Hi everyone.
I'm a new member here, and was wondering if you guys may have any advice for me. I use to laugh at the thought of investing for the future since all i wanted to do was to work and have fun, but now that i am married my perception in life has changed and i want to invest in property so that my family may enjoy a better life in the future. My goal is to do some renovation projects as i go along to provide funds for the long term investment.
My wife and i are in our mid 20s and we earn a very modest $100k between us a year. So far we've only managed to save about $90-100k and we want to buy our first home for about $300k, but the problem for me is that i also want to invest as well. So what would be the best option?
Hello
Why not do both at once. By that I mean buy a house to live in while you renovate it.
The advantages are that you will be able to get the FHOG and if you sell there will be no CGT to pay.Cheers
Elkabuy your home.
This home will probably be modest and like many couples you will prob upgrade as your family outgrows it. Or you will move chasing opportunites. It would be quite a minority who buy a house for their whole life as my grandparents did.
So planning for this I suggest you buy with a 20% deposit. Get an IO loan and put your savings into an offset account. Continue to save in that offset account.
So you now are a bit more experienced. If you still wish to invest in an IP then start looking for one. I wont discuss what to buy, that is up to your research.
Buy this next IP with a 20% deposit. If your PPOR has risen in value then draw this deposit and costs from an LOC or split loan attached to the PPOR.
If it hasn't risen in value then reduce the PPOR loan from your savings and draw your IP deposit from the LOC or split loan as described above.
Repeat.
The object of the above is to maximise your investment debt.
Your PPOR debt is virtually reduced via the offset but you have preserved the PPOR loan so that when you do upgrade to another home you can use the offset savings to fund the new PPOR deposit and retain the maximum loan against the exPPOR which is now deductible.
Too many folks end up needing to sell their first PPOR as they had followed the old advice to payout the home loan ASAP. Having done this they now have all their equity tied up in an IP and a large nondeductible debt against their new PPOR.
There are other ways to tweak this strategy but this is where I would start if I was in your position. This strategy can be used for other investments such as shares or managed funds. Don't discount these out of hand as many property investors do.
I have a longer article I wrote on this that I can email to you if you like.
Cheers
Good advice from Richard as usual.
Just a small tip; I wouldn't refer to $100k income as 'modest' and 'we've only managed to save $90-100k'.
There are many people who are not as well off as you and might take offense to that. You are actually in a very good financial position for your ages.
Hi there
am new to this – someone please tell me what FHOG, PPOR and LOC means
Thanks
LGLynette Greig wrote:Hi there am new to this – someone please tell me what FHOG, PPOR and LOC means Thanks LGFHOG = First Home Owners Grant
PPOR = Principle Place of Residence = Home as opposed to IP or Investment Property
LOC = Line of Credit = a flexible type of loan run in a similar manner to a credit card
FHOG – first home owners grant, generally $7K but different states may kick in a bit more (check up on latest rules), also on offer is the stamp duty exemption up to a certain $ amount, again check the current rules.
PPOR – principle place of residence, this is where you actually live, ie hang your toothbrush, not just where you intended on living. What I mean is you cant live with your parents and have an IP that you claim is your PPOR when it comes time to sell it.
LOC – line of credit, a loan to a certain amount secured against an asset, such as your PPOR. The idea being that you have access to quick funds should you find a good deal without the need to go through the time delay of application. A great tool when used cautiously, however, be aware of the temptation to use the "free" money for non essential items and thereby increasing the amount you owe on your PPOR.
Hope that helps
TammyDon't forget;
I.P – Investment Property
P.M – Property Manager
I.M.H.O – In MY Humble Opinion
W.T.F – What The Fu*k?WOW…all the advice are very welcoming. Thank you everyone. I will try to do some more research on what you guys have told me.
Hi. Simon Macks. It would be awesome if you would give me some info on that article.
Tammy: Thanks for clearing things up
Marc: Well thanks to my wife as she is a very good saver, since i used to spend a lot a few years ago but now have changed my ways
. L.A Aussie wrote:Good advice from Richard as usual.Just a small tip; I wouldn't refer to $100k income as 'modest' and 'we've only managed to save $90-100k'.
There are many people who are not as well off as you and might take offense to that. You are actually in a very good financial position for your ages.
Ah; sorry folks; this should say "Good advice from SIMON".
Too many Margueritas.
Mortgage Hunter wrote:buy your home.This home will probably be modest and like many couples you will prob upgrade as your family outgrows it. Or you will move chasing opportunites. It would be quite a minority who buy a house for their whole life as my grandparents did.
So planning for this I suggest you buy with a 20% deposit. Get an IO loan and put your savings into an offset account. Continue to save in that offset account.
So you now are a bit more experienced. If you still wish to invest in an IP then start looking for one. I wont discuss what to buy, that is up to your research.
Buy this next IP with a 20% deposit. If your PPOR has risen in value then draw this deposit and costs from an LOC or split loan attached to the PPOR.
If it hasn't risen in value then reduce the PPOR loan from your savings and draw your IP deposit from the LOC or split loan as described above.
Repeat.
The object of the above is to maximise your investment debt.
Your PPOR debt is virtually reduced via the offset but you have preserved the PPOR loan so that when you do upgrade to another home you can use the offset savings to fund the new PPOR deposit and retain the maximum loan against the exPPOR which is now deductible.
Too many folks end up needing to sell their first PPOR as they had followed the old advice to payout the home loan ASAP. Having done this they now have all their equity tied up in an IP and a large nondeductible debt against their new PPOR.
There are other ways to tweak this strategy but this is where I would start if I was in your position. This strategy can be used for other investments such as shares or managed funds. Don't discount these out of hand as many property investors do.
I have a longer article I wrote on this that I can email to you if you like.
Cheers
Simon I would like to read that longer article you have written on finance if that's ok. Thanks
I'm like the universe at the moment trying to expand my knowledge every which way I can.Hello,
Another option to consider is "…renting where you want to live and buying where you want to invest…"
The reason behind this is that the area that you live in may not always be the best place to buy in the current market.
If this ideology does not appeal to you then I suggest going down the obvious path of buying your first home, then borrowing against the equity to buy a 2nd investment property.
Kind Regards,
Mark Leith
Property Advocate
Global Buyers Agent
http://www.buyersagent.com.auWould I be able to get a copy of that article aswell Simon.
Chris
I can only send it to folks who email me
I cannot message you and attach it via this website.
Ciao
What would be the benefit of renting as your Primary residential address while buying a property to invest? The way i see it is that you are loosing your money with rent while having to struggle to pay for your mortgage. Can some one explain this to me?
Also I don't know it this is good or bad news, but my parents in law have offered us their old weather board house in Box Hill for a good price i think. The thing is it we won't be able to move in until maybe end of 2008 early 2009, while in the mean time we are still renting.
Can i ask would it be better for us to buy another house now to live and sell later in 2008-2009 while knowing that we may have the house in Box Hill in the future to settle down for maybe another few years until we can rent it out?GetRichOrDieTrying,
if you have plans on buying a property to live in within 2 years why not just save as much as you can in the place you are in right now, by the time you buy a place, pay all the fees and charges and mortgage repayments you will be worst of then if you just saved the difference between your rent and your future mortgage repayment.
just remember that rent or mortgage interest is just dead money so pick the lesser of two evils for the time being.
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