Another first timer looking for advice

[smule]

Hi everyone, great forum and community here. Have been reading through most of the threads over the last few days and now seeking some advice,

I'm looking to buy my first property, I'm early 30's single on a decent salary. I have around 150k in the bank and looking to buy a property. I have no debt at current or other overheads with the exception of phone bills, fuel, car maintenance and a fairly expensive life style which I'm trying to tame.

I have grown up around Brunswick and love the area and would like to stay around, I have looked at apartments, single terrace houses in Brunswick all the way out to houses in the Coburg Pascoe Vale area, and frankly I'm confused on what to buy and what to do.

I know this seems a bit vague but can someone suggest what I should be doing, putting all my savings down to a deposit or just the minimum? buying a small brunswick house or moving further out to a bigger property (land)?

Oh and yes I plan on living in this property.

Any thoughts and advice would be greatly appreciated.

 

[alexlee]

Are you putting in the max into super and planning to work until you're 65?
Alex

 

[smule]

Hi Alexlee, super fund is fairly healthy, and to be honest I havent put enough thought into retirement age

 

[WinstonWolfe]

I'm looking to buy my first property, I'm early 30's single on a decent salary. I have around 150k in the bank and looking to buy a property. I have no debt at current or other overheads with the exception of phone bills, fuel, car maintenance and a fairly expensive life style which I'm trying to tame.

I have grown up around Brunswick and love the area and would like to stay around, I have looked at apartments, single terrace houses in Brunswick all the way out to houses in the Coburg Pascoe Vale area, and frankly I'm confused on what to buy and what to do.

I know this seems a bit vague but can someone suggest what I should be doing, putting all my savings down to a deposit or just the minimum? buying a small brunswick house or moving further out to a bigger property (land)?

Oh and yes I plan on living in this property.

Any thoughts and advice would be greatly appreciated.

Borrow as much as you can via a loan with an offset account. Stick any remaining cash into the offset account to reduce your interest. But you still control the cash. Can pull it out and stick it in shares or spend on a used ferrari anytime you like. Cheaper than credit card, margin or personal loan debt.

Buy the biggest house you can on the biggest block of land in the best street as close to the city and public transport. Seems you should get a 2/1/1 terrace for well under 500k. Try and get something with future opportunity to put an extra couple of bedrooms in i.e. add a second level.

Then live in it for 12 mths, and simultaneously rent one of the rooms to a boarder. If the boarder thing doesn't work out, or we go into a recession, move out of the house back to your Mum's or become a boarder in someone else's house, and rent yours out for maximum rent. Seems you should get $400 a week for a 2/1/1 in Brunswick.

Be prepared for property prices to not grow much for 7 years
max 5%pa
min -20% over 7 years

Think about what life is going to be like when petrol is > $2/litre

 

[alexlee]

May I ask whether you've accumulated the 150k in savings over a number of years, or whether you recently came into it? The reason I ask is, $150k is a lot. If you accumulated it over a number of years, why haven't you bought something before?
Alex

 

[smule]

Winston -My main concern is to pay off a sizeable amount of the house asap and look at buying another place in the next few years.

My research shows me that if you move to a neighboring suburb (lets say coburg) you will find a freestanding home on a larger block for the same money as the terrace in Bruncwick. So the question there is what is the smarter alternative to buy?

Alexlee - I've spent quiet a few years travelling and working overseas, and its only know really that I'm back home that I'm focused on buying something, I realise that I'm at the tail end of the boom and that leaves me wondering what the smartest option for me to do now is .. where do I buy ..do I buy now ... or wait..

 

[Rolf Latham]

Hiya Smule

What Winston said in regards of the finance.........borrow 80 to 95 % Loan to value ratio, with an IO loan, park the balance in an offset acct.

Park any extra repayments in the offset,

When buying the next place try and borrow agains the equity of the old place, again to 95 % of possible and again keep YOUR money in the offset.

Overall this strategy costs only a little more in ongoing interest ( since the money in the offset is the same as paying the loan down). Yes lenders mortgage insurance costs a little, but can usually be added to the loan

Properly structured finance at your stage will make an enourmous difference to the end outcome.

Seek the services of an independent mortgage broker that is Investment savvy and understands how to maximise the use of equity

ta
rolf

 

[alexlee]

Alexlee - I've spent quiet a few years travelling and working overseas, and its only know really that I'm back home that I'm focused on buying something, I realise that I'm at the tail end of the boom and that leaves me wondering what the smartest option for me to do now is .. where do I buy ..do I buy now ... or wait..

And after you buy, then what? Are you planning to buy more investment property, for example? Or shares? That will partly determine how to structure to the loan. You need a plan on what to do AFTER you buy a property.

