My progressive story

B

Belu

Hi all,

Some of you may have seen me around, and others would have met me at the last MIG. For those of you who don't know me, here is some background:

My name is Ben and I'm 21, currently finishing up a business degree (6 months left) and saving up as well. I have been looking into property for the last couple of years, doing research until my wage kicks in in Jan where I will have a decent enough wage to borrow for my first place.

I thought I would start to write a bit of a story through this thread, what I am up to in my search for the first place, and if I have any questions or advice. I can't really give a lot in regards to advice, but if I can share some experiences it may help someone.

I have been hanging around SS a while now, about 2 years, thinking about investing for my future, rather then my dreams of making millions off a business idea! How things have changed since then. I was working full time then, only on $26k p.a but had no savings and a $2k CC debt. Now I am only working casually while I finish uni but have saved $7k and am on track to get to about $13-15k in savings by the time I start work.

So I am off to start going to open houses and auctions this week, my mother seems keen to help me look around too(although being the most adverse person to risk - preferring Super and the bank interest rate only, she is still very supportive of me taking this plunge).

Looks like my budget is $250k. The options I am tossing up between are:

1. A 2 bedroom flat/unit in Footscray, maybe trying to squeeze one out of Ascot Vale or flemington but much harder to find.
2. A 1 bedroom flat/unit in North Melbourne
3. A 1 bedroom flat/unit in essendon/flemington/ascot vale/kensington

Budget for the first 2 are $250k, whilst with option 3 I would only want to go to around the $200k mark.

Looking to move into it for 6 months for two reasons, one is to get the $10k FHOG and the other is to get out and live by myself - independence.

So thats where I am at the moment, looking around at the markets in the areas I am interested in, getting used to open houses and auctions so I can buy in Jan/Feb as soon as I have the income to support it. Have 3 open houses and 3 auctions this sat so off I go to get started!
 
Hi Ben,

Looks like you have narrowed down some great suburbs that fit your criteria. Enjoy hunting around this weekend!

Great plan by the way!

Regards Jason.
 
cheers guys, a little re-jig of the options, what do people think:

To re-cap:
1. A 2 bedroom flat/unit in Footscray - $200k
2. A 2 bedroom flat/uni in Ascot Vale or flemington - $250k (harder to find)
2. A 1 bedroom flat/unit in North Melbourne - $250k
3. A 1 bedroom flat/unit in essendon/flemington/ascot vale/kensington - $190-200k

I am happy to get something and spend the 6 months im in it doing it up as well.

Thoughts on the above?
 
I'm not from Melb but a 2 bedder in Ascot Vale or flemington should make for a good investment. A mate of mine lives in Ascott Vale and likes the location.

A 2 bedder will give you more options - would be good to get off street parking if you can

Good luck
 
Hi Ben,

As far as past and potential future capital growth is concerned, the suburbs you mention have been and are more than likely going to be fantastic. You probably can't go too far wrong in that general area.

For what it's worth, I reckon two bedrooms are better than one - but that is purely my opinion. Two bedrooms open up a bigger potential pool of tenants, from a single person looking for some extra space to a few people looking to share the rent together. And the price of a two bedroom place, in general, is not that much more than a one bedroom place. Similar with the rent.

Go for it :)

Thanks,

BDM
 
I'd echo BDM's comments. Not that I have invested in units yet, but when ever I look, I only look for 2br+. Would'nt consider a 1br, even if it's still a single person - they will still appreciate the extra storage room/study etc.
 
Hi Ben.

Great to see you thinking about your future.

You said you will have $13-15K when you are ready to buy.

Do you think this will be enough? By the time you allow for legals, stamp duty etc, it doesn't leave much for the actual deposit.

Don't mean to sound like a wet blanket, as I genuinely like to see young people looking to secure their future. It's just that I've seen (or heard about) people getting loans with little deposit and then suffering for some time afterwards with the repayments.

Maybe I missed something.

Anyway, I wish you well.

