Newbie looking to buy in Cairns... Need advice!

Hi Everyone,

At the moment I'm 18.5yo, from WA, and moving to Cairns in July for uni. I've been researching house prices and they are so much cheaper than in Perth, so I've been thinking about buying an apartment/unit/townhouse to live in while I'm there, and later rent out as an investment property.

I have a few problems though.....
#1 I don't have a lot of idea about property investment!

#2 Body Corporate fees....: I don't fully understand these, but from what I can gather it's a fee that is charged to the owners for the upkeep of the building and it's facilities as a whole. They seem fairly high, though, so would it make more sense to buy a house, and avoid paying these fees?

#3 By the beginning of next year, I hope to have saved $30K (I have $7K in bank so far, have a high paying summer job each year, will be working full time till July, and part-time while at uni, and will be selling my $15K car, too) so I'd be able to get a loan (hopefully) for $150K. So I could get an apartment worth what I'm able to loan, OR I could get a cheap apartment (I've seen them as low as $40K, but would more likely go for the ones worth minimum of $70K) that I could comfortably pay off in about 3 years. Would it be better to have the smaller asset paid off sooner, or a bigger asset that I'd be paying off for around 15 years? Another benefit of a cheaper property may be that I could lend the money from my parents, and pay it off in bigger chunks/lump sums when I'm earning larger amounts during the summer, rather than it being a big tight making weekly payments sometimes during uni and part-time work.

#4 As I'm only fresh into adulthood, I have no credit history. What would be the best/most effective way of getting a credit history in 12months that a bank would look upon favourably?

#5 Last, but not least....Is Cairns a good place to buy property? Are there any other things I should know about buying property in Cairns?

Sorry for so many questions...I appreciate all advice anyone can give! Look forward to learning from you all. :):D
 
Hey Toots,
Welcome to SS and I'm glad you have stumbled across this amazing site. Firstly great work on your outlook at such a young age. To be already positioning yourself to get into property at 18 is an amazing achievement.

To best answer your questions.
1 - I am glad you said this first. Before you do a single thing you should educate yourself on property a lot more. Understand the pros and cons and then the strategies available to you to achieve wealth and ultimately an end goal of financial freedom. There are endless good books available. I like the easy reads of steve mcknight 0-135 or something by Margaret lomas. Very good entry level books which cover a lot of topics.

2 - The books will answer this but your basically on the right track. Body corporate fees basically cover the cost of repairs and maintenance to common land. The fees differ greatly depending on ameneties, for example prepare to pay a lot more if your complex has pools, gym, tennis courts.etc

3 - This is where you are going to need to educate yourself a lot more about both property investing and the suburb you are considering. I am not sure what 40k could even get you but I imagine it's growrh outlook would not be promising. What sort of yield would you get? Remember it costs money to hold property (finance, rates, maintenance, body corporate, management.etc). If when this becomes an IP your getting $60 a week and even after paying it off it costs you $5000 a year to hold then you actually losing money and the property becomes negatively geared. This is not a bad thing when the propery has strong growth outlook but a 40k student apartment in cairns most definitely will not have that.

4 - The banks look at so much more than just a credit history. Speak to one of the many amazing brokers on this forum but going out and getting a credit card to improve your credit score will do more damage to your serviceability. Given your 18 have saved as much as you have will go a long way! The unsteady income is the main obstacle in your way. It is very likely you will need to get a part time job whilst studying to show you can afford a loan. A pure summer job is unreliable, they will want to see a constant cashflow I would say before they would consider lending to you.

5 - Type cairns into the search and you will find a huge thread about it. Cairns has shown some good growrh recently and there are talks of a massive casino development but a lot believe this is just a ploy. Also "cairns" is very General, you need to drill down and explore the suburbs. 10km can be the difference between no and a lot of growth.

Good Luck!
 
Hi Toots
I suggest that you spend some time reading and learning more about property investing generally while you are saving before jumping in.
Yes there are some very cheap units in cairns -$40k I haven't looked for a while but I assume you mean serviced or holiday apartments in Woree, these were approx $30k in 2002 increased in value before decreasing again. They are probably difficult to use a security for a loan at a decent LVR as the banks don't seem to like them?
There are some good value units around between $100,000 and $175000 at the moment but you need to be careful of body corp fees which can vary greatly and be excessive.
The Cairns market generally was hard hit by the GFC, high dollar and cyclone Yasi which has led to probably the highest insurance premiums in Australia.
I have seen some good deals recently eg $140k 2bed unit rent $260 BC fees approx $3k per year, still a good return.
There have been practically no new units built in Cairns since 2008-2009 due to the GFC and essentially a market failure in the unit market due insurance premiums but things seem to be improving with the tourism industry picking up.
For a cheap place to buy and avoid paying rent, your repayments on a P&I loan might be similar to renting.
If you are a portfolio builder this mightn't be the best option for quick capital growth to get you started.
It also depends where you would like to live while going to JCU but either way I would suggest getting to know the local market better before jumping in.
Hugh
 
Don't automatically reject body corporate fees. These usually include some things you have to pay for with a house - building insurance, security, gardening etc. the sinking fund component allows for external painting, roof repairs, and building maintenance.

