Beginner

Well yes except for the negative gear bit. If you do a good job on the reno you should be able to achieve neutral to positively geared.

I disagree with this being the "best" idea. You lose a lot by selling. If you buy, reno and revalue you can extract the equity to buy your next one, thereby retaining an asset that will appreciate (above the equity you have just created) AND have your deposit back to buy again. With this strategy you can keep on buying AND holding. Repeat, repeat, repeat.

Jake, I have re-read your first post. My apologies .. i was reading your post as someone who is going to use your carpentry to work your way into development. My apologies .. i have read a bit too much into the statement.

You want to use the FHOG grant wisely? Just remember that its used to get someone in and really exists to offset the stamp duty on a property. Its not going to be much benefit otherwise. The only time it really comes into being more to you is when the property is of a lesser value in which case the FHOG doesnt just pay for the stamp duty .. it contributes to the property as well.

The smartest thing i can give you for advice on buying your first properties .. either for investment .. living or using the FHOG is .. buy as much VALUE property as possible for your coin. Unless you are on an executive income to start with .. you'll be initially limited to around the 200-250k for borrowings from the bank. As you might guess .. that wont go very far in the current metropolitan area. If you feel you can take on an 'improver' do so. The whole idea since you are looking for a PPOR to start with is to get the maximum out of it. So look for a property you can add to … use a backyard and subdivide … a 2br you can extend cheaply to become a 3br .. something where you and your skills can provide the additional value to make it something great. Because thats the idea in the end, after a year of living in the property you can assess from that point on whether you rent it out (renters will wear out your property) or go on to sell. As your PPOR its going to be CGT free (there are conditions) but if you are looking for a base to start an investment plan .. that works great.

Jake,
As a most of the investors on this forum will tell you, receiving tax benefits should really be seen as an added bonus of your investing, not a reason to invest.
If you use negative gearing, you are required to pay the shortfall between the rent and repayment using your after-tax dollars. Although this can give you solid deductions at tax time, it also limits the number of properties you can purchase because eventually banks will not lend you any more money due to servicability (your ability to repay the debt) factors.
Hopes this makes sense

Hi Jake

Welcome to the forum.

You’re at the right place. Keep asking questions and carrying out your research. You’ll be offering up your own opinions in no time!

All the best with the investing.

Cheers

Jamie

Hi Jake,

Just want to congratulate you on being a young gun – only 20 and getting your Builders Licence – awesome. 

We are bit longer in the tooth than you (but not old enough to be your parents!) but similar background.  My partner Carl is a Builder (Carpenter by trade).  Our strategy is a mix of build & sell, build & hold (rent out) and buy existing / renovate & hold (rent out) – with development on the same block where possible (ie., buy an old house on large block, reno and build 2nd dwelling at the rear).  Our sole goal with the build and sells is to generate income to enable us to increase our long term property portfolio.  You may be surprised but very few Builders actually have an investment portfolio – many just see the lights of the quick development dollars and thats where it ends.  Our sell developments are the equivalent to someone else's job – they are the fuel for the whole engine, in fact we have done almost solely our own work over the last few years and only at the moment (as I no longer work outside the business and we got affected by the floods on our farm and not eligble for any assistance due to having the outside business, building) ramping up our client work.   Over the long term holding property will put you in a sound equity position and enable you to gradually get into larger projects.  The FHOG wasn't around when I bought my first property at 20 and putting the 20% plus purchase costs together that were required then in the early 90's meant sacrifice. I bought another few properties down in Victoria in my 20's which we still own (10 years down the track) and when I met Carl the growth in those properties enabled us to leverage into other projects.  It is very rare to hear someone say 'gee I wish I'd sold that property' more often than not we look back and kick ourselves for selling out when we look at current prices.

I think your strategy of buying an older property using the FHOG, doing a reno and then leveraging against the increase in value for future investments as the opportunities arise is sound.

When you do start to look outside of PPOR reno's I definately recommend getting some Accountant advice on structure.  It may be that you don't put everything under one.  Some of our property is under the Trust entity, the build / sell often in the company name and some of it in our personal names.

All the best.

Meg

Hi Jake,

Good on you for taking the first step in securing your future. I bought my first property when I was 21 with a lot less in savings, so you're already ahead of me when I first took the plunge!

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My second suggestion, find yourself a mentor. Talk to your friends, family and others who you trust that have made some money from property investing. You'll be surprised by how willing people will be in mentoring a young and ambitious person like yourself.

My final suggestion, never pay more than you can afford. This comes down to knowing what mortgage is appropriate and running the numbers. Again, use the website to help you in this process.

Good luck and let me know if you need any help.

All the best,
Jase