buying first IP - Questions

Hi all,

First time poster here.... been lurking for last few days

So come September (once my tax is back), ill be in the market for my first property which will be a investment property.. This will be a place I don't intend to live in within the foreseeable future if at all as I plan to go OS for work in the later part of 2015

I have been cutting the numbers of late with regards to what I can afford before I hit the streets and look at places and I have decided a budget of 325-330k is what im in-line to purchase... im open to either a unit,town house or house.... however as little outgoings as possible with a very strong rental yield is what I would like (I would like rent to cover mortgage each month and I don't mind putting into my own pocket for fees such as rates/insurance/body corp ect when required)

here is how I am intending to budget the purchase (based on approx 5% interest only loan for 3-5 years and then PI from then on... over 25 years)

Deposit - $33000 (10% deposit on $330000 budget)
Stamp Duty - $11000
Misc fees - $2100 (building inspections and misc associated purchased costs)
3x months repayments - $3900 (to be used as buffer for the mortgage in not tenanted for a period of time)
Mortgage Insurance - $5000
TOTAL BUDGET - 55k

Cutting the sums via the banks mortgage calculates, I can see that the repayments for IO around roughly 1300 a month which is somewhat affordable for me

my questions are

1) As per my budget above, have I set aside enough for misc fees and mortgage insurance?
2) I hear conflicting info about whether mortgage insurance is actually tax deductible.. is it or is it not??
3) I've also heard that mortgage insurance can be bundled into the loan... is this wise or should the policy be taken out separately??
4) Will I require a life insurance policy as well?? I have income insurance as I am a IT contractor, however just wondering if I need to also look at a life insurance policy and factor that into the costs
5) At what stage once I have purchased a place should a depreciation report be undertaken and how much should I budget for this to cost?
6) I take it with property management fees, they take there cut from the rent? is this true or can I pre pay for a year upfront?
7) what's the typical amount a property manager/agent takes as there cut from the rent?

Thanks for reading this post and im sure i will have plenty of more questions on this property investment quest
 
Hi there

Yes lmi can be included in the loan depending on lvr. 90%+lmi is quite do-able depending on your situation.

Lmi is tax deductible over 5 years or life of the loan which ever is the lesser. Interest on lmi is deductible also.

Pm fees will be a % of rent anywhere from 5%- 15%+. Cant pay in advance and if you could, then dont as if your not recieving rent the pm wont be getting paid either.

Depreciation report should be done at purchase. $600-800 for a decent one.

Life insurance is up to you. Its risk management. If you have a partner or family that will get the property on your death, then you would want a policy to clear most of the debt for them.

Hope this helps

Cheers
 
Hi MLK

I have been cutting the numbers of late with regards to what I can afford before I hit the streets and look at places and I have decided a budget of 325-330k is what im in-line to purchase... im open to either a unit,town house or house.... however as little outgoings as possible with a very strong rental yield is what I would like (I would like rent to cover mortgage each month and I don't mind putting into my own pocket for fees such as rates/insurance/body corp ect when required)

Good strategy.


here is how I am intending to budget the purchase (based on approx 5% interest only loan for 3-5 years and then PI from then on... over 25 years)

You can stay on an interest only loan + offset account instead of PI. This way you can reduce your interest but also have access to the funds if needed.

All the best

Andrew
 
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