PPOR or Investment property first.

Hi people.
I have just joined this site hoping to learn from people in my position or people who have learnt from there mistakes and sucess.

Positon. 50k salary
30k savings + FHOG + stamp duty in ACT if i buy PPOR
30k Saving + stamp duty if i buy IP

living at home for $50.00 a week plus my partner
earns 70k a year but cannot go on the loan due to Credit file.
Can live at home for another year "so the parents have told us."

Thought's are buy IP Smash as hard as possible then use equity to buy PPOR.
which we have worked out be 80k-90k in front after Grants deposit and smashing the mortgage.

At the minute Saving $3500 a month.

Any advice would be so helpful.

 

Hi Filo

Always good to see a fellow Canberran amongst the forums.

Have you considered doing both? I wrote an article for an investment magazine recently on this - I've pasted below.

A question I’m often asked is whether people should buy an owner-occupied property first or an investment property. What most don’t realise is that it might be possible to do both. A client could purchase a property that needs a cosmetic renovation, add value to it and then leverage into the world of investing.

Accessing this newly created equity means they could fund a deposit and costs on their first investment purchase. With this strategy, the client also gets to take advantage of government bonuses like the First Home Owners Grant (FHOG) and stamp duty concessions.

As an example, take Mike and Kate who recently purchased a $400,000 property in the Australian Capital Territory. They were able to take advantage of the $7000 FHOG and concessionary stamp duty (which was only $5000). Using a 10 per cent deposit, they took out a loan of $360,000.

After a couple of months of carrying out cosmetic renovations on their first home, which included new paint and flooring, new kitchen cupboard doors and sink, light fittings, window furnishings and landscaping, their property was revalued at $450,000.

They were then able to increase their loan back up to 90 per cent of the new value and access $45,000 in equity. This equity was used as a 10 per cent deposit (plus costs) on their first investment – a property across the border in Queanbeyan.

This strategy isn’t for everyone. Some people may not be in a position to afford the holding costs on their own home and an investment property. Others may prefer to rent in a particular location they enjoy or live at home while investing.

Either way – having your cake and eating it too, or in this case buying a first home and an investment property, is a possibility.

The orginal article is available here - Australian Property Investor :: API Property Blog

Hope that helps.

Cheers

Jamie

 

Hi Jamie.

I read your post on the API website its very interesting.
where would you suggest to buy in canberra or would you look else where at this point in time????? I think investment first then moving on is the best way for me to go.

Any advice would be great, especially with myself being so young.
Cheers

 

Hi Jamie

I just read your stories in the magazines, and noticed you bought in wagga wagga. I am originally from there and have relocated here to canberra and have thought of wagga to be a good place but am still very timid. What area of wagga did you buy.
Cheers

 

It may be possible to do both. To qualify for the first home owners grant you must live in the house for 6 months but must move in within the first 12 months. Accordingly, day 350 of your ownership you move in and you are qualified providing you live there for 6 months. Accordingly, buy the property rent it out for 11 months and then move in, you can stay with your parents for 12 months so pay extra off the mortgage and put the rent off the mortgage and put yourselves ahead. Once you move in you may then be able to access equity for an investment property or you are just a lot further ahead on your mortgage that you would have been.

I am not sure of requirements for ACT stamp duty exemptions so you may need to check that out.

Good luck.

 

Yeah thats true Vanessa as I did some research on when you have to move in for the FHOG, and I think that would suit our stratergy quiet well. then hopefully we can then try and work something out for that IP

 

I know of some friends who are effectively using the First Home Benefits in order to build their overall investment portfolio as well. In their case, their using First Home Benefits to first get their PPOR, then they plan to rent out that PPOR later on after the requirements are satisfied, and then get more IPs from there using the equity.