New to property investment - solution needed!!

First Investment Dilemma
I am a 26 year old female with a secure government job, I earn $53,000. I have just purchased my first home in Western Sydney for $320,000, my mortgage repayments are about $890 per f/n. So far I have re-painted, polished the floorboards, installed a new kitchen, and new air-con in the lounge room and master bedroom, all up I have probably invested $20,000. I have lived in the home for 12 months, and I rent out 2 bedrooms for a total of $325 per week (Including bills).

My dilemma is this: I have worked hard to secure the house which I hope in the future to turn into an investment. It doesn’t feel like my own, and I am sick of living with other people. I am thinking of renting an apartment and, renting my whole house out instead of sharing. I believe I could get $320 - $350 p/w for the house, however this would match what I myself would pay in rent. At the moment I have very little disposable income with all of my money pouring into fixing up the house. My long term goal is to secure investment properties for a good future; but I am extremely unhappy with my current living arrangements :(

Q1: Is it financially viable for me to rent out my house, and me rent an apartment somewhere else?

Q2: Tax time is coming – do I declare the rent from my roommates for the purpose of claiming the tax incentives (Interest on loans etc) – I don’t know too much about this area – or do I just keep the cash in my hand?

Q3: What is the best way for me to move on and up from here?

First Investment Dilemma

I am a 26 year old female with a secure government job, I earn $53,000. I have just purchased my first home in Western Sydney for $320,000, my mortgage repayments are about $890 per f/n. So far I have re-painted, polished the floorboards, installed a new kitchen, and new air-con in the lounge room and master bedroom, all up I have probably invested $20,000. I have lived in the home for 12 months, and I rent out 2 bedrooms for a total of $325 per week (Including bills).

My dilemma is this: I have worked hard to secure the house which I hope in the future to turn into an investment. It doesn’t feel like my own, and I am sick of living with other people. I am thinking of renting an apartment and, renting my whole house out instead of sharing. I believe I could get $320 - $350 p/w for the house, however this would match what I myself would pay in rent. At the moment I have very little disposable income with all of my money pouring into fixing up the house. My long term goal is to secure investment properties for a good future; but I am extremely unhappy with my current living arrangements :(

Q1: Is it financially viable for me to rent out my house, and me rent an apartment somewhere else?

Q2: Tax time is coming – do I declare the rent from my roommates for the purpose of claiming the tax incentives (Interest on loans etc) – I don’t know too much about this area – or do I just keep the cash in my hand?

Q3: What is the best way for me to move on and up from here?
 
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Q1: Is it financially viable for me to rent out my house, and me rent an apartment somewhere else?
It depends on what you are saving / spending now. If you rent your house out as a house and pay the same rent on a unit somewhere else you will be missing out on the rent you currently get from 2 rooms. Can you afford that?

Q2: Tax time is coming – do I declare the rent from my roommates for the purpose of claiming the tax incentives (Interest on loans etc) – I don’t know too much about this area – or do I just keep the cash in my hand?
No need to delare rent from boarders no. They can be considered contributing to household expenses. There are other threads on this in the forum here.

Q3: What is the best way for me to move on and up from here?
A few options:
1. Make more money - get a promotion / start a business on the side
2. How about getting your place revalued since you have done a lot of reno work? You might be able to refinance some cash out for a deposit on another place.
3. You might just have to wait a while while rents increase over the period of the next few years.

Congratulations on getting this far.
 
Q1: Is it financially viable for me to rent out my house, and me rent an apartment somewhere else?


Yes, we did that for many years.

Q2: Tax time is coming – do I declare the rent from my roommates for the purpose of claiming the tax incentives (Interest on loans etc) – I don’t know too much about this area – or do I just keep the cash in my hand?

As I undertsand it, as long as you haven't and do not claim interest, depreciation etc on your current home, you basically have 2 "boarders" assisting with your costs. There are other threads on this:

http://www.somersoft.com/forums/showthread.php?t=38101
http://www.somersoft.com/forums/showthread.php?t=56658
http://www.somersoft.com/forums/showthread.php?t=8595


Q3: What is the best way for me to move on and up from here?

There is never one best way - each to their own.

The Y-man
 
Am I going a little crazy, or is this a duplicate thread. I did post an answer to this question but it has either disappeared, or is there a duplicate question somewhere else?
 
There were 2 threads - I've merged - not sure where your repsponse went though.... :(

The Y-man

Thanks for letting me know I am not going mad Y-man :).

