Forums / Property Investing / Help Needed! / investment before a home?

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  • Profile photo of chivy76chivy76
    Participant
    @chivy76
    Join Date: 2008
    Post Count: 2

    Hi,

    I'm completely new to this: the forum and property investing, I hope I can find some help.
    I'm a 31y.o single female and after having take care of a few family responsibilities in the past few years, I'm now focused on trying to gain some financial independence and a home by the time I turn 35.
    I'm employed in IT on a long-term contract at the moment with a fairly good pay-rate and therefore, I'm keen to make the most of it now while the contract lasts.

    I currently rent in Melbourne and am aiming to buy a property this year – possibly in the Northern suburbs of Melb.

    I've 10K saved up and should have another 10K by the end of May. I should be able to save up at least 60Kappx by the end of this year (acc to my little spreadsheet calcs that I did the other day!, xed fingers)

    I'm a bit unclear on what is the best course of action for me – here's a dilemma that I'm posing myself:

    Should I use the 20K at the end of May to buy an investment property & rent that out while I continue to rent where we are + pay off the IP and continue to save up any remainder for a 'home' deposit for me to actually live in (which'd probably cost more) towards the start of next year? – ie is this more 'smarter' than 'riskier' or am I taking on more risk with this option?
    OR
    Just wait it all out until the middle/end of the year and just buy a 'home' then?

    Also – does anyone have recommendations on some good mortgage brokers/financial advisers/accountants who may be able to help with more detailed questions as I travel down this path?

    Much appreciate anyone who can help, thanks.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    http://www.sro.vic.gov.au/sro/SROWebsite.nsf/rebates_fhog.htm
    If it is your first home you live in the government may help you with a First home owners grant .
    If you own and live in the home you do not have to pay rent. Any capital gain is capital gains tax exempt.
    Rents are forecasted to increase over the next two years
    see http://news.theage.com.au/rents-to-rise-50-over-next-four-years/20080404-23k3.html

    Profile photo of The ContrarianThe Contrarian
    Member
    @the-contrarian
    Join Date: 2005
    Post Count: 97

    I think the best advice to give anyone about to purchase their first property is to "start small"…

    Think of your first property as a stepping stone to your dream home.

    Since you are on such a good salary… I would purchase in May/June with your $20K, $7K homeowners grant & stamp duty exemption, with say an affordable 2 bedroom townhouse in a good average suburb.

    Whether you rent or live in it will be up to you, however… by starting small, it will:

    1. Get you into the market (to take advantage of capital growth spurts)
    2. Give you confidence with property & learn about the legals, financing, building & pest reports, depreciation schedule (if for investment property), rates / strata, learn how to manage property, etc
    3. Give you a financial "buffer" zone… you can opt to either speed up repayments to mortgage or offset account and/or save a little money on the side for family responsibilities…

    Start affordable, finish strong…

    Profile photo of newbi2newbi2
    Member
    @newbi2
    Join Date: 2008
    Post Count: 227

    I agree with the start small.  For both the IP and the PPOR. If you are willing to get to the "dream PPOR" by going through a few steps, you may find you end up with a nice portfolio of IPs AND a PPOR rather than just struggle with the interest on a dream PPOR with no rental to offset it.

    Also you may like to consider your first purchase being one you can value add to. Even if it is as small as a paint and re-carpet and garden redo. These can be done over a period of time and will assist in increasing your equity faster then the average where nothing needs to be done.

    Just a thought
    Mick

    Profile photo of chivy76chivy76
    Participant
    @chivy76
    Join Date: 2008
    Post Count: 2

      thank you guys:Mick,contrarian,duckester, so much for your advice…it's helped me work through the process…I think I'm definitely leaning towards buying a place when I have my 20k or so done now and more clearer on why too!..
    Contrarian, I agree with the points you laid out as these were sort of 'back of mind' for me too – although I hadn't thought of it as clearly as all that, Duckster – yeah, the idea of increased rent over the next few years makes me think I need to get out of the rent rut ASAP if I can help it!…
    Mick – yeah, I don't mind going thru a few steps and I would indeed like the idea of a portfolio of IPs – my main worry with the 'value-add' thing is that I don't have any experience with properties(other than living in 'em!), let alone the building-side of things – and I've heard some horror stories about renovations that go horribly wrong and blow out costs/time/everything from some colleagues and the upshot seems to be that unless you really know someone in the construction industry don't go anywhere near something that needs reno! – is that just a rumour or wise words for the unwary?…for instance where do I find out how much a carpeting/garden re-do'd cost?…I really like the idea of working on a property as I think it'd give me a chance to put a bit of 'me' in it too – but I just don't want to end up with a 'white elephant' either y'know?…

    Also – may I pick your collective brains on this one: – what do people think about one of those student accomodation places? – there's this place going for 140,000+ located between 2 major uni's + local shopping centre/tram etc
    & apparently returning $9,539pa with CPI rent increase of 3% in 2009 with further options of 5 x 5 year leases. Has anyone got one of these & would they recommend one?…it all sounds great, but not sure if there're some questions that I should be asking?…happy to hear your thoughts, thanks!

    Profile photo of newbi2newbi2
    Member
    @newbi2
    Join Date: 2008
    Post Count: 227

    Hi Chivy,

    1. reno – I agree, if you are not a handy person and not comfortable with the possible risk attached, then give the renos a miss. That said, dont lump all renos in together. It is very easy to replace carpet, the guys in the shop do it for you. Use your current living arrangement as an example. Get a few measure and quotes (no cost to you) and get a feel for carpet costs (types and prices) and overall room/house estimates. If the place you consider has old capret, use it as the drop mat whilst painting. Trust me, unless you have a very bad wall (cracks, holes that need repair etc) then it is a very straight forward, although for me personally monotenous job. But I know others that enjoy that side of it as they plug in the ipod a chill out. If you start small, you will get a feel for it. And besides, it will be your place, you can always paint over it!!!!!!  As for the garden, again, look at your current place, visit a garden centre, think basic maths – lawn size x cost metre square, plants + mulch. Keep it simple, treated pine edges (already straight!), mulch and a few hardy plants come up looking great and easy to maintain.

    2. Student accomodation – can be very worthwhile, but check with the regulations in your state. There are alot of these for sale that I am sure dont meet the requirements for fire etc and as such insurance. It never hurts to run it past you insurance agent. I am sure there are prevuios postings on this forum about this so try a search.

    Mick

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