It has recently come to my attention that the first home owner grant/boost of $26,500 in regional Victoria will end on 30 June, 2012. This along with the recent rent increase of $40 per week has prompted me to take action, and I am considering purchasing my first PPOR ahead of schedule. I would like to purchase this property for capital gains (+$100,000) over the next 5 years, but have it neutrally/positively geared at the same time.
One of the emerging suburbs that seems quite promising is 'Lucas, Alfredton', which is located in the wealthier parts of Ballarat and very close of suburbs that have recently boomed (rippled effect):
"Lucas has been planned to include all the things that people need to function well together as a community – shopping and employment, schooling, community facilities, public transport, extensive parkland and community spaces and a variety of housing types." http://www.lucasballarat.com.au/life-at-lucas/masterplan
I am currently in the process of conducting research, but in the past 72hrs I have:
1) Spoken to a couple of real estate agents
2) Confirmed infrastructure plans and estimated time of completion with council
3) Placed a block of land on hold (about 200m away from school/park, and 800m away from shop)
I am thinking of building a 4 bedroom/2 bathroom/2 garage home on this block of land, and renting the rooms out individually for +$100 per week. The estimated cost of land is $130,000 and cost of building after accessing FHOG/B is $125,000-$150,000, bringing loan to around $280,000 and based on 7% interest p.a. would result in $377 per week interest repayment.
Based on a yield of 5% of surrounding suburbs, receiving a rent of $350-$400 per week, would equate to price of $364,000-$416,000. The next purchaser I have in mind at this stage is a young family, and I am thinking of selling within the next 3-5 years at the peak, once most of the infrastructure is complete.
My questions are:
1) What are your thoughts and views about the above? Do you have any words of wisdom?
2) How do you normally go abouts with your due diligence and research?
3) Am I allowed to claim FHOG/B, and then rent out the rooms that I am not residing in?
4) What are the tax implications? Will the property still be considered PPOR or IP? Will interest repayments be deducable? Will I be able to claim depreciation on the cost of building, if so how much? What about the contents inside the house that is shared such as furniture, electrical appliances, oven, fridge etc?
5) Are there any good accountants, lawyers and mortgage brokers you would recommend in Ballarat/Melbourne?
At this stage I am still in the process of conducting my due diligence and still remain undecided about whether to go ahead with PPOR purchase (need to analyse median house prices, jobs, housing finance, buildings approvals, and consumer sentiment), but any thoughts, opinions and words of wisdom would be appreciated.
KongpossumpalMember@possumpalJoin Date: 2006Post Count: 48
Its only my opinion but I would be nervous about buying in Lucus. Have a look at the number of properties up for sale and how long they are taking to sell in “the Chase” the last subdivision out that way. To me it just seems like sprawl, and will travel time to the CBD could be up to 20mins during peak times.
Having said all of that there is not much other land available around Ballarat if you are wishing to build.
Good luck in whatever you decide.
Thanks for the post possumpal,
I've had a look at 'The Chase, Alfredton' but I couldn't find many properties for sale on realestate.com.au and according to the developer's site they are 'Sold out':
A place of tree-lined boulevards and natural landscapes, where majestic parks meet with thriving wetlands, and all just a stones throw from every home. Engage with an authentic lifestyle where children can thrive and a family can prosper, where community comes first and outdoor play is expected rather than exceptional. Discover The Chase.
I feel a bit nervous as well, since I have never purchased a property before, and market sentiment doesn't seem that great, but I'm thinking that in terms of exit strategy for worst case scenario I could always discount my property by up to $26,500, and many real estate agents have stated that if I were to do so, it would sell relatively quickly. Also if the property is neutrally/positively geared market swings over the next 5 years shouldn't be too big of a deal.
Anyways, I suppose the only way to combat fear is through knowledge, and have plans in place to mitigate the risks, so I'll continue to do research into this – reia.com.au and abs.gov.au seem like good places to find out information on jobs, median house price, housing finance, building approvals – are there any other sites you guys would recommend?
KongFreckleBlocked@freckleJoin Date: 2012Post Count: 1,680kong71286 wrote:I feel a bit nervous as well, since I have never purchased a property before, and market sentiment doesn’t seem that great, but I’m thinking that in terms of exit strategy for worst case scenario I could always discount my property by up to $26,500, and many real estate agents have stated that if I were to do so, it would sell relatively quickly. Also if the property is neutrally/positively geared market swings over the next 5 years shouldn’t be too big of a deal.
worst case scenario I could always discount my property by up to $26,500
Are you serious!!! That’s not even close to worst case scenario and if things go bad I can tell you from experience it will not sell quickly.
Keep your money in your pocket and watch and wait. The fireworks are about to start any day soon.
Thanks for the advice Freckle,
The more research I conduct the less confident I feel about investing in the property market for generic growth, and I might follow your advice and hold off.
When do you think the fireworks will start? What do you think will happen? How will this impact jobs in Australia, interest rates, and the property market? What are you doing to prepare yourself for the fireworks?FreckleBlocked@freckleJoin Date: 2012Post Count: 1,680
Kong your problem at this time is your lack of knowledge and experience. The current market is really one for PI experts and I expect to see them have great difficulty as well. The PI landscape is changing rapidly and mainstream methodologies and approaches will need reshaping to capture value in the property market.
Your current proposal is a recipe for disaster. 5 – 10 yrs ago yes (a rising market) but not today (a falling market).
We are likely to experience over the coming years one of the greatest financial calamities of our lifetime. GFC v2 will make GFC v1 look like a practice run. It will present opportunities to the patient and the well informed but crucify those who rush in and only do cursory DD.
The new generation of PI’s will need to take a more holistic view of the market and incorporate national and international economic drivers into their investment planning.
There are some very switched on and experienced cookies within this forum. Leverage this knowledge base to up skill yourself over the next 12 months while you watch and learn to see how the PI landscape evolves as this current GFC unfolds.DubstepParticipant@dubstepJoin Date: 2012Post Count: 395
GFC v2 will look something like this :