I would also think a bit on why you decided not to buy anything (shares?) while overseas. I worked overseas for a while and only came back last year, and I bought Australia property and shares while overseas.
Alex

 

[WinstonWolfe]

Seems you need to have a harsh look at what motivates you these days Smule.

You express this strong desire to live in Brunswick. Ask yourself why.

If it is because of the cool cat crowd that must be seen out all the time, sitting in restaurants, doing coffee, arthouse cinema, wearing the latest style, then seems you have a dilemma on your hands. Why? because being groovy yourself isn't going to help you achieve your other strong desire, paying down debt as quickly as possible.

let's have a look at the opportunity cost of the latte lifestyle.

If you have 2 coffees away from home 6 days a week, at $3.50 each, that's

2*3.50*6*52 / .6 = $3640 pre tax pa

Then if you eat out 4 times a week and buy your lunch 5 days a week

(4*15+5*8 ) * 52 / .6 = $8666 pre tax pa

Then if you are buying the new fashion twice a year

2 * $500 / .6 = $ 1666

That cool cat lifestyle could pay the IP interest on $175k of debt.


If you are serious about paying down debt asap, then you'll seriously consider the following advantages of living in a Brunswick
- do most of your socializing at home or others' homes or parks and beaches. not cafes and restaurants and cinemas
- socialize via a second job quite different to your regular job. i.e. if you are in an office all week, consider mowing lawns or gardening or labouring work on a Saturday. People form social networks through work nowadays anyway, so if you work more, you potentially have more opportunity to make friends.
- take up a hobby or craft or gardening and take stuff to markets to trade. good social outlet while making mulah.
- learn some trade skills for renos.
- stop buying books and get to know your local library.
- sell your car and buy a bicycle off ebay, and reduce the desire for long distance travel to a minimum by cultivating a local social network. most young people don't understand how much a car costs. Even a small car will cost you $10k pre tax pa. If you allow 1k for public transport and bicycle costs pa, not owning a car will save you 9k, which could service another $112k of interest on IP debt.

If you throw in a bit of casual weekend work, and make the current enriching adjustments to your lifestyle, then your debt serviceability has just increased by $300k pa.

 

[willair]

I'm looking to buy my first property, I'm early 30's single on a decent salary. I have around 150k in the bank and looking to buy a property. I have no debt at current or other overheads with the exception of phone bills, fuel, car maintenance and a fairly expensive life style which I'm trying to tame.

Oh and yes I plan on living in this property.

Any thoughts and advice would be greatly appreciated.

Smule,150k in cash is a very good start,but the first question to ask yourself is what do you want,you know the area that you intend to live in,you would already know the value of properties,and if it's your ppor then if it was me i would go for the most upmarket property you can find in those streets with a high land content,move in then just rent the rooms out,as you are single who knows what will happen..
The first step is always have the Finance in place,you have several MB'S in this site they all seems to be upfront otherwise they would not have lasted in this forum, then have a simple 4 year plan and stick too the plan,timing is not super critical as property is starting to slow in several area's,some country area's that i watch have gone down in value over 70k over the past 9 months..willair..

 

[smule]

Thx for all the tips people

Thing is im single in terms of marital status but in a serious relationship so renting out rooms is not something I'd consider, as marriage is not to far in the future, however the purchase will remain based on a single income repayment.

I have my share portfolio which I do not want to break.

Reason I want to live in Brunswick is not so much the hip factor but the fact that I've grown up there and I'm comfortable in the area, I go out to other areas and just dont feel at home (does that make sense, or am I being silly ?)

I have capabilities of minor renovations and have several friends in the industry that could help.

So from what I understand by the worst house in the best street, something with potential to add bedrooms later on. Put the minimum deposit on and then at a later end put all your money into it.

Ok so one more question, if I draw equity to a possible 95% on my current property to fund another IP , then dont I really have to rely on capital growth in order to ensure I can pay both houses off ?

 

[Rolf Latham]

Hiya

If you can do 2 houses at 80 % and pay them off, you can also do them at 95 % notional and pay them off, being mindful that the CASH difference between the 2 options is only the lenders mortgage insurance premium

ta
rolf

 

[chara]

Borrow as much as you can via a loan with an offset account. Stick any remaining cash into the offset account to reduce your interest. But you still control the cash. Can pull it out and stick it in shares or spend on a used ferrari anytime you like. Cheaper than credit card, margin or personal loan debt.

Is that mean the repayment on IO will be different every month because of the different amount of cash in the offset account every month? how about if you have fix loan? the repayment will be depend on the cash in the offset account too?

 

[Rolf Latham]

Hi Chara

yes, it will vary............most lenders DONT do 100 IO offset on fixed, a couple do, and for those that dont, you can do a cocktail fixed and variable then with the 100 % offset on the variable

ta
rolf

 

[chara]

Thanks Rolf