have an account, you can register here.