Basically, I suggested that the third room (your own) be rented out for another $165 per week but having not rented houses by the room before, I an unsure of the legalities of this.

Then you could rent a small unit that costs less than the total of the three rooms you could rent your house for. Stop spending money renovating and if the house is negatively geared, look at doing a tax form to get back your refund each week to help with the cash flow.
 
First Investment Dilemma
I have worked hard to secure the house which I hope in the future to turn into an investment. It doesn’t feel like my own, and I am sick of living with other people. I am thinking of renting an apartment and, renting my whole house out instead of sharing.

Your situation can be best summed up by this quote: There are two things to aim at in life: first, to get what you want; and, after that, to enjoy it. Only the wisest of mankind achieve the second. - Logan Pearsall Smith

It sounds like at 26 you're acquiring the wisdom that many new investors don't discover until much later in their life.
 
I am interested in where in Western Sydney you would purchase a home for $320k, spend another $20k renovating and then only be able to get a rent return of $325pw. That is less than 5% yeild for the dollars spent. :eek: :confused:

An ex-housing commission home in Mt Druitt will rent for around $280pw, whereas a nicer home in St Clair will get you around $360pw. At this stage in the market, you won't get a huge amount extra in income for a renovated home. Are you 100% sure in your estimate of what the rent would be?

As for your boarders, again, are you charging the right amount? My daughter is paying $140pw for a room in a small unit in Mt Druitt, NOT INCLUDING BILLS. This is about the going rate. Since the purchase price of your home is around $320, I would guess that it is not in one of the H/C suburbs, so you could easily get more that $165pw if you wish to rent by the room.

Firstly, I would STOP RENOVATING. It appears that you may be overcapitalising. Instead of renovating, have you considered putting in a Granny Flat. You could live in the Flat (by yourself), while renting out the home.
 
Hey skater,

I live in Colyton (St Marys) on the boarder of St Clair and St Marys. The house is about 30 years old, brick vaneer, has three bedrooms, 1 bathroom (3 way but needs to be renewed), formal lounge room, another lounge/sunroom room, formal dining room, a large eat in kitchen, a storage room (used to be a laundry - hope to turn it into a small bathroom), internal laundry, it has a 1.5 car garage on a 581sqm block. The location is good, a nice quiet street only used by residents, walking distance to local shops, doctors etc.

I'm not certain of the rental value, as I just did a comparison with those in the area with similar features. I rent 1 bedroom out at $150 and the other furnished at $175 - neither rooms have air-con, but both have built ins, freshly painted, new carpet or newly polished floorboards including bills, foxtel and internet. I live in the master bedroom that has air-con and is of the same standard freshly painted etc.

I have considered turning the garage into a granny flat - but it would need alot of work as it is a fibro garage on concrete. Any ideas on cost to tranform? I would take an uneducated guess around $12,000.

I would obivously get more in total if I were to rent my bedroom out and live elsewhere - as the house would be furnished and I guess I would still have to cover the bills. I'm assuming in total I could get in the area of $500 p/w on a room by room basis with me covering bills - or around the $320 - $350 p/w mark for a normal unfurnished rental house.

What are your thoughts on this?

Also a question: How much equity or cash would I need to purchase my next investment (if I were looking at the lower end of the market say max $250,000) - Considering I only earn $53,000 from my work (not including the rent I receive)

I have taken into account the other responses - and yes to rent a place for myself for $350 P/W is maybe extravacant. I could perhaps live with family members for about $150 p/w including bills, but I might be trading one frustration for another.
 
Could you BUY a small unit using the equity as a deposit. The money you would need to repay this next purchase would possibly not be much more than rent somewhere else.

Living back with family after being on your own would be hard (in my opinion anyway).

If you get a cheapie place to yourself, pay it off whilst enjoying your own space and rent your place out, then you already have your second IP. Keep it interest only and repeat.
 
Transforming a garage (if you are doing it legally) can be quite expensive. I haven't done this myself, although I do have one of these at the moment that needs extensive reno's. To get it past council, from memory when looking at the new regs for granny flats, it will need to sit 90cm off the boundary. I could be wrong though. You can also get a pre-fab one, but you still have the costs of connecting to services, etc.

Another alternate is to section off a part of the existing home, if you have two bathrooms & could put a kitchenette into it. Depending on the layout of the home this could be a realitively easy project, or an impossibility.

As for the equity required for another purchase, well, depending on your banker/broker it could be 10%-20% of the purchase price of the new one, but would you have that much yet, because you would have to keep the total LVR around 80-90%?
 
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