Question from a beginner

[frayli]

Hi Im am new to the forums and this seemed to be the best place for this post.
Well the year is over and my wife and I have a few choices to make. We now both have secure jobs and are starting to think whether buying a house is the right choice right now. We are both 23 and have around $400-500 spare a week that we are saving right now. Savings to date are at about 20k, 5k is in shares so I will probably leave that there right now. At the moment we have quite cheap rent 12k a year in mill park. the three choices I can see is:

1. Buy a house to live in while prices/interest rates seem to be low around our area. Preferably something new to boost the FHOG (maybe even metricon with their new offer)

2. Buy a house as an IP and live in it to get the FHOG (needs to be near work) / Buy an IP but forgo the FHOG in hopes to benefit in a higher yield/ capital growth area.

3. Keep saving and buy a house/more shares in the future

 

[The Y-man]

My view given the current economy and FHOG, is buy a place to live in - save up enough for a 20% deposit...


Cheers,

The Y-man

 

[frayli]

Is the 20% purely to avoid mortgage insurance or just a better leg up on paying the loan. As far as areas go Slightly south of mill park would be nice for my wifes job but north is much more affordable. Would you have any reccomendations with suburb within 10km or at this point in time does it not matter too much.

 

[The Y-man]

Is the 20% purely to avoid mortgage insurance or just a better leg up on paying the loan...

Bit of both. If it is going to be a ppor, then I would avoid the LMI.

As for the area, you are going to be living there, so I think to some extent, personal preferences should take precedence.

Cheers,

The Y-man

 

[Propertunity]

1. Buy a house to live in while prices/interest rates seem to be low around our area. Preferably something new to boost the FHOG (maybe even metricon with their new offer)

I think this is a good idea (but I am biased). I'm not to into new though - as new tends to be in new estates and developers have certain control over pricing. I'm personally more into old in need of reno in established area - but that's just a personal choice. Take the Fed's money while its on offer.

2. Buy a house as an IP and live in it to get the FHOG (needs to be near work)

You probably mean buy a PPOR to get the FHOG and at the first available opportunity - turn it into an IP. Yep - fine.

Buy an IP but forgo the FHOG in hopes to benefit in a higher yield/ capital growth area.

nah, take the Fed's money. Get some equity going in your PPOR and use for deposits on IPs down the track a little.

3. Keep saving and buy a house/more shares in the future

Do all the above and then keep saving and buying more houses and shares.

 

[want2bewealthy]

A while ago I would have advised to keep renting cheap and purchase an investment, but as you have the buying power to pick up a really good deal if you do it right combined with low rates and the increased FHOG and stamp duty concession Id be purchasing my own home, as Ive just done myself, you will be able to keep saving and purchase more with your equity and savings, I also suggest going interest only on your PPOR with an offset account which you can use as your deposit whilst decreasing your monthly repayments, still 'pays off' your mortgage but you have the flexibility to keep it as 'your money' whenever you need it, if you ever do, you might find you are still able to save alot each week and in time you can just purchase with equity and further leverage into the market, never underestimate the power of OPM or leverage, in my opinion it is the main key to wealth.

 

[frayli]

Thanks heaps for the help, I am on holidays which gives a nice amount of time to think about the year to come. I think i have decided on the
"save 20%" route the new house idea was mainly since the house we are renting at the moment is brand new and my wife liked the idea of moving into something similar, but I do agree with you that their is rarely going to be a bargain from a developer. My wife will be working 4 days a week this coming year so that gives us some reno time as she has helped do up two of her parents houses quite nicely. My only decision now is which suburb to pick, Mill park does have some potential with all the new shopping centres being built right around it and I have seen some houses which would nearly be cash positive with only a 20% deposit. If anyone else has an oppinions about neighbouring suburbs I would love to hear them.

 

[Lamingtons]

Frayli, I think there are a lot of newish houses in Mill Park that are quite affordable (compared to Bundoora). What was the price range you were looking at, I keep seeing 3 bedroom townhouses/units that are in the area of $330K whenever i search Bundoora.

 

[frayli]

Target budget is around the 300ish obviously the cheaper it is the quicker I can afford the 20% It seems alot of those 3br houses come with very small land content is it worth looking for something a bit larger? 290K looks achievable for a nice 3br, which at the moment are still fetching near 300p/w for rent.

 

[sparky23]

If the house is for you to live in then the size of the yard will depend on how much yard you want for yourself otherwise I would only go for a big yard if you want to have the opportunity to sub-divide in the future and then you would need to check in advance with council as to what would be permissable.

If you give a tenant a big yard chances are it won't be maintained and it won't affect the amount of rent you can charge either. To give you an idea a couple of the homes I am selling at work rent out at $440 per week but the block sizes are only around 450sqm, other houses on the estate with larger blocks do not attract more rent.

 

[Lamingtons]

Frayli, sorry I was under the impression you wanted a PPOR.
If you are after brand new appliances and don't want to renovate a smaller plot of land would work. I did not realise that you were thinking of renting it out. I think a lot of Mill park is new built, correct me if i am wrong or they are <10 year old. So i wouldn't expect a huge block of land. If you are after land content with your budget, i would expect to have to fork out for renos and brand new appliances.

 

[frayli]

Lamingtons the idea is to use it as a PPOR only for the 6months needed to get the FHOG after that we would rent it out. The house we are renting at the moment is a brand new 2br unit in mill park for 230 a week (the owner is a friend of ours) the identical block next door is rented our for 260p/w. As far as appliances go the only things I can think of is a dishwasher am i correct? (we didnt have any appliances given to us by our landlord) We would be quite happy to renovate as long as it doesnt involve knocking walls down etc.

 

[want2bewealthy]

Lamingtons the idea is to use it as a PPOR only for the 6months needed to get the FHOG after that we would rent it out. The house we are renting at the moment is a brand new 2br unit in mill park for 230 a week (the owner is a friend of ours) the identical block next door is rented our for 260p/w. As far as appliances go the only things I can think of is a dishwasher am i correct? (we didnt have any appliances given to us by our landlord) We would be quite happy to renovate as long as it doesnt involve knocking walls down etc.

Mate, I honestly would be jumping onboard, the FHOG is $14000 for the time being, double what it was and stamp duty concession depending on purchase price could be around a further $15000

How can anyone pass this up? its almost a years wages for nothing tax free, would take care of your repayment for a year or more so your effectively living rent free, or you could do rennovations to add value, new car, whatever you want, then when you move out you attract a higher rent and make the property cashflow positive, how could you go wrong? youve got another few months to negotiate a good deal and buy equity from the get go so theres more money for you, who knows you could end up 'buying' 30k on a good deal so 60 odd thousand and then the grant falls back to $7000, I really hope you do something.

 

[frayli]

I will definately be doing something serious in the next month or two, I have already made a booking with a friend that is a mortgage broker to truely weigh up what I can borrow etc. The main help I need now is if Mill park will be better off than south morang or epping which are all close enough to work. I have a few days off next week where I will do some drive bys/inspections. I am really stuck with the area choice though as it seems things are cleaning up around here which makes lalor (just around the corner) a bit more enticing although in its current state I couldnt live there.

 

[want2bewealthy]

Live wherever youre most comfortable, chances are that others will think likewise and therefore your potential for capital growth as opposed to the other suburbs would most likely be increased.