Features that increase fees dramatically are on-site managers, lifts, gyms and, to a lessor extent, pools. Though in Cairns, a pool would be an asset.
Marg
 
Hi Toots, you?ll be moving to a beautiful part of the world and July is a good time to do it ? it will give you a chance to adjust to the heat and humidity.

Re the body corp fees ? they?re high-ish in Cairns due to the insurance premiums but you?re correct in saying they?re also to look after the facilities. You will have similar expenses with a house though.

If you?re looking to purchase a unit be wary or size as a lot of banks don?t like it if the unit is below 50sqm, You can still get lending but the LVR is quite low.

Keep in mind what you will need to qualify for lending with one of those being consistency in employment. If you are currently working full time in Perth and looking to purchase a principal place of residence in Cairns the banks will question this and will want you to show that you?ve also secured employment in Cairns too.

Don?t pay down your mortgage! If it?s going to be an IP eventually then set the loan up as interest only with an offset account. Therefore when you move out you have maximised your tax deductibility on the place. It is getting a bit hard to have an IO loan against your PPOR, though, I?m not saying it can?t be done.

I wouldn?t be too concerned about not having a credit score ? being 18 the banks expect this. To show the commitment to repay put aside in an account how much the loan would cost you every week/month and show that you can afford the loan before it?s even granted. Also don?t let your account be overdrawn or any dishonours on direct debits you may have set up.

GFC hit Cairns hard and is coming off a low base but in the last couple of years prices have started to creep up slowly. With the speculation of Aquis there were a lot of people holding off on putting their properties on the market and now Aquis has been put on the back burner in this month alone there?s been quite a few properties go on the market which may soften prices a bit but I don?t think is overly concerning as there?s a lot going on at the moment with investments in infrastructure and the like. There?s a couple of areas in Cairns that have experienced the highest CG % in the state but also, if I recall correctly, Palm Cove has the highest default rate. But, I do see Cairns experiences a bit of CG in the next few years.

Have a look at the council website for flood zones. The red areas will attract much higher insurance premiums. Though, I am in a red area and haven?t flooded (yet!) with the last couple of cyclones.

Just read, read and do some more reading of the forums and educate yourself that way. There?s a wealth of information on here with a lot of SME?s willing to share their knowledge for free.
 
For a unit purchase the M suburbs, Woree and Paramatta Park are the cheapest due to the areas having a high % of HC tenants, I have seen some cheap 4-6 unit blocks for sale in these areas over the past few years but haven't jumped mainly due to concentration risk and high insurance premiums. I have used an insurance broker to find better premiums on occasions in Cairns.
 
Vacancy rates for houses and units are also quite low and rents are still edging up which will also support future price growth as a lot of units are still below replacement cost.
 
Just going off #4 - building a credit history.

I find there is a lot of misconceptions with younger borrowers about the need to 'build' a credit history, so they get a car loan/personal loan/credit card to do this. What they don't realise is that this is actually detrimental to their credit score and borrowing potential!

Get a good *investment specialised* mortgage broker who can listen to your investment goals and help you grow your knowledge - this will help supplement your investment knowledge and play into the types of investments you may buy, price ranges, yields etc.

Kinnon who posted earlier is a Cairn's local who is also a mortgage broker - have a chat with her and I'm sure you'll come out of it in a stronger position with an increased knowledge of your capabilities. :)
 
I am friends with a couple who moved from WA, Perth specifically because they could not afford property in Perth. They now have a mortgage on a unit in Holloways Beach that backs on to Hibiscus Lane, the most desirable address in Holloways Beach, the second beach from Cairns.

So yes, there is great property available in Cairns for the discerning buyer. Whilst HTW have moved Cairns up a cycle in the property clock, my experience is that the property market is not a given upswing yet.

I had an offer accepted on a property at Holloways Beach two weeks ago for 7.5% below asking price, and my sister had an offer accepted 6.5% below at Goldsborough

Given that, I would not be offering asking price... as of... ever...
 
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