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loop holes for the first home buyer?

Discussion in 'Real Estate' started by lukeypapa, 14th Jul, 2009.

  1. lukeypapa

    lukeypapa New Member

    Joined:
    14th Jul, 2009
    Posts:
    4
    Location:
    melbourne,vic
    hey all,
    i have been looking to purchase a PPOR in order to get the FHOG, although after the 6 months i wish to convert the property into an IP.
    i vaguely read somewhere that in certain circumstances the 6 month requirement can be reduced, and therefore converted into an investment property sooner. is this true?
    also i have found some good buys interstate but this would mean that i would not qualify for the FHOG because i would not be able to move into the PPOR?
    furthermore i have been receiving centrelink youth allowance payments (i am a student). does purchasing a first home sacrifice my payments or increase them?
    is there any way around my dilemma?

    any help will be much appreciated.
     
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    I think you will find our bigger issue will be getting finance, have you looked into if a bank will even lend you any money? and if so how much? Also do you have at least a 5% deposit, because banks are becoming more rigid about individuals having a deposit even if they are eligbible for the FHOG.

    Also it's my understanding that if you don't live in the property for 12 months you will be foregoing your stamp duty exemption (though I'm not sure of its specifics down in Victoria - or if it's even offered). That said I haven't heard of any "loop holes" in regards to reducing the required time to quality for the FHOG.

    I don't mean to stomp on your dream, but it sounds like you have low/no income, so another important question you need to ask is, is this a good time given the world economic turmoil to be taking on a large amount of debt relative to your income. Can I ask why you are considering this option now?

    Lots of people intechange the word "debt" with biased words like "leverage" and that it's the way to financial freedom, but at the end of the day taking on excessive amounts of debt only makes you indebted, which means you are legal obligation to the bank. So you'd want to make damn sure that if things go south that you have the ability to fulfill those obligations.
     
  3. greygoose

    greygoose Member

    Joined:
    9th Jul, 2009
    Posts:
    13
    Location:
    WA
    yeh i agree with chris. youth allowance is $371.40 a fortnight. you could get a cashy job paying you another $200 odd a fortnight which would take your total yearly income to $15,000. according to the ANZ calculator your borrowing power is $4,262.12 lol.

    if its something else like your going as tenants in common with your parents or something, then yes, it is going to affect your youth allowance.
     
  4. lukeypapa

    lukeypapa New Member

    Joined:
    14th Jul, 2009
    Posts:
    4
    Location:
    melbourne,vic
    hey chris, investing in this time of economic turmoil seemed like a good opportunity.. also i have visited multiple banks and financing won't be an issue as i can come up with 20-30% of capital, therefore interest rates can be comfortably covered by rent payments. after reading your response it is all pretty clear to me now, the only issue is i think i will have to sacrifice my youth allowance payments when i start to rent it out after the 6 month period or 12 months to qualify for the home grant and stamp duty exemption. another issue i am yet to explore is putting the property in a company name (with me as director or a trustworthy source) and then reserve the first home grant and stamp duty excemption for the future, by exploring this idea i might still be able to qualify for my youth allowance..
    i almost forgot to address my question, is this legal? do-able? or am i just chasing pipe dreams?

    thanks for your help guys! and dont worry about stopping my dream, i like honestly however brutal it may be lol
     
  5. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    What makes you say that?


    This assumes retail interest rates stay low and rental yields stay at current heights, both are IMO reasonable outcomes for the very short term, but looking forward 18 - 24+ months from now I'd be no where near as confident.

    I'm just suggesting that when it comes to property investment it is worth looking further ahead than the next 6 - 12 months because for most people (and I'm assuming you are as well) it's a long term investment, and your due diligence should then obviously extend to rationalising the real long term risks.


    I think the best place to get clarification from would be centrelink and the ATO. They both might be worth calling. I don't think many people on these forums could speak with experience when it comes to situations like this.


    There are often alternative vehicles and structures you can pursue, but they often come with their own drawbacks and pitfalls.

    Buyenlarge, the tax and welfare system are designed such that if you make money, you are going to eventually have to pay tax, and if you want welfare you need to deserve it.

    So if you are serious about making money, trying to maximise your welfare payments is probably not the best way to go about it...

    ;)

    That said, something to remember when using a company as a investment vehicle, is a company is an entity in its own right, and any money the company makes is its own, not yours. So at the end of the day if you want some of that money its going to come to you in the form of income that is then taxed, or in your case will mean loss of centrelink payments.

    So I guess what I'm trying to say is that you might be able to find temporary patches for short term situations, but unless you are looking to be on welfare for the rest of your life, it's probably better to just be upfront with the system and focus more on making big dollars rather than pinching pennies.