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Advice for a first timer.

Discussion in 'Investing Strategies' started by jamin, 10th Apr, 2008.

  1. jamin

    jamin Member

    Joined:
    10th Apr, 2008
    Posts:
    10
    Location:
    gold coast, QLD
    Hello all, i guess since this is my 2nd post a little introduction is in order.
    My name is Jaime, 22 yrs old and live on the goldy. I've always been interested in wealth creation ever since I can remember, before I knew it what it was you could say. Only recently have I actually had the resolve to do anything and I guess the statement to sum me up at present is I'm a millionaire, I just haven't got the money yet.
    Im not trying to make excuses for my lack of resolve in doing anything up until this point, things have happened, I've learned from them and I'm here now willing to do something about it, I am lucky to still be young although it would have been great for me to have started 4 years ago when I wanted to.

    That aside, the reason for my post is this:
    My mum has a property (PPOR), she bought it 3 yrs ago for $200k. It's sitting pretty probably worth about 260-270K at the moment. I live with my partner and she is at uni at the moment, life is hard with the two of us until she finishes her teaching degree (end of next year), then the money will start coming in nicely. At this point in time we can just afford to save $200 a week, and what I am thinking is that I might be lucky enough to convince my mum to let me use some of her equity to find my first property.

    Here is the deal, if allowable, should I use her equity to get my first IP (remembering I can afford to put aside $200 a week for it).

    I would be looking at investing for the long term, not for capital gains. I know that I cant afford a property near a capital or near CBD but I could most probably afford a house in a largish town (like Casino NSW for example). I'd be looking at no more than $220K for the property, using as much as my mums equity as possible (because I know the bank has to keep a certain percentage for some kind of insurance?).

    As a matter of personal opinion (not financial advice) do you think this is a viable option? (I would be taking into account the interest rates and I would probably wait a few months till they dropped a bit.)
    And if so, how much money should I have stored away for any costs the property would incur once bought and ongoing?
     
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Not that my advice is the most experienced on these forums or anything, but I get the impression that once interest rates start dropping a bit I think there will be a lot of backed up demand for people looking for both PPORs and IPs which will put a lot of pressure on property price to start moving north again.

    I'm actually in the process of saving for my first PPOR/IP myself and I'm doing everything possible to try and get in the market before the first interest rate cut.

    That's just my two cents.
     
  3. jamin

    jamin Member

    Joined:
    10th Apr, 2008
    Posts:
    10
    Location:
    gold coast, QLD
    so for everyone, would it be a good idea to get a variable 1 or 2 years and then once it drops to below 8ish get fixed?

    which brings me to the thought of how long do you think rising interest rates will last until they start cutting them again?
     
  4. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
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    Location:
    Brisbane, QLD
    http://www.invested.com.au/85/economists-warn-further-rate-rise-australia-34337/

    In this thread posted by Sim, it has a nice little video on some major economists projections for the next 18 months, which in short suggest that assuming the March CPI figures are less than 4% it is unlikely that the RBA will raise interest rates any further.

    In the lateline report it was suggested that we might then see the first drops in interest rates either late this year or early next year, and it was suggested that they may drop over the course of 2009 by up to 1.25%.

    From most of the stuff I have read, heard and watched in the last month or so, this theme is pretty similar, the economy is starting to slow to the point where future interest rates rises are unlikely and considering the gloomy forecast for the world economy we may well start seeing rate cuts in the future.
     
  5. jamin

    jamin Member

    Joined:
    10th Apr, 2008
    Posts:
    10
    Location:
    gold coast, QLD
    i would love this to happen, that would rock. if i could lock in for 5 yrs and 8% interest i would be happy as pie. by that time i should have my own deposit an i can use my mums equity for another or maybe to jump into the market with some good MFs