Advice for the novice?

W

WebBoard

Guest
From: Gibson Nolte


Hello all!
My partner and I are just starting out in our investigations of the IP market and are very eager to learn. We have been reading books and magazines and checking out a few websites such as this one (a very accessible, non-threatening forum) and the reiwa site (we live in Perth).
So here's what we're pondering at the moment (there will, no doubt, be limitless ponderings down the track too): As a relatively low income couple (with no debt, mind you) we are curious as to whether we should be looking into living in the first home we buy or renting it out while shovelling in all we can on top of the rent.
You see, we are currently in a rental owned by a family member in a good area with very cheap rent. It seems to make sense to stay here while letting someone else pay higher rent on our IP, doesn't it? We stay in a nice area in a nice house while pouring our excess earnings into the loan before moving in in the last month of our first ownership year to qualify for the $5000 First Homebuyer's Grant.
Any comments? Ideas? At this early stage they will be most appreciated.

Cheers,
Gibson and Claire
 
Last edited by a moderator:
Reply: 1
From: Rolf Latham


Hi Gibson

That does make sense, and you'll pick up 7000 for the FHOG too. In those situations its always nice to have friends and relos that will let you rent for a low cost.

One thing to look out for is that some lenders will let you do a loan with a 5 % deposit for your home, but require a 10 % deposit for an investment loan, and the lenders Mortgage insurance if its required (like if you dont have at least 20 % deposit) is commonly more expensive. Shop around or use a broker because you will find some big differences as to what one lender will do vs another.


Ta

Rolf
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1
From: Simon St John


I agree - stay in the cheap rent family house sounds the go (lucky you), though I think the FHOG is not claimable for an IP. Must live in the premises within and for a period of time?

Hear ghastly stories the other day of people being caught and having to pay back the FHOG plus interest.

Could be wrong on that though....
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.2
From: Frank Shead


Gibson,

You can get 105% and pay more interest over the first five years. No LMI though and Rolf is correct.
frankshead@ym2t.com.au
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.2.1
From: Gibson Nolte


Thanks for the responses! Right now our enthusiasm heavily outweighs our knowledge (better than the other way around but still frustrating) and we are looking for ways to build our understanding. Being professional, practicing artists this IP gig is a whole new world but thoughtful responses to questions are a real confidence booster.

By the way, does anyone know of a reputable Perth-based organisation/individual who regularly holds IP seminars or q&a sessions? I've found a couple that seem (after a bit of research) to be nothing more than 'Pay to come along to this seminar where we will espouse the virtues of these pre-selected IP's' type deals. I have spoken to some real estate agents who have been quite helpful, and will be visiting our accountant next week, but contact with genuine, like-minded individuals would, I feel, be very beneficial.

Lastly, should I be posting in the 'Meeting Place' section? I don't want to bug.

Cheers,
Gibson
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.2.1.1
From: The Wife


Gibson,

The Freestyler Network starts up in Perth on the 5th of Feb, this is a likeminded group of individuals, the web site is www.freestyler.net.au

Cheers, TW
 
Last edited by a moderator:
Reply: 2
From: Splinter Wood


Hi Gibson & Claire,

Maybe a last note of some interest. Best thing to do in my opinion is get out your pen & paper out and work out your 'cash flow for option 1 and option 2.

1 being:stay where you are and buy the new house and rent it out and 2.: Buy the new house and move in.

basically add up your expenses for both scenarios: rent, interest payments on the new place, rental income for the new house (Allowing for all expenses and \vacancy) My rule of thumb is figure you will bank 80% of the rent before income tax. Tax deduction on the interest (Loss) which you can write off again your income tax.

Other thing to consider is if you do rent the new house out, you will be subject to Capital Gains tax when you sell. You need to do some research on this but if you intend to keep the house and move in later when you get on your feet, then CGT is usually not a big deal.

Figure in Stamp Duty and other costs when you buy.

Bottom line, go for it. Get in. Handle the hard times which may be the first few years and you will get the hang of it.

Regds
DR A

You may have trouble with the FHO deal if you 'intend' to rent it out ??
 
Last edited by a moderator:
Reply: 2.1
From: Paul Zagoridis


In an ideal world I'd recommend buying an IP first and renting at the cheap end. In Sydney rents are down to 3-4% yield and IP's can be had at 4-6% yield.

Nella and I have committed to doing that for a year or two.

But...
It takes tremendous self discipline to keep investing the difference and not splash out on doodads (like a Red Jag *<B=} ).

Steve Navra once said that most Sydney-siders make money on their homes and lose it on their IP's. I agree (except in my case for some reason, all my bad deals have been "homes").

A home you are paying off can provide equity for the great deal you find later. This is the conservative path to freedom. Keep it simple then wake up rich one day.

Paul Zag
Dreamspinner
WealthEsteem coming soon at...
http://wealthesteem.dyndns.org/
 
Last edited by a moderator:
Top