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  • Profile photo of jonwilliamsjonwilliams
    Member
    @jonwilliams
    Join Date: 2011
    Post Count: 3

    Hi Everyone,

    Nice to meet you all. My names Jon, im 23 and from the Gold Coast.

    I have been doing some research on some suburbs and with some input from relatives have opted to look at mainly two bedroom, two bathrooms units within a 6-12 block. My plan would be to live in the property for 12 months and then look to rent it out with hopefully positive cashflow.

    The area which I was intersted in getting some more insight too would be regarding the loan deposit.

    I would most likely look to borrow  $280 000 – $300 000. I know its a safe idea to have at least %20 of the loan amount, however this amount would take me a fair while to save.

    Currently I have roughly %5 of the deposit, my questions are:

    For someone starting out would if a good idea to start with a small depsoit like I do?
    Or would it better to wait it out 6-12 months to build it up more?

    Also I the first home owners grant, can anybody give me an insight into this?

    Apologies for the long post and thanks in advance for the replies!

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

    Hi Jon

    Firstly welcome to the forum and i hope you enjoy your time with us.

    Have to say we assist many forum clients with their loans and set up when they have a lot less than 20% deposit so this is not an issue especially when you believe you will rent the property out in a year or so.

    If this is the case you may wish to maximise your borrowings (95% lvr) and structure the loan so that the balance of available funds can be deposited in a 100% offset account. This will keep the funds available and on call whilst at the same time reducing the interest payable whilst you are living in the property.

    When you move out the interest on the net loan balance can be claimed as a deduction and is not contaminated.

    As long as you have not purchased a property for owner occupation before then you will qualify for the $7000 State Administered First Home Owners Grant as well as the First Home Owners Stamp Duty concession. These can be an important savings and used correctly can go towards your next deposit.

    If you have 5% deposit currently saved and qualify for the FHOG etc there is no reason why you cannot start to think about buying now. A good mortgage broker can show you how to structure the loan accordingly to maximise your position going forward.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of jonwilliamsjonwilliams
    Member
    @jonwilliams
    Join Date: 2011
    Post Count: 3

    Hi Richard,

    Thanks for the reply!

    Regarding the FHOG, does that $7000 get added onto the deposit? Or do you use your deposit and then get approved etc for the FHOG and then it comes off the price.

    So just for instance when I woud apply for a loan, would I be looked at with my deposit and FHOG as a combined total?

    Thanks again!

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

    jon, the FHOG is over and above your deposit so with most lenders you need 5% saved deposit minimum and the FHOG is a bonus.

    Couple of lenders that dont work this way but in the main add the $7K to your savings.

    Dont have to use it as deposit but will be catered for.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Matthew_WMatthew_W
    Member
    @matthew_w
    Join Date: 2009
    Post Count: 19

    Hi Jon!

    Just thought I'd add my two cents on top of Richards. Doesn't hurt getting a second opinion I guess :)

    I just want to suggest that if you're living in a 2 bedroom unit – presumably by yourself (or with a partner), you'd only use one bedroom. Try and get a flatmate in to rent the other room to give you some more income; because, unless you have a well paying job, home loan repayments for $280-$300k would be around the $2,000/month mark; obviously not including other (living) expenses.

    Obviously the more deposit you have the better. $7k on top of your 5% deposit won't really get you very far, especially paying the minimum $2,000/month mentioned in the above paragraph. You must live in the property for a minimum of 6 months (or is it 12 – it escapes me now lol) to get the FHOG.

    IMHO, unless you have a well payed job, or you put the house in your parents name (and they put their house up as collateral; which, depending on the lender, would give you a better interest rate), I'd save for the next 6-12 months. OR purchase a property now, and get someone in to rent for the next 12 months, until you're ready to move in. Then you can somewhat have your cake and eat it too ;)

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

    Only need to live in the property for 6 continous months commencing within the first 12 months to qual;ify for the FHOG.

    95% lvr is available and achieveable if every other box is ticked.

    $300,000 structured correctly only going to cost you around $1680 /month.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    I'm going to throw my 10c worth in here.

    The thing that goes up in value is the land the dwelling sits on.  The building itself depreciates over time.  So personally I'd be looking to get a solid dwelling on the largest chunk of land that I could comfortably afford. 

    A friend of mine recently bought her first home… she started mucking about looking at one bedroom units in unitblock complexes and I managed to convince her that financially, she'd be better off getting a 3 bedroom house and renting two of the rooms out to friends.  She'd end up with a bigger house on a bigger bit of land, and while the friends live with her, her costs are lower than they would have been if she'd been by herself in a one bedroom unit.  She's since bought herself a 3 bedroom house and has, many times, said she is sooooo glad I talked her into getting a house over a small unit.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470
    JacM wrote:
    I'm going to throw my 10c worth in here.

    The thing that goes up in value is the land the dwelling sits on.  The building itself depreciates over time.  So personally I'd be looking to get a solid dwelling on the largest chunk of land that I could comfortably afford. 

    A friend of mine recently bought her first home… she started mucking about looking at one bedroom units in unitblock complexes and I managed to convince her that financially, she'd be better off getting a 3 bedroom house and renting two of the rooms out to friends.  She'd end up with a bigger house on a bigger bit of land, and while the friends live with her, her costs are lower than they would have been if she'd been by herself in a one bedroom unit.  She's since bought herself a 3 bedroom house and has, many times, said she is sooooo glad I talked her into getting a house over a small unit.

    Hi JAcM- I have to say that I do not agree with you 100%. Although a house sits on more land than a unit  block, the land component of a house is not always more than that of a unit. If you are talking about buying a house close to a CBD, then generally that would be the case. However if you buy a newer house in an outer suburb for say $350k, you probably only have 35-40% of the value as a land component which is lower than many inner city apartments.

    Cheers,
    Luke

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Yep, in some cases you'd be right. However as an example, my house is in a boring suburb 30km from Melbourne and tripled in value between 2000 and 2010 while smaller dwellings closer to the city merely doubled in value.  Point being it's not just the fancy suburbs that perform.  Definitely a good idea to do your homework :-)

    There is also the other matter of this:
    If you own a large block, you have options as to what to do with it later on as things get rezoned, council reduces permissable block sizes and so forth.  eg Bring in the bulldozers and redevelop, or build a second dwelling in the backyard etc.  You will struggle to do that if you're choking on the constraints of a body corporate with a bunch of other owners in the mix.

    With inner city apartments there is sometimes that danger of oversupply as well.  There is just so darn many of them, and they're all the same, that there's always a bunch of them up for rent or sale at once, which is not helpful to your pricetag.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of jonwilliamsjonwilliams
    Member
    @jonwilliams
    Join Date: 2011
    Post Count: 3

    Richard and Matthew thanks for the replies.

    Any opinions/information is greatly appreciate!

    Id definatley live in the unit for the first six months and getting a flatmate would definatley help out. Although if I"m looking at paying $1700 – $2000 a month, it would be tight after other living expenses and trying to save extra money too.

    I think I need to research the average rent prices in the area I'm looking at in order to see what I would potentially rent a room for and then I can work out how much I would have left over for living expenses, etc.

    Thanks for the advice guys! Im sure I'll have alot more questions coming soon!

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