I have a dilemma, i really would like to move out now. I figured i could put my money towards my own home and in the near future use the equity to invest with. Is this approach ok ? Is it a major setback ?
Or should i stay put with the old folks & use my savings to invest with right now ? Keep in mind i would really love my own place right now but if that’s going to slow down my investing progress I’l give everything another thought
Maybe once i have enough equity & savings i’l do a couple of reno’s to pay down my home ASAP and speed up my savings growth
Any thoughts or comments are welcome,
ThanksHi Adiskay
What you're asking will pretty much come down to your borrowing capacity and whether you can service the debt on a PPOR and an investment(s).
Your best bet is to get a decent broker to crunch the numbers for you to see what's achievable.
I have had quite a few clients use their first home to leverage into property investing.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I always advise my clients to invest first, purchase the PPOR later. With an investment you have a much better budget, and will be able to purchase much better quality property. No point buying a dogbox 1 bedroom apartment that is going to have limited growth, in my opinion, if that’s all you can afford.
I guess it comes down to personal preference.
I actually lean towards purchasing a PPOR first and then using it to get into investing. Particularly if the PPOR can do with a cosmetic reno that adds equity early on. That way, you can kick start the investing sooner rather than later.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I agree Jamie. Each has their own pros/cons. I think it is healthy to live away from home – whether that be in a PPOR or by renting depends on the financial position of the person.
Have to be honest i always suggest PPOR first as whilst you can get a second grab at FHOG you can't in most States with the Stamp Duty Concession.
If you take Qld for example the savings if you buy your PPOR initially, comply with the S/D residency requirements and then rent out the property amount to nearly $12,000 on a $400K property.
Each to there own but as i say nothing to stop you living in the property then renting it out.
Maybe Hank will have a different opinion.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hahahah i see i am already becoming infamous.
I most definitely agree with Richard and Jamie, if you are a first home owner then definitely use the government grant to your advantage. When you have built up enough equity and then you can leverage into your next property.
Like Richard i too don’t see an issue of buying a PPR, obtain the grants, satisfy the Grant conditions that you must reside in the security for 6 months then move back home and rent the property out. This is how i got started with my portfolio.
Adiskay i am not sure what state you are in, another option that can be done is purchasing a investment property in a trust structure where you name is not listed on the lands title office (common in NSW) so your First Home Grant is still in tact as your personal name will never have been listed as owning a property. This path means that you must have funds for stamp duty and not receive the First Home Grant. This was a handy tool when stamp duty was waived for under $500K purchases and i was investing in smaller securities.
Jamie and Richard i am the new kid on the block apologies if i have treaded on anyone feet.
Hank to qualify for the FHOG you need to occupy the property for 6 continous months commencing within 12 months of Settlement.
There is nothing to stop you moving in on the 364 day.
Unfortunately the Stamp Duty concessions are not as liberal and vary from State to State.
In Qld for example you need to occupy the property for 12 months from the date of Settlement so cannot move out after 6 months.
In regards to the FHOG you can still purchase an investment property and then purchase your own PPOR at a later date and qualify for the Federal Grant.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thank you Richard for correcting me, you are right on all counts. I want to see if i can get to 9000 posts on this forum
Hey!
Out of curiousity is your aim to move out of your parents place or to have a place of your own?
What if you invested in a place with high rental and used a small portion to rent a room or a cheaper place? This way you can still move out and claim depreciation etc. Mix it up, perhaps buy a place and live in for 6 months (renovate?) then find a cheaper place to rent.
Don’t get hung up on FHOG. It’s great yet limiting in a sense, I was obsessed with trying to make it work and didn’t invest for 2 years (due to my work lifestyle, very hard). Bit the bullet and just bought an investment property straight up.
Gluck!
Here in Victoria the FHOG for an established property is only $7,000 – that is hardly anything. The tax deductions and rental you get from the first 6 months of holding an investment property far outweigh this paltry sum – particularly for higher value properties.
Woah!! Thanks for sharing everyone
I like that idea Jamie, I’m leaning towards the reno for that extra, quick equity. Seems safe & simple.Perfect IMO. Someone mentioned pro/cons with this V renting. I’m not feeling too confident with renting, Does income alone determine which of the two are more suitable or is there other factors to look at ?
Yes i’m in NSW Hank, I’m not 100% familiar with this strategy you talked about, seems interesting though I’l do some research
So..How do i go about finding a good broker? I’ll need to get started right away.
and NHG my aim is indeed to have a place of my ownBig Thanks to all !
Hi Adis
Give Jamie a call he is an experienced broker and long time contributor to the forum.
He also owns a few investment properties so can advise you with an element of experience.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Interesting Hank, I own a company with a similar name – The Loan Experts Pty Ltd.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Small world
Thanks for the wrap Richard – yes, have plenty of clients accross the border so location is not an issue.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Is ACT really across the border.
Often quicker to go from parts of Sydney to Canberra than across the City itself.
Either way when most applications are lodged electronically and documentation done by email etc these days your Mortgage Broker could be anywhere.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I'm going to do something unusual Adiskay for this thread .. and actually try to answer your question.
If you have the flexibility of not having an immediate draw on your resources, aim for an investment property over a PPOR. The benefits are fourfold, Its a situation where your tenant will be paying for your property as well as your contributions to the investment, it makes allowance for offsetting expenses and depreciation against your income. You will have an equity draw for your future PPOR purchase .. and an income additional to your earnings for working out how much you can borrow (for the PPOR presumably).
With a PPOR your main benefit will be a principal residence deduction on capital gains. So any capital gains you get on the property you keep. However its a full set of bills, water, electricity, phone, internet, etc and additional to that you have a full payment you must produce on the property with no tax deductions. In other words .. once you have a PPOR .. its a major money dunk and will severely hamper your investment capabilities in the near future.
You want the freedom? You'll have it when you have an income producing property you can offset against your income .. and a residual income you dont have to work for .. THATS where you get your freedom. A PPOR will give you your individual space .. but will tie you down in the short term with greater expense. And with a possible 5 year period until property takes off again … you may be waiting a little time for your capital gains to justify itself for you.
On a sidenote to what i've just said. The prices for property have gone down quite a bit. The price to purchase a PPOR (or investment for that matter) is cheaper than its been in a while and thats meaning your money and borrowings buys more at a better overall return than its been buying for a while. So while the buying is good .. you can make better choices.
Have you considered doing both?
Buy a main residence, live in it briefly and then move back home and rent it out.
Claim all associated costs and retain the CGT exempt status.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I think we all missed that point, good response.
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