NSW First entry into investment, buy and hold <$450k

Discussion in 'Where to Buy' started by regalen, 22nd Aug, 2020.

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  1. regalen

    regalen Member

    Joined:
    1st Jul, 2015
    Posts:
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    Location:
    Sydney
    I am looking to dive in to the market for my first purchase so thought I would put my current situation out there to gather some thoughts. I am a FHB so no stamp duty up to 800k.

    I am looking to buy solely for investment and rent where I want to live. My strategy will be to get into the market with a neutrally or mildly negatively geared property with the goal to build equity through a buy and hold over the long term and paying down the principal (or an offset). I would then look to use the equity built to buy another IP and so on. The ultimate end game is to have enough equity in 30+ years that I can sell off the assets to pay down debt and have a passive income.

    I only have $34,000 in genuine savings but can double this in 12 months with some austerity measures in my personal finances. My parents have 1.5 Million in equity in their Sydney home and are willing to give me a parental guarantee to make up the balance of a 20% deposit and hopefully avoid LMI. I've had an initial assessment with a broker (@Shahin_Afarin thank you) and my borrowing capacity is up to around $560k although I would not want to stretch it that far. I am renting a room from my parents to help them out and am happy to continue to do so as I live my own life anyway.

    What am I thinking?
    Buy a 1 bedroom unit (relatively new) in the Parramatta/North Parramatta or Westmead/Wentworthville area and immediately rent it out. I don't think there is much use in living in it for 6 months for the $10k FHG. Looking at around $470k to $500k with rental of 400/420 p/w.

    I have also looked at Penrith right next to the train station where I can pick up a 1 bed unit newish unit for around $400k and rent it for $390/$410 p/w.

    I really don't care where the property is tbh, I just want to get in to the market and kick start my IP.

    Thoughts?
     
  2. Trainee

    Trainee Well-Known Member

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    That's a stupidly low amount to risk your parents 1.5m equity, which might be their biggest, probably only, asset. Given they are even thinking about it, they aren't financially sophisticated (and you are 'helping out' by renting a room from them?) and it would be morally wrong for you to take the guarantee.

    Would be safer for your parents to loan you the LMI instead of providing a guarantee.

    Honestly? Save more or for longer and pay the LMI yourself.
     
    Last edited: 22nd Aug, 2020
  3. datto

    datto Well-Known Member

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    If you’re lucky 450K might get you a house in Mt Druitt. So much better than a unit IMO.
     
  4. regalen

    regalen Member

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    1st Jul, 2015
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    Considering the fact that they offered it despite my desire to do this on my own, I am not seeking moral advice but investment advice so let's keep it on topic.
     
    Zara likes this.
  5. pattoman

    pattoman Well-Known Member

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    Location:
    Melbourne
    You need more savings. 150-200k. Would give you much more options in Sydney.
     
  6. regalen

    regalen Member

    Joined:
    1st Jul, 2015
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    Location:
    Sydney
    I agree although people get into the market with less
     
  7. Trainee

    Trainee Well-Known Member

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    Get the savings to 100k, use the full borrowing capacity to buy in the 600s and pay the lmi. You could get a house with land instead of a one bed. Doubt sydney is going anywhere in a hurry and the growth of a one bed is going to be less than the house.
     
    The Grinch and regalen like this.

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