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NSW 40K in Savings and looking to buy property

Discussion in 'Where to Buy' started by Ideacrash, 28th Jun, 2016.

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  1. Ideacrash

    Ideacrash Active Member

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    Hi All,

    As most of the novice beginners , I am also confused with so many options.

    My scenario , at the moment i have around 40K in savings .

    Things am sure are i need atleast 95% loan to buy a decent property with the amount of money i have. I have to add atleast 20k more before making any purchase .

    I am from sydney and if i get a decent property around good transportation options I would like to move in. If i have to settle for interstate or very far from CBD , i would not mind making it an investment property. With the current savings I can aim for a propery with value arpund 500K.

    I have seen with 800K budget I may get a very good house with 600m2 land + house in suburbs around blacktown.

    Here are few of the suburbs I am interested in :
    Carlingford
    Baulkham Hills
    Hornsby
    Girrraween
    Penrith
    North Parramatta around Kings school
    Cherrybrook
    Werrington around wollemi college
    woodcraft
    blacktown
    Toongabbie
    westmead
    Quakers hill

    What should be my strategy ? Is it wait for somemore time and add to my savings ? go with what ever i get now and move in and later think of buying bigger property?
     
  2. monalisa

    monalisa Well-Known Member Premium Member

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    Hi @Ideacrash

    Welcome to PC.

    I think $40k savings won't take you too far in those areas.

    Understand you want to consider a 95% LVR, which will have a significant LMI cost.

    If you do have the option to invest, I would recommend looking interstate to build equity else where. As you may be aware Sydney has grown significantly over the last few years, to fast track your net worth, you can buy in another rising market, and then bring back equity / funds to Sydney to purchase a home here.

    Ultimately, it will come down to what is important to you: your own home now vs investing.
     
  3. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I agree with @MsAli... 40k is your stamp duty in most of those places.

    Edit: Doh! Sorry @monalisa ! I just looked at the avatar.... call it a compliment, you're both clever and savvy chicks :)

    * from one chick to another :)
     
    Last edited: 28th Jun, 2016
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  4. JacM

    JacM VIC Buyer's Agent Business Member

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    Hi @Ideacrash

    The other component to being able to secure a loan is serviceability (your ability to repay the loan). A 95% lend on an $800k property is one heck of a big loan, and the rent will not cover anywhere even close to the loan repayments and holding costs.

    Rather than choose the suburb and expect it to fit your budget, take a realistic look at budget in conjunction with a mortgage broker, and the amount you can borrow (either now or in the near future) will help guide which suburbs are in play and which are not.

    I believe that @monalisa who has responded to you above is in the broker space, and also knows quite a bit about the NSW market. Perhaps you should chat to her further.
     
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  5. MsAli

    MsAli Well-Known Member Premium Member

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    Haha ...noticed the typo...you're not the only one :).
     
  6. ashish1137

    ashish1137 Well-Known Member

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    In none of the suburbs you would be able to find something in 500k. I you are okie with a 2 bed 1 bath unit, thats a diffeent story altogether. Forget anything with land component. Apartments is another option.

    Even if you can source something at 5% in order to buy at 500k you would need 25k(deposit) + 20k (stamps) + 2k (solicitor + misc) + 5-6k (some banks will ask for LMI upfront) + 5 - 10k (some emergency funds + renovations ) = 57k - 63k at least.

    Not to forget 2200 (monthly installment) + council/ strata + water + electricity + other expenses (300 approx.) Per month totalling to 2500 per month.

    Regards
     
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  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hiya

    Are you purchasing a ppor or an ip?

    Either way - you'll likely need to beef that deposit up.

    For a ppor you can get away with a smaller deposit compared to an IP. Having said that - a 5% deposit is generally a thing of the past as high lvr loans are usually restricted to 97% incl of LMI (Westpac group for instance) which really means a 92% to 94% lend with lmi on top. Bankwest goes to 98% - some smaller lenders might still do 95% plus uncapped lmi but it's becoming quite rare (Liberty might I think)

    Cheers

    Jamie
     
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  8. Leo2413

    Leo2413 Well-Known Member Premium Member

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    With that budget I'd be looking at a home in Adelaide in a growing area and something you can do a cosmetic reno with to extract equity asap.

    I know 2 girls, decent incomes but little savings. Did 4 cosmetic renos i think in 18 months or less and created a chunk of equity to increase their investment options.
     
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  9. larrylarry

    larrylarry Well-Known Member

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    You're looking at areas that command far more than 800k for a decent house especially carlingford, Westmead, n Parramatta etc.
     
  10. Ideacrash

    Ideacrash Active Member

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    Thanks Guys,

    I think I can afford to pay every month around 2500( with some changes to my lifestyle) and upto 3000 if my partner continues to work. I will try to beef up my savings to 70K before making any purchase.

