Introducing myself + a few basic questions

[SJB]

Hi guys

I stumbled upon this forum a few days and figured I may as well sign up and start getting involved.

Brief rundown of me:
- 25 years old
- Living in Canberra
- Current annual salary $76 300
- Spent the last few years reading many, many property books and websites, I also subscribe to Your Mortgage, Your Investment Property and Australian Property Investor
- I currently have one property, a 1 bedroom apartment which I bought off-the-plan and will be my PPOR. Construction will be complete/settlement will be late September this year.
- The apartment cost $309 500, I've already put down 5% ($15 475), have $10k saved in the bank, and the $21k FHOG coming to me.
- I'll be applying for my loan in July, looking to put down 15% deposit in total and keeping at least $10 000 as a bit of a buffer.

As for my questions, it's really just one general one. My overall plan is to buy enough investment properties so that (hopefully) by the time I'm 35 I only have to work if I want to. I don't plan to ever sell this apartment, or any subsequent property purchases. At the moment I'm trying to decide:
1) When to buy my first investment property
2) How much deposit to put down
3) Whether to wait and use equity from my PPOR
4) How to actually go about it for my situation/what type of loan to get
etc

I know these are very vague questions, that's just where I am at the moment. I'm planning for my first investment property to be another off-the-plan, at least that way I'll be able to secure the property at today
s price then have about a year before I need to do anything more with it. This would require an initial deposit of at least 5% and at least if it comes time for settlement and I'm not actually ready for an IP I could just onsell it.

There are plenty of suitable developments happening in Canberra at the moment, I have a friend who is a real estate agent and sends me info on new ones every other day - I just have to figure out how to know when I'm ready!

Any advice you guys can give me would be much appreciated, although I'm sure I'll figure it out with more reading and by browsing these forums. Either way it's good to be here

 

[Simon]

This would require an initial deposit of at least 5% and at least if it comes time for settlement and I'm not actually ready for an IP I could just onsell it.

Welcome. Sounds like you are as keen as the rest of us.

Just be careful with OTP purchases. You could just as easily end up selling before settlement and do your 5% and maybe even have to cough up another 5%.

Agents and developers have us believe OTP is easy money but in fact it can be very high risk.

But I love what you say about never selling. If someone had punched that into my skull 20 years ago I'd be worth twice as much as I am now.

Look forward to hearing more from you mate.

Cheers,

 

[tobe]

Welcome!

I'd put the least money I can down, on PPOR and any further properties.
I'd get the grant, stay 6 months and promptly move out and rent something cheaper. I'd have I/O with offset acount with my loans to maximise cashflow and possible change of use/deductability later on.
I'm not sure about off the plan (OTP). It does not always (ever really,what is the price for a plan of a future property?) lock in todays prices, and in the wrong market can be very risky. The docklands in Melbourne earlier this decade, and every 7 to 10 years or so in the gold coast for example. Also some OTP contracts have some nasty clauses which can theoretically ratchet up the price if it increases before settlement, and most have much longer sunset clauses than advertised settlement times. In a falling market most have clauses that mean you can only resell to the original vendor, which can also be problematic.
From a lending perspective its also fraught, with most lenders now unable to approve an OTP until just prior to settlement, which means you are left with the risk until it settles.
I dont want to make this just a critique of OTP, but its also the opportunity cost. To get a good deal on OTP, you have to get in early, sometimes years before settlement. thats a long time to be spent without any rent, and while there may be growth, its not borrowable, or saleable equity until settlement. If I had put investing on hold like this for my first year or two, my investments would have been greatly held back, because I wouldnt have been able to refinance and buy again in the meantime. Again, sorry if this sounds like just a critique of OTP, well researched, and well thought out it can work, I have just been at the pointy end of the docklands a couple of years ago, and saw a lot of real wealth destroyed based on assumptions of capital growth and lending possibilities of OTP purchases.

 

[luckyone]

You might be better off to put the extra $10,000 into the ppor so you can avoid mortgage insurance and you can pay mortgage insurance later when you go to buy an investment property and that will then be tax deductible. Not sure if this is the right idea for you, but just a thought. If you ever plan to make this apartment an investment, then it is probably better to stick with your current strategy.

I'm not an advisor, so please don't take my thoughts as such. I'm just another investor with some ideas.

 

[wobbycarly]

Hi SJB, I'll share my opinion.

Hi guys

I stumbled upon this forum a few days and figured I may as well sign up and start getting involved.

Brief rundown of me:
- 25 years old
- Living in Canberra
- Current annual salary $76 300
- Spent the last few years reading many, many property books and websites, I also subscribe to Your Mortgage, Your Investment Property and Australian Property Investor
- I currently have one property, a 1 bedroom apartment which I bought off-the-plan and will be my PPOR. Construction will be complete/settlement will be late September this year.
- The apartment cost $309 500, I've already put down 5% ($15 475), have $10k saved in the bank, and the $21k FHOG coming to me.
- I'll be applying for my loan in July, looking to put down 15% deposit in total and keeping at least $10 000 as a bit of a buffer.

As for my questions, it's really just one general one. My overall plan is to buy enough investment properties so that (hopefully) by the time I'm 35 I only have to work if I want to. I don't plan to ever sell this apartment, or any subsequent property purchases. At the moment I'm trying to decide:
1) When to buy my first investment property

When you can afford it.

2) How much deposit to put down

As little as possible.

3) Whether to wait and use equity from my PPOR

Both. If you're ready to buy again, and you don't have enough equity OR cash, combined, you might have enough.

4) How to actually go about it for my situation/what type of loan to get
etc

Find a good mortgage broker and they will help you not only define a finance strategy, but also get you the loan(s) to meet that strategy.

I know these are very vague questions, that's just where I am at the moment. I'm planning for my first investment property to be another off-the-plan, at least that way I'll be able to secure the property at today
s price then have about a year before I need to do anything more with it. This would require an initial deposit of at least 5% and at least if it comes time for settlement and I'm not actually ready for an IP I could just onsell it.

There are plenty of suitable developments happening in Canberra at the moment, I have a friend who is a real estate agent and sends me info on new ones every other day - I just have to figure out how to know when I'm ready!

Any advice you guys can give me would be much appreciated, although I'm sure I'll figure it out with more reading and by browsing these forums. Either way it's good to be here

Good luck!