All Topics / Help Needed! / First time investor/home ownership

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  • Profile photo of koonskoons
    Member
    @koons
    Join Date: 2007
    Post Count: 3

    I am in my early 30s with a wife and 2 young kids, living in Sydney. We plan to move to Melbourne in the near future because we were thinking of buying a place, preferably a 3 bedroom house. I have $40-50k available, no debts, family income of around $110k before tax. We are eligible for first home owners grant.  We can pay up to $3000  a month to fund loan repayments.

    Do we:

    1) Buy a 3 bedroom house in Melbourne around $350-400k as our home? (making use of the FHOG).

    2) Buy an investment property and rent a place to live. How much to spend on investment property? ( I will lose FHOG)

    3) Buy a home (2 or 3 bedroom) and stay for 1 year, then move out so that the property becomes an investment property.

    From reading some books/internet, it would be wise to have an investment property rather than to stay as the 3 bedroom house will definately be negatively geared. And i can save some tax.  Or should i plan to buy a smaller place for around $200k for investment and free up some resources to buy another investment unit later on.
    I am only halfway through Steve's 3rd book (haven't read the first 2 books). But from what i read so far, it's better to have a +ve cash flow investment property.

    Please help. What would you do if you were in my position.
    Thanks.

    Profile photo of letlet
    Participant
    @let
    Join Date: 2007
    Post Count: 10

    Hi koons,

    If I were in your position…  I would take the FREE money from FHOG, live in the property for 12 months as required in vic. (This property can always be sold). Renting ??? may be an option if I couldnt afford to buy but thats only waisting money in my veiw. The IVP sounds  great but without living in it you will loose the FHOG. Also look into all tax aspects as they vary according to your situation. I understand your delema but remember you have to crawl before you walk, also that great things come from equity.  

    Profile photo of koonskoons
    Member
    @koons
    Join Date: 2007
    Post Count: 3

    Yes agree that renting would be wasting money. But if i bought and lived in the house, i would be so highly negatively geared that i won't have much capacity left to do property investment. Will have to take a 95% loan i think as stamp duty already cost $18k approx.
    Unless of course the property's price went up and i had additional equity to play with, then i could start an investment prop.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Just to correct a couple of the facts from the previous post

    1) Is there a minimum time limit I have to reside in the property to get the FHOG?  
    From 1 January 2004, at least one applicant must occupy the home as his or her principal place of residence for a continuous period of at least 6 months, commencing within 12 months of either the date of settlement or the date construction is completed.

    2) You will not loose your entitlement to the FHOG if you purchase an IP first.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    let wrote:

    Hi koons,

    If I were in your position… I would take the FREE money from FHOG, live in the property for 12 months as required in vic. (This property can always be sold). Renting ??? may be an option if I couldnt afford to buy but thats only waisting money in my veiw. The IVP sounds great but without living in it you will loose the FHOG. Also look into all tax aspects as they vary according to your situation. I understand your delema but remember you have to crawl before you walk, also that great things come from equity.

    Welcome to the forum, but …

    you probably shouldn't give FHOG advice so enthusiastically to people unless you know the facts.

    Have a read of the legislation online

    cheers,

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Koons

    I like option 3. But there are other factors to consider – that fact that someone else is living in your home, and the hassle of living in rented place where you may have to move after 6 months etc. Maybe work out how much you will actually be saving by renting the place out and then see if it is worth it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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