    Well for IP I guess in Sydney I would have to settle for Unit or Townhouse (upto 550K) or Adelaide/Brisbane ( was reading the Kallangur thread) . And then once I build up enough equity buy in Sydney ( a decent house as PPOR ) .

    Will spend some more time on Brisbane and Adelaide threads to understand the market .
     
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  11. larrylarry

    larrylarry Well-Known Member

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    You need to think of emergencies. Do you have income protection, Total and Permanent Disablement Fund as part of your super policy as well as your partner?
     
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  12. Jenny

    Jenny Well-Known Member

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    :cool:Remember also if you try pull out any increased equity from an ip for a Ppor that portion is no longer tax deductible plus and can become financially complicated v quickly - imo best to get tax/broker advice with future plans to structure in the right way before you do anything
     
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  13. Timwest

    Timwest Well-Known Member

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    I am in a very similar situation. I decided to get a 88% LVR (LMI is cheaper at this %) and buy an IP in North Brisbane (Kallangur area) for 300-350k, build up a portfolio and eventually when Sydney is right to buy in again (10 years) bring my equity back to Sydney and buy a PPOR.

    My current strategy is to buy BMV if possible, have space to manufacture equity with a cosmetic reno and also have the format of the block to be able to add a detached dwelling to increase cashflow later in the picture. I recommend talking to a good broker first (plenty on this forum) and read the forum daily for the next three months before committing to anything. Good luck!
     
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  14. Jenny

    Jenny Well-Known Member

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    Also it gets tricky to pull out equity above 80% LVR so if you are putting down small deposits in the first place the property has to grow enough to go down past the 80% an into the 70% LVR before banks will let you take it out or its worthwhile which can take a while if in anything but a boom market !
     
    Last edited: 29th Jun, 2016
  15. Ideacrash

    Ideacrash Active Member

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    Yes , have those covered in Super
     
  16. Ideacrash

    Ideacrash Active Member

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    Has anyone consolidated a good check list for both IP and PPOR ? like things i need to make sure before I dive into the world of property investment ?
     
  17. MsAli

    MsAli Well-Known Member Premium Member

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    "Strategy" - how does it look like?
     
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  18. Ideacrash

    Ideacrash Active Member

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    @MsAli
    Thank you MsAli. I quickly had a lookinto the thread . I think i will best fit under the below bracket :

    Houses / Units / Villas / Townhouses (Metro capital cities $160K - $300K and Regional $1 - $160K);
    • Yielding at least 7% (metro) and 10% (regional) in gross rental return;
    • Smaller blocks due to ‘unique’ factor;
    • At least 2 bedroom, with parking space / garage;
    • Maximum age 20 years, due to depreciation, which would facilitate with the property’s cash flow due to tax return;
    • Properties which require minimal work, and may require cosmetic value add to increase market value;
    • Below market value to comparable properties (5% - 10% discount)
    1. Buy and Hold - cashflow neutral/+ve and capital growth comes second [helps if you are starting out with low capital / income] - helps you hold more assets than otherwise. The property may have future potential for development also
    2. Buy and Hold - potential for capital growth and -ve cashflow - could be a drain unless you're on a high income and it may inhibit the expansion of your portfolio and therefore limit your exposure to the market
    But in the current circumstances in NSW is it realistic to get the below :
    1)Houses / Units / Villas / Townhouses (Metro capital cities $160K - $300K
    2)Yielding at least 7% (metro)
     
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  19. Ideacrash

    Ideacrash Active Member

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    am thinking you would say look in brisbane or Adelaide :) . I think end of the it may boil down to how much mortage I pay every month without burning myself and have a buffer of around 6 months expenses inlcuding mortage payment.

    I started feeling like am I missing the opportunity by not being in the ground and just sitting on cash.

    One of my good friends were planning to buy a property in 2012 around stanhope gardens and houses are selling sround 430K . I believe they though its a very high price and they need some more money for the deposit and then in the same area they paid around 620K and were saying we literally put all of our money . In 2016 i guess the same house is around 900K. Am i the same boat that its too much and I cannot afford to buy.
     
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  20. teetotal

    teetotal Well-Known Member

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    That risk factor of missing out will always remain.
    It is always the right time to buy(with due diligence), the question is where and what you can afford. Because by the time you could save more there is a high chance that prices are up again and it still isnt making even 10% deposit.
    Like your friends, i also had a chance to buy land in Ponds in 2011 for 330K(imagine that) but found it expensive & also i was just short on savings so thought to wait out and save more.
    This is what i have learnt - if you think you are ready then do your due dilligence and buy where you can & whatever you can afford right now. It is always the right time.
     
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