What would YOU do???



From: Michael Howser

Hello, o' learned ones.

I'm hoping to get some opinions from those who have been there, done that.

My wife and I are both in our early/mid 20's and are just starting out on this exciting journey. We're renting from family friends (only $100/week) and hence find ourselves in the dilemma of what to do first.
We're both very interested in IPs, so we have no questions about what we want to do, we're just not sure how to go about it.

We've considered a few options:
1/. Buy our 1st PPOR , live in and reno, then borrow against the equity for PPOR #2 (renting house #1). Do the same with #2, then buy #3 with the new equity. The tax benefits don't look good here though, because our new loan is now PPOR and hence interest not tax-deductible.
How do others do this?

2/. Buy an IP while taking advantage of the cheap rent, using the opportunity and tax savings to save for deposit on #2, or our own house.

3/. Build 1st PPOR in a new estate, taking advantage of FHOG and pre-family double income to pay off as much as possible. Borrow against equity in 2-3 years for 1st IP
(We realise this is a lot slower and riskier, but the personal comfort factor comes into play here.)

I'm sure there's many other options, just didn't want to bombard you all with too much info. Is there info required that might help the formulation of your opinions? We're in Vic, combined income just under 90K... More info needed?

Any opinions would be most welcome, as the more we read the more confused we become.


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Reply: 1
From: Manny B

Hi Michael,

what I would do in your situation is:

1. Try find a a vacant block that can be subdivided to build your home (leaving enough land to build your first IP on the remainder land)... that way you can get the $10k rebate from the govt...

2. When u get your finances right, build on the remainder block a 2 or 3br unit which u subsequently can rent out...

3. When u have built up enough equity (which you will immediately) & finances allow, look for your next IP...

This may mean that u start off in a smaller home, but when u build enough $$$

This is just my opinion, I hope this helps...


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Reply: 1.1
From: Simon and Julie M

Hi Michael
Yes there are lots of options for you to choose from. Whatever you decide to do, make sure you feel comfortable with the strategy and the property you choose to work with.
Through my experience as an investor I have learned the "KISS" principal often is the best in the long term.
Remember that not all properties make good investments. Be aware of the market you intend to enter. Small steps allow for small mistakes to learn from.
I believe that the biggest mistake you could make is to do nothing.
happy investing
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Reply: 1.1.1
From: Mark Laszczuk

Can't tell you what to do, that is your question to answer. But, here is what my partner and I are doing. We're almost identical to you, except the pay (yours is much higher). We also pay more more rent than you. But, we choose to do so for a number of reasons which shall remain private. We have decided that we are going to purchase IP's first, home later. But that is a decision we made based on hours of reflection and discussion and lots of questioning. In your case, I don't see why you would want to not take advantage of the REALLY cheap rent for as long as possible. Is it easy for you to maintain your lifestyle/needs (by this I mean getting to work, shopping, etc.) where you are now? If so, stay where you are and buy IP's (please note that this is what I would do, it's an opinion, not advice). With your income and rent, you should be, at the very least putting one of your pays away as savings, if not that and part of the other one as well. Sounds to me like you're on a real lucky streak there, mate. Wish I was you! Anyway, good luck and don't make any rash decisions.

'no hat, some cattle'

P.S. I'm in Melb. also if you'd like to get together, email me.
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From: John Fewster

Stay with the cheap rent for as long as possible.
Buy your dream home now. Let the tenant and the tax man pay it off for you. In the meantime, save as much money as possible. When you eventually move in,say five years time, use your substantial savings (one partners entire pay placed in managed funds for that time) to pay off loan as quickly as possible. Then worry about other properties. The equity will be there by then. So will the experience of dealing with tenants.Thats what I did. Now got 4 properties. Paid off P.P.R in 3 years. Gained 250k in equity in 5 years. And thats in Adelaide!
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From: Michael Howser

Isn't it incredible how such an obvious solution can be so easily overlooked!!! This sounds like EXACTLY the idea that has bounced off my head so many times! Thanks to all who responded, particularly John!
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From: Boyler Room


Why aren't we seeing you at Freestylers if you're in Adelaide?? We'd love to have you, and anyone else in ADL that's interested in investing.

Boyler Room
Co Ordinator for ADL Freestylers
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