Hey all. I have recently finished reading Steve’s book “$1,000,000 in property in one year” and decided to check out this website. I have a quick question to ask…
I’m 21 and recently entered the workplace and am starting to save up money for a house. I’m still living with my parents for the moment and therefore have minimal expenses. I am having a hard time deciding between 2 options.
1. Save up enough for a deposit for a house that I want to live in, and get in there ASAP.
2. Save up enough for a deposit on a positive cash flow property that I could rent out and pour my money into that for a while. Considering that the house will be paying itself off I could still continue to pour in a decent amount of my weekly pay into it as well to build up a decent amount of equity.
Living at home doesn’t really phase me, so the thing that will ultimately enforce this decision will be purely financial as I aim to get out of the workplace as soon as I can. It didn’t take me long to realise working a regular 9 – 5 job was “not my thing” and that I don’t want to do it for another 40 or so years.
Any help, ideas or tips would be much appreciated. Thank you.
Hello.
I can’t say what you should do as only you can make that decision. I can, however, advise you to sit down and actually do the numbers – that is, work out exactly what each of these options will cost you to start out and to maintain over the long term. The bottom line may very well make your decision for you.
For example, when faced with a similar decision my wife and I did the numbers and discovered that even with a CF- Investment Property (IP) we would still be $40-50 better off per week AFTER TAX if we stayed renting than if we were to buy and live in own home.
You could also consider buying your own place, living in it for a year to take advantage of the New Home Owner’s grant and reduced or lack of Stamp Duty (depending on where you buy) before renting it out to someone else to enjoy the tax breaks and rental stream.
Also, take a look at some of the older topics in this forum (do a search for some key terms) as there is a wealth of info there for the upstart investor. Don’t be afraid to ask questions and don’t be discouraged if you ask them on this forum and you don’t get answers. Sometimes the right peopl aren’t watching at the right time.
Finally, READ, READ, READ. Use other people’s experience to your advantage!
All the best,
Art‘Great spirits have always encountered violent opposition from mediocre minds.’ – Albert Einstein
If you want to fast track your investing and get out of a 9-5 scenario you have to not buy your own home. saving and pouring money into your residence is much more difficult maonly due to lack of tax benfits in different areas. Could be different if you are only planning on living there a short time and taking advantage of the FHBG
Option 2 over one every time at your age!!!.
but…. don’t spend less time choosing the investment property just because it is an investment. If I was in your situation I would try and find a mid yield property in an area close to your home that families are moving to. Try and buy somewhere where people actually want to live.
Probably a good idea to be close to the first few. Take your time and get the best possible deal on each property that you can achieve given your level of skill and the vendors level of motivation.
cheers
I Buy Property http://www.cashflowproperties.co.nz
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
definately agree with DLPP.
option 2 sounds like the way to goJoshua
Investor Finance
[email protected]I would go with a mixture of the two options. I would buy somewhere to live for a short time to get access to the FHOG, livie in it for at least 6 months and then move back home and turn it into a rental. If you do your sums I think you will find that you would be quite a long way ahead after 6 months as compared to if you bought a property and rented it out straight away.
Regards
AlistairWow so much great feedback. Thanks everybody.
Yea a few days after I posted I was talking to a friend and they also suggested that I could live in the property for 6months to take advantage of the FHBG, or I could even just change my address to there but remain at home with my folks and use those 6months to do any outstanding repairs and minor renovations (minor so that I don’t break the bank [biggrin]). Thanks again guys for giving me something to consider while I am amassing my cash for a deposit.
Originally posted by balkanwarrior:or I could even just change my address to there but remain at home with my folks and use those 6months to do any outstanding repairs and minor renovations
Would this count as actually living there?
Is it legal?
Hmmm? food for thought for me.Buy an old dump. Change my PPOR to that place but live at parents. Fix the crap place up. Then rent later. Hmm, i could do this with a smaller deposit(or try a more expensive suburb and a crap house).
Guys, can we have more feedback regarding this one point about staying at home but having the property have your name as living there.(while you repair and get ready for tenants).
Pritty sure it aint EXACTLY legal, but nothing really stopping you from doing it. Wanted to move out, got a house with FHBG. After a few months realised that you bit off a bit more than you could chew so you moved back and rented it out.
ATO would prob screw you if they find out… but then again why would they have any reason to scope you out?
If you want to know if it is legal, why not just ring up the ATO. They make rulings on these sorts of things and sometimes it is in the taxpayers favour.
Todd Burns
http://www.freepropertyhelp.com.auAt your age my advice would be to have fun.
Hello balkan warrior
The thing about staying with your parents while saying that the new property is your PPOR is a bit tricky. The ATO has “tests” to see if in fact a place is your PPOR.
Things like :-
whether you have moved your personal belongings into the home
the address to which your mail is delivered
your address on the electoral roll
the connection of services (for example, phone, gas or electricity)In your situation I would set up at least a bedroom in the house and make sure I met the above “tests”. Anyway if you are renovating you will find it very convenient to sleep there sometimes.
The big plus with using the property as your PPOR first and then as an IP while you move back in with your parents is that you can rent it out for up to 6 years without being liable for CGT.
Cheers [smiling]
Elkahi – just wanted to add to this point made by art
Finally, READ, READ, READ. Use other people’s experience to your advantage!DO, DO, DO! This may not mean actually buying homes but get out there away from the PC and meet people.
cheers
I Buy Property http://www.cashflowproperties.co.nz
Cash Flow PropertyDon Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
DO, DO, DO! This may not mean actually buying homes but get out there away from the PC and meet people.What people do you suggest I meet with to build my knowledge??
Hey, I’m in a pretty similar position mate. I’m the same age, but I NEED to move out with my girlfriend in the next couple of years.
It’s a huge toss up to either invest in smaller IP type properties now, and sacrifice the FHBG, or save up for a bigger deposit, and buy your PPOR with the FHBG. Passing up the grant, and more importantly, the fact you don’t have to pay Stamp duty, is a big call. It’s a lot of risk free money you’d be throwing away. On a property worth $500,000, FHBG equates to around $30,000!
At the moment I’m leaning towards saving for a couple of years, utlising the FHBG, and buying my PPOR first up. At least this way you’ve utilised the benefit the government is willing to give you, and you still have plenty of options. If you wanted to sell in a years time, and rent a place so you can use your original property as an IP, you can. Alternatively, it may force you to find other ways of generating cashflow….
Doing this also allows me, at least, to enjoy life while I’m still young. I still have the money in the bank to spend if I decide to travel, or whatever. There’s also no huge obligations to banks or lending companies! At the end of the day, you only live once, enjoy this life how YOU enjoy it most!
As Rob Kiyosaki would advise, pay yourself first, and everyone else later. Never say “I can’t afford it”, but rather, ask “How can I afford it?”
There are ALWAYS option, no matter what situation you’re in. [biggrin]
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