For those that know something about something!

We have two options.



1.Buy IP in Sydney. $300 - $400K. (To live in it to claim FHOG we need 2 bedder not much further then an hours drive from city)

Con: need to keep saving for longer to afford deposit, need to move out of our house to live in it to take advantage of the FHOG, higher holding costs, higher loan, less rental yield.

Pro: Can claim first home owners grant, is in a local(ish) area



2. Buy IP in a regional area price range $100 - $300k

Con: To far away for us to live in it to claim the FHOG (but it has been confirmed we would still be entitled to use the grant when we buy our home, have to pay stamp duty unless we buy off the plan) dont know the area, limited access to get to the house.

Pro: Can get on the property ladder almost straight away, holding costs alot less, can start adding properties to our portfolio quicker as costs are less, don't have to move out of our home (for the FHOG) higher rental yields.

I am sure there must be tax implications for each that could be deal breakers. I am unaware of them but have an appointment to discuss it with a adviser soon.

I'm confused on which is the best option. Would love to know your feedback.


TIA :)
 
We have two options.
Awh I'm sure there are many more options than just 2 ;). Anyway let's discuss the 2 you have here :)

1.Buy IP in Sydney. $300 - $400K. (To live in it to claim FHOG we need 2 bedder not much further then an hours drive from city)
Sounds like a good plan. Sydney is going through a growth phase now after stagnation from 2003- early 2009. If you choose well, you should get good CG and be able to draw down on that equity for further IP deposits.

2. Buy IP in a regional area price range $100 - $300k
Also an option but you need to be ultra careful & do your DD to make sure you are buying in a good CG area.

.....but it has been confirmed we would still be entitled to use the grant when we buy our home, have to pay stamp duty unless we buy off the plan)
Yes, you can claim FHOG later after an IP purchase. I think you may be wrong about not paying stamp duty if buying OTP (at least in NSW I'm pretty sure you are still up for stamps)

Pro: Can get on the property ladder almost straight away, holding costs alot less,
Yes, you can get on the property ladder, but you will be stuck on the first rung of it, if you choose a property that does not grow for sometime. (this can be a risk in regional).

can start adding properties to our portfolio quicker as costs are less,
Only if you get CG to draw on and only if the MI is happy with your chosen postcode to do higher LVR loans on.

don't have to move out of our home (for the FHOG)
I'm presuming that by "our home" you mean rented accommodation? You'll have to do it one day - so don't get to emotionally attached.

.....higher rental yields.
Yes, but in regional, sometimes at the expense of low CG. Choose carefully if you go down this route.

I'm a fan of buying your PPOR, and using the grants on offer and SD relief while it is available, to do so. It also gives you some emotional comfort from where you can launch your investing.

However, it is just as valid to live as cheaply as you can in rented digs while you build a large IP portfolio.
 
Agree with Propertunity on all points!

You may get an income from a regional property, let's say $12 - 15K year rental...what can you really do with that? After you pay your loan & costs (eg insurance etc) each month, you may come out neutral. So it's great it's paying for itself, but how do you use this IP to move on to IP2?

Even if you come out $20 ahead each week, it's not enough income to save for a deposit on another property. I believe you really need to look at capital growth as the fastest way to move forward. A well located property could make you eg $50-100K in a year & that's what you can use towards another property.

Perhaps you can compare regional growth over the last 10 years with growth in Syd cbd & inner suburbs? See how quickly you could get IP2 if you'd bought 10 years ago in a regional compared to inner.
 
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