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Buying my First IP

Discussion in 'Real Estate' started by duduk, 25th Jun, 2014.

  1. duduk

    duduk New Member

    Joined:
    25th Jun, 2014
    Posts:
    1
    Location:
    Sydney, NSW
    Hi Guys;

    I have Just registered to this forum, i have actually just found it via google, not only that, but i am actually very new to this world of investment... :)

    i am thinking of buying my first IP, i have never bought any properties before in Australia, been reading online about it, but i found lots of terms and techniques that kept me even more confused.

    and finally i decided to buy an investment property, which would be positively geared, or at least with a rental that would cover the loan repayments and the regular fees (council, strata,water,...etc) AND with a good a chance of capital growth in the next 5-10 years.

    Now i have lots of questions that i am still looking for an answer to :

    1- is that model even possible ?
    2- should I get a house in western suburbs or 2 beds aptmnt somewhere close to the CBD (500K-550K) ?
    3- what if i get an older house in Western Sydney for a lower value, renovate and then put it for rent , would that achieve my goals ?
    4- would a house in western sydney be easy to rent ? [any website i can get stats or information about the renatl percentage for certain suburbs]
    5- is there any specific suburbs to consider , which could be promising in the next few years ?
    6- considering the loans, if i have enough cash to pay around 50% of the unit price, should i do that and minimise the repayments, or pay only 20% (or less with LMI) ?
    7- my understanding is that, for negatively geared properties, only the portion of the repayment which represents the interest , is deducted for tax purposes, is that correct? Usually, or roughly (for estimation sake), what percent that would be from a monthly repayment ?
    8- what do you think of paying to a buying broker for his services to find, negotiate, and do all the work to buy the property for me , does it worth it?
    9- i am thinking to buy another property to live in, early next year, is there anything i would consider while buying my IP now?
    10- considering that i have never bought any properties before, i belive i am eligible for some government grant, would that apply to investment properties ? if not , you think i should consider living in this property for a while to get the government grant benefit ? or in other words, what i actually need to do to benefit from that ?

    Thanks for your help, and sorry for the lengthy thread...

    cheers
    duduk.
     
  2. PhilB

    PhilB New Member

    Joined:
    27th Aug, 2014
    Posts:
    1
    Location:
    Sydney, nsw
    Yes, the model you are looking for is certainly possible, but you have to do the research to get the right area and type of property etc. The one thing I would suggest is that you always try to do your own research wherever possible. If you want to get skilled up on some property investing strategies, you could do worse than checking out some of Dymphna Boholt's educational seminars - iLoveRealEstate - 1-Day Training Event
     
  3. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    1- is that model even possible ?

    Anything will be positive cashflow with enough deposit

    2- should I get a house in western suburbs or 2 beds aptmnt somewhere close to the CBD (500K-550K) ?

    This is like asking what you should have for dinner - depends


    3- what if i get an older house in Western Sydney for a lower value, renovate and then put it for rent , would that achieve my goals ?

    What are you goals?

    4- would a house in western sydney be easy to rent ? [any website i can get stats or information about the renatl percentage for certain suburbs]
    Plenty of renters in all areas of Sydney. Look for vacancy rates in the areas you are consideing.

    5- is there any specific suburbs to consider , which could be promising in the next few years ?


    6- considering the loans, if i have enough cash to pay around 50% of the unit price, should i do that and minimise the repayments, or pay only 20% (or less with LMI) ?

    You say below you may buy a PPOR later on. if all your cash is tied up in an investment that will mean higher non deductible loans on your PPOR. This means more tax will be payable

    7- my understanding is that, for negatively geared properties, only the portion of the repayment which represents the interest , is deducted for tax purposes, is that correct? Usually, or roughly (for estimation sake), what percent that would be from a monthly repayment ?

    Only interest on a loan is deductible - whether positive or negative geared.

    You should get an IO loan and all the interest will be deductible.

    8- what do you think of paying to a buying broker for his services to find, negotiate, and do all the work to buy the property for me , does it worth it?
    Could be a good idea/


    9- i am thinking to buy another property to live in, early next year, is there anything i would consider while buying my IP now?

    Borrowing as much as possible for the IP to preserve cash for the PPOR.

    10- considering that i have never bought any properties before, i belive i am eligible for some government grant, would that apply to investment properties ? if not , you think i should consider living in this property for a while to get the government grant benefit ? or in other words, what i actually need to do to benefit from that ?

    Are you talking NSW? I don't know of any first home owner grants but it might be a good idea to live in the property initially for CGT reasons.
     
  4. K_veg

    K_veg Active Member

    Joined:
    24th Jan, 2011
    Posts:
    32
    Location:
    Milan, MI
    Sorry I don't know much about the Sydney market, but for your other questions:

    6- considering the loans, if i have enough cash to pay around 50% of the unit price, should i do that and minimise the repayments, or pay only 20% (or less with LMI) ?

    - Get a loan with an offset account (this is a MUST, and for tax purposes is NOT the same as a redraw facility)
    - Get an interest-only loan
    - Borrow as much as you can (up to 80%) and put any extra into the offset account. The interest on this loan will always be deductible, even it if is needed later for personal use.
    - Keep making IO payments, but put all your savings each month into the offset account. (I like to have my salary paid into the offset account as well).
    - When you buy a PPOR, withdraw the funds from the offset account, so that your non-deductible PPOR loan will be lower.
    - Keep making IO repayments on the investment loan (so the loan itself never reduces), and start paying as much as possible off the loan on your PPOR.

    7- my understanding is that, for negatively geared properties, only the portion of the repayment which represents the interest , is deducted for tax purposes, is that correct? Usually, or roughly (for estimation sake), what percent that would be from a monthly repayment ?

    Correct. As stated previously, get an IO loan and all interest will be deductible.


    9- i am thinking to buy another property to live in, early next year, is there anything i would consider while buying my IP now?

    As stated above

    10- considering that i have never bought any properties before, i belive i am eligible for some government grant, would that apply to investment properties ? if not , you think i should consider living in this property for a while to get the government grant benefit ? or in other words, what i actually need to do to benefit from that ?

    I think you need to live in the property 6 months to get the grant. It depends on your situation. You need to weigh up 6 months of rental income and depreciation savings from renting the property out straight away, compared to what you would receive in grants if you lived in it.