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From: Mike .


buy 1st home or get into IP?
From: Ed ([email protected])
Date: 7/12/00
Time: 10:06:43 AM

Should I buy my own home first (currently renting) or go for an IP? The $7k freebie looks nice, and I'd only pay a mortgage for what I'm currently paying in rent.

My own home would give me equity to borrow against for buying IP, but I'm not sure how large a deposit I'd need. Isn't the deposit for one's own home much larger than what's needed for an IP?

Any suggestions?

Thanks for your help. Ed

 

[WebBoard]

Stephen

Reply: 1
From: Mike .


Re: buy 1st home or get into IP?
From: Stephen Torso
Date: 7/12/00
Time: 10:51:05 PM

You can buy an investment property using a deposit bond and they cost about $1000. What you'll need to do when you settle is create 100% finance. This strategy is for buying property off the plan, otherwise you can get unsecured loans for the deposit.

 

[WebBoard]

Pierre

Reply: 1.1
From: Mike .


Re: buy 1st home or get into IP?
From: Pierre
Date: 7/12/00
Time: 10:52:50 AM

If you buy the right IP, you'll get equity in that through capital growth - just like you would if you bought your own home (in the right area of course).

There are some definite advantages for first home buyers at the moment with the grant and conditional Stamp Duty exemptions in some states, so maybe you want to consider buying a home, living in it for a year, then moving out and renting it out.

After a year, if you have chosen well, you will have some nice equity in the house, will have been able to pay off a nice little $7000 lump sum, and should be in a position to purchase another property.

If you do opt to do this, you will likely have to take out a P&I loan for the first year. No worries - so long as the cashflow is OK, you'll simply have to renegotiate finance when you move out and rent. This way, there can be no doubt as to the purpose of the finance on the property which has now become an investment.

I'm not sure how the government and the Tax Man view this (WRT to the $7000 grant and the Stamp Duty exemption in NSW), but check it out. You may be able to set yourself up nicely.

Pierre

 

[WebBoard]

Bob

Reply: 1.1.1
From: Mike .


Re: buy 1st home or get into IP?
From: Bob (in the ACT)
Date: 7/13/00
Time: 9:54:05 PM

Ed, If you're in the ACT then in your position I'd buy a rental property and move into it next financial year. Why? Your stamp duty will be deductible, along with the 2000-2001 interest and other deductions.

You have to move into it within 12 months according to another thread here, but if you don't live in it in the financial year you get the full stamp duty back. Note that this does not apply to freehold purchase (but you can't do that in the ACT).