First time buying a property, need some advice :)

[pichoo]

Hi Guys,

After a reading some books, property magazines, and this forum. Im planning to go down the property investment path.

Im 29 years old (How fast life passed in a blink of an eye, I have always thought Im still in early twenties lol) and currently have saving around 70k which some I put in high-interest saving account. Im thinking to invest this money in properties instead.

Im earning around 80k a year, with superannuation included. As for now Im living back at home in Sydney western suburb to save up more money to buy at least 1 property this year.

Spending wise, I think i am quite a good saver. We do cook meals rather than eat out. I think i can comfortably spend $4000 a month after tax to pay out morgate.

Just like most people, buying the first property seems like a real big task. I think im more comfortable buying an IP first and renting it straight away, and save the first home buyer grant for next time.

My dilemma is whether to buy a good cash-flow units closer to sydney or even in sydney itself, or buy a house at a further suburbs, possibly western suburbs like blacktown or liverpool, or maybe buy a 2 bedroom unit around campsie or marrickville? What do you think of these 2 suburbs?

The budget im looking to buy is maybe around $400k property. Does this sound okay? Or should I buy cheaper property? which is getting alot harder these days i think?

Would I be better off buying 2 cheaper properties instead of 1, maybe around $250k each?

Is there another strategy that might work better for me? I always think paying 20% deposit is a good and safer way to go, however after reading this forum, it seems like many people comfortably borrow 90% or even more. Can anyone explain the benefit of doing this, other than getting the property faster?

Lastly, my end goal is to have more properties in the next 10-15 years, until Im retired.

I will eventually look to buy and renovate properties, to bring up the value, and either rent it or sell it. However at the moment, i just want to take 1 step at a time.

Hope to get some advice? Any helps would be much appreciated.
Thanks

 

[annE]

Hi and welcome to the forum.

I can only give you advice based on what I did. When I was in your position in 1997 wanting to buy and not knowing about the so many IFs people were talking about (which were mainly negative) - the economy could crash, you won't get any tenants, the interest rates will go up - they usually do and then they come down again) I decided to get a small unit in a western suburb of Sydney (Penrith).

So I went to the RE agencies and saw a few units. I decided on one 2 bedroom one with garage, kitchen and small balcony. It was decent in a complex about 30 years old (I have heard the older the complex the larger the rooms). The rent was basic. I had around 2/3 of the amount saved so took out a small loan to cover the rest. I wanted everything to be manageable.

So I settled and waited to see when the sky would fall in... as it turns out I'm still waiting... The unit is managed by the RE agency.

For your first IP perhaps get something that is very manageable for you and that your SANF is OK. Then you will make your own discoveries about what you want to do and in which direction.


However in view of the GFC and some threads I've read recently on this
forum I would perhaps be careful about the size of your FIRST loan as I understand the interest rates are still on their way up. Those who are borrowing 90% from the bank may already have several IPs.

I can't give you any info about the inner Sydney suburbs. For MY next IPs I went to QLD. I find Sydney expensive and the public transport system needs improving.

Good luck
annE

 

[BuildingBlocks]

Have a think about how you will buy property 2,3,4,5,+ and when these will need to be purchased to meet your goals.

How will having these properties achieve your goals? Will you sell them all and keep the profits, or live off rent?

Read a few books, read the forums and in a few months your own answers will come up, nobody can choose a strategy for you

 

[BV]

Pichoo

I think you should go for a unit in your area with the view than one day you might choose to live in it so make sure you are confortable with it. The prices and rents there have probably peaked for now so take your time and find something you like.

Use 20% deposit because you are unlikely to keep buying properties so you don't need the cash and it would be a shame to waste your money on LMI for your first property.

Good luck.

 

[Jody in Darwin]

Rental Appraisals

Get rental appraisals on properties you are seriously considering from property managers - don't rely on figures supplied by the salesperson. Sales people have a vested interest in supplying just the upper limit rather than giving you a realistic range and picture of the state of the rental market (which they often don't know enough about anyway). Realistic figures are a must for planning cash-flow.

Good luck.

KR,
Jody

 

[pichoo]

Thanks for the replies guys

Im still learning a lot from books, magazines and this forum. Luckily rate doesnt go up today. However from many sources it seems that the RBA going to increase the rate sooner or later.

Being single again and having only 1 source of income doesn't help my situation.

Anne - Thanks for sharing the experience. I agree sydney property market seems a little bit expensive compared to states. However I think i'll stick with sydney and suburbs as for now.

BuildingBlocks - Im starting to count how much I can earn and pay in the next 5-10 years.

BV- yes Im looking at a property that I can potentially stay in one day, at least for this first one.

Jody - I always look at rental price around the area im looking for. For example if Im looking at a unit in marrickville, I will search on realestate.com for rental prices for similar units.

Im wondering if there's anyone who have similar situation with me, single income and around the same earning, which seem a bit low and hard to enter the property market? I'd like to hear your experience in properties and how its going so far.

Cheers guys

 

[Rolf Latham]

Hiya

With 70 k deposit and those types of goals you have no real choice but to go for an 85 to 90 % lend.

Aside from the fact that you CAN buy what you want, a 90 % lend will preserve your TAX paid cash and give you some risk buffer in your bank account.

I would look dimly upon a strategy where you put your last bit of savings into an IP and have low or no cash buffer to cover for challenge or opportunity.

Some will argue that you should do an 80 % lend now and if you want to buy another IP ( or a PPOR for that matter) that you THE refinance to 90 %, but there are a number of issues why that may not be ideal. Some are

1, if your next purchase is a PPOR, then neither the extra 10 % borrowings, nor the LMI component are in any way deductible or depreciable
2. LMI with cash out can behard to get, and can be a little more expensive
3. When you really want the 10 % you may need weeks to get it


etc

WE dont know enough about your soft data to make a real judgement call as to if a 90 % lend can work for you, but as a general comment it does look suitable

ta
rolf

 

[Marketing Mogul]

Have a think about how you will buy property 2,3,4,5,+ and when these will need to be purchased to meet your goals.

Read a few books, read the forums and in a few months your own answers will come up, nobody can choose a strategy for you

Are you a life coach Building Blocks? You have demonstrated some natural talents in the quote above. So profound!