Buying property with no cash buffer

How common is it for people to often have no cash buffer when purchasing their first property to reach a particular deposit requirement?

 

I think it's quite common. Done it myself actually. You know scratched around to get the initial deposit.

Still paying off the commodore. No money for fuel.

What gets you through is 1. A paying tenant 2. A job 3. Time

The beauty with time is it includes property booms.

Property booms are like having a rocket shoved under you lol. They give the necessary lift off.

So, you go from no buffer to a super wuffer.



PS I don't know what wuffer means. I just threw it in as it rhymes lol.

 

No cash buffer buyer chiming in - IP settled last month and had to max out credit card to pay for insurance etc

My recommendation would be map out all potential costs and take steps to minimize any lump sum expenses that might pop up....

- pay insurance monthly instead of annually in advance (might cost a little more in total but will help you stay in the green while you build savings)

- arrange for rates notices to be forwarded to your PM to be taken out of rental income

- consider cancelling any credit cards before settlement so you aren't tempted to spend beyond your means

There's a post on these forums about a bloke who drove uber after work every day to build up a buffer...

If you want it bad enough you'll find a way

 

This is very common when in acquisition phase when accumulating as fast as you can. Have a credit card as a buffer if you don't have cash, if you are a risk taker.

 

For my first home I borrowed half the deposit from a mate and the purchase price was only $211k! So no cash buffer but the repayments were ridiculously low so I wasn't worried. These days I don't buy without a cash buffer.

 

It's always hard work and a slog in the early days. I personally think many of the investors in SS do suffer early on and questioned whether it was worth all the stress.

When things does not go well, it is human nature to think that life is being unkind.

Personally for me, yes have suffered by not having a big buffer in place but I think the saving grace for me other than good luck and fortune, is that I have a very stable employment and opportunity to work more in order to earn an additional income to make up the difference. It's def not an ideal situation because all it takes is one bad turn.

 

Everyone has a different risk profile but do what you need to do and be aware of the downsides.

I have clients that going above 80% with several 100k in offsets is a no go yet others will happily go to 95% with little or no buffer and not loose a minutes sleep.

Cant believe you are not on gas!

 

my first place was purchased with 5% deposit and then very little cash was left so i had 6 weeks to try and earn the extra 5% for a 90% loan!!! worked all but about 3 days of that 6 weeks doing extra shifts and overtime to be ready for settlement and had to use a temporary LOC to make it.

 

Sometimes it makes more sense to buy with no buffer than wait for the buffer to be built. (ie if the market is getting away from you and you will be priced out)

Ideally, you want a good cash buffer or at least have a really good plan to create one in a short period of time.

Ideas for that
- sell your un-needed surplus stuff (garage sale, ebay etc)
- down size your car
- ask for a pay rise
- snowball any debt you have then once paid off snowball the money into savings
- pick up some extra work
- look at likely tax returns to see if you are expecting a refund
- chase owed money (if people owe you money)
- sound mum & dad out for a loan in the event you need it
- longer settlement so you can save a buffer

 

Gas? Not this bogan That's like drinking shandies. lol.

 

Govt was handing out home loans to anyone with a uni degree and $1k in the bank. Found out about the scheme, borrowed the money and bought the house. No savings, no buffer. A long time ago in a galaxy far, far away. Very different mindset now, operate a large buffer for business and now property investment activity. Get nervous at the thought of it dropping below 6 figures.

 

I've always maintained a buffer in cash (and more recently, shares) but no harm buying without a buffer IF, IF, IF you have a reliable plan in case of emergency such second job as an exotic dancer, help from mum and dad etc

I'm conservative enough to think it's nuts to buy with no buffer and no plan in case the hot water goes and you get fired the day you settle.

 

Or a significant other to bail you out.

 

Funny bugger. Have you ever considered stand up?