Regards
Marty
 
Belu said:
cheers guys, a little re-jig of the options, what do people think:

To re-cap:
1. A 2 bedroom flat/unit in Footscray - $200k
2. A 2 bedroom flat/uni in Ascot Vale or flemington - $250k (harder to find)
2. A 1 bedroom flat/unit in North Melbourne - $250k
3. A 1 bedroom flat/unit in essendon/flemington/ascot vale/kensington - $190-200k

I am happy to get something and spend the 6 months im in it doing it up as well.

Thoughts on the above?
Click to expand...

Saw you at MIG but didn't get to catch up with you. Maybe next time!

I might throw in: Fairfield 1 BR

Reason: I own a 1BR in both North Melb and Fairfield. The Nth Mel one has already jumped in price, but the Fairfield one is still floating around 2004 valuation prices ($170-180k).

Happy hunting!

The Y-man
 
thanks for the notes on the 2BR guys - looks like if i go down that road it will be more ascot vale ($250k) or footscray ($200k).

In terms of deposit I was thinking of going for a 100% homeloan, using the FHOG and some savings to cover the costs.

The aim is to buy the first place and live in it for 6 months, then either move out and rent or move back home to save up again. A $200k loan will be about $350/week in payments, leaving about $320/week free after mortgage - i think i should be able to live off this.

I moonlight doing website coding, which is where the savings are coming from. So far i have $7k of jobs lined up over the next 6-8 weeks (plus $7k in savings which is where i get the $13-15k from). I have other money which covers incidentals and living expenses for the year and tax will cover car insurance, so if i can get more site jobs i should get more savings.

I also will be having to buy a lot of things like a couch, new bed, whitegoods, etc as i will be moving out. will be buying second hand as I dont know where I will be after the first place.

Say I was able to get together $20k by the end of the year - with FHOG adding $10k to bring to $30k. Would it be better to put a 5% deposit down and get a 95% loan or keep the other money for the next place and get a full 100% loan?
 
The Y-man said:
Saw you at MIG but didn't get to catch up with you. Maybe next time!

I might throw in: Fairfield 1 BR

Reason: I own a 1BR in both North Melb and Fairfield. The Nth Mel one has already jumped in price, but the Fairfield one is still floating around 2004 valuation prices ($170-180k).

Happy hunting!

The Y-man
Click to expand...

Cheers mate. I am looking to stay over in the North to North Western suburbs because I have family out here, and friends, as well as play hockey here 3 times a week, would make things a hell of a lot easier...haha.

BUT saying that, there is no point in buying somewhere (in my case anyway) where prices are going to be stagnant for 1-3 years. I am looking long term, but i think if i can find somewhere to give me a boost in short-term CG it will allow me to borrow more to jump-start my investment portfolio.
 
Hi Belu,

Looks like you have narrowed down some great area's and know what you want. Personally, I think Option 2 (1Br in North Melb) is where I would be heading. I was a Property Manager in Richmond for a few years and in terms of rental demand, 1 Bedders are highly desired. It can be hard finding a good sized one over 50sqm (which is the requirement for LMI), but if you can its worth it. Alot of renters would rather pay an extra $30PW for a decent sized 1BR with good/modern finishes, instead of the same priced 2BR that is run down. - Although I'm sure this mentality is mostly an inner city thing.
When I was 19 I bought a large 1Bedder in Prahran that I have been very happy with. Things to look for when buying apartments (and are desired by tenants) are:
Security Entrances
Off Street Parking
Gas Cooking
Entrance halls (instead of walking straight into the lounge from the front door)
Separate Bathrooms (not ensuites) - I'm talking abot 1Br flats mainly
Try and stay away from blocks of flats with catwalks (i.e. Everyone walking past the front door and windows).

Whatever you deside, you'll do fine, and its fun!

Cheers
Nikki
 
Thinking Thinking Thinking...

I guess there is a 2nd option to buying and moving out. Buying solely as an investment and staying in. Eg: taking $15k to cover costs, buying a $180k 2 br unit in footscray at 100% LVR, rent it out, stay at home and save some more.

Repayments at $290 a week (7.5%) with rent being about $180. So shortfall is about $130 a week after fees and what-not. So i should be able to save about $300/week whilst at home. And in 6 months time should be able to borrow about $170k again. This time using $10k FHOG and about $10k in savings will see me with a 2nd property in 6-8 months, rather then 1 and then having to maybe move home to save again. Thoughts?
 
Belu said:
thanks for the notes on the 2BR guys - looks like if i go down that road it will be more ascot vale ($250k) or footscray ($200k).

In terms of deposit I was thinking of going for a 100% homeloan, using the FHOG and some savings to cover the costs.

The aim is to buy the first place and live in it for 6 months, then either move out and rent or move back home to save up again. A $200k loan will be about $350/week in payments, leaving about $320/week free after mortgage - i think i should be able to live off this.

I moonlight doing website coding, which is where the savings are coming from. So far i have $7k of jobs lined up over the next 6-8 weeks (plus $7k in savings which is where i get the $13-15k from). I have other money which covers incidentals and living expenses for the year and tax will cover car insurance, so if i can get more site jobs i should get more savings.

I also will be having to buy a lot of things like a couch, new bed, whitegoods, etc as i will be moving out. will be buying second hand as I dont know where I will be after the first place.

Say I was able to get together $20k by the end of the year - with FHOG adding $10k to bring to $30k. Would it be better to put a 5% deposit down and get a 95% loan or keep the other money for the next place and get a full 100% loan?
Click to expand...

The more you have as a deposit, the less youll be paying ofcourse, BUT.. Is this necessarily a good thing?

You have to work out if you want to use an interest reducing offset account percentage while youre saving, you will want to know wheather paying more [with less deposit] is a good thing as far as - gearing goes,

at tax time, these expenses can be really good but is it saving you more than paying less interest?

Remembering that the more you pay down, the money remains as if its in your bank account once you sell up, with interest ofcourse ;]

Everyone has different strategies, you must find one that suits you best.
 
Belu said:
cheers guys, a little re-jig of the options, what do people think:

To re-cap:
1. A 2 bedroom flat/unit in Footscray - $200k
2. A 2 bedroom flat/uni in Ascot Vale or flemington - $250k (harder to find)
2. A 1 bedroom flat/unit in North Melbourne - $250k
3. A 1 bedroom flat/unit in essendon/flemington/ascot vale/kensington - $190-200k

I am happy to get something and spend the 6 months im in it doing it up as well.

Thoughts on the above?
Click to expand...

Hi Ben,

Looks like you have researched your prices well. As you will eventually rent it out, try to work out what a prospective tenant would think of the places you inspect. Some points may be:

1) Are the properties convenient to transport,

2) Is it pleasant - neat and tidy?

3) Does it have adequate car parking (either provided as part of the purchase) or adequate parking on the street.

4) What would attract a tenant to this area in general?

5) What age are the tenants likely to be? (Eg North Melbourne consists of mainly younger renters who are students or professionals working in the city).


Doing up a place could add some value which would be useful for when you have it re-valued by the bank with the intention of drawing on the equity to purchase again.

I'm hunting around again for an IP. I often float prospective properties by my property manager. In fact, that is how we purchased the last one. She came and inspected the place and said "buy it right now!" So we did, and boy, was that a good move!!

Regards Jason.
 
Well done on starting the journey of home ownership, its good to see that you are realsitic in your outlook on what you want. You may want to look at getting a guarantor for a loan also if you are short this may help you get into the market now rather than waiting for the deposit, of course this all depends on servicability. Try posting on the finance part of the forums and see what help you get.
 
Well just got back from a couple of open house inspections and two auctions. First auction saw a Violet st 35sqm 1 br in essendon go for $216k, and the second didnt see enough interested parties - 3, and we were one so really only two (was in fletcher st essendon).

Looks like for my budget i will be better served in Footscray for a 2br apartment. Interesting times ahead...
 
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