VIC First Home Buyer

Hi All,

Apologies, if I am posting under a wrong discussion group.

I decided to buy my first home. I recently moved into a new job in July first week (6-month contract - IT consultant- TFN and not on ABN). With my carrier, I am ready to relocate with opportunities.

So, I would like to buy 3 or 4 bed, 500 sqm min. property as owner occupier and rent it out later, if I need move to another city for job. I have two kids and my wife is a home maker.

I am currently in Melbourne and with a budget of max 600,000 (about to go for pre-approval). I have around 140K in savings so planning for a 20% deposit. With the new train line already in, a good public primary school, new massive shopping centre coming soon, in I am looking at Doreen as the probable suburb (close to trains station). Apart from this, I am also looking at surrounding suburbs like South Morang and Diamond Creek as the next possible one. While short listing, I also looked at Burnside Heights in the west, due to good primary school, however its beside St. Albans and no Train station and hence dropped. I don’t like the south west suburbs and most of the other good suburbs in Melbourne are out of my budget or way too far from CBD.

I lived in Brisbane in the past and love it. When I moved to Melbourne, I had a Brisbane hangover for a year. So, my mind keeps pulling to look for properties there, but I must be realistic and hence thought of buying where I live right now as an owner occupier. (unless experts from the forum think otherwise)


I am new to property buying and would like to be educated. So I have a long list of questions:

1. Is my thinking right in terms of suburb selection?

2. Will I be able to get a loan with my causal job and single income

a. If yes, how should by loan be. Redraw or Offset account.

b. How should my loan be structured so it could be turned into a rental property (If I need to relocate to another city later)

3. With current interest rates, should I use a Fixed or Variable or partly both interests

4. What should I look at when inspecting the property at a bare minimum for narrowing down the property

5. What factors I should be mindful of that I am not fooled around by agent during negotiation.

6. What kind of settlement period I should be looking at

7. What should I be mindful of when it comes to signing a contract

8. What costs I must be aware of like insurances, rates, so I am not surprised later on etc..

9. This is general question: At many auctions I see there is a price range. Say 600 to 660k. Why does no one starts with a bid and wait for a vendor bid from agent. Say if one wants to buy that property for just say 540k (10% below base asking price), why can’t I see anyone bidding with that number in mind (though agent can reject). They wait for vendor bid and then I see someone starting out or it gets passed in. I have seen many times where it is told not to start a bid. Why?

Regards
Yorker

 

I hope i can help you with a some of them.

1. Is my thinking right in terms of suburb selection?
Dont know the area sorry.

2. Will I be able to get a loan with my causal job and single income
Anz was the only one that would give me a loan on my casaul employment.
Could be helpful if you can get a letter from work stating the hours you work and length of contract.
a. If yes, how should by loan be. Redraw or Offset account.
I prefer a offset so you have access to that money in your bank accound over a redraw where you have to discuss with the bank about releasing funds. They both work to reducing interest but your wage will go strait into the offset over remembering to transfer money into the redraw accout.

b. How should my loan be structured so it could be turned into a rental property (If I need to relocate to another city later)
If your living there you have to pay principle and intest but turning it into a investment the loan turns into a investment loan. Apart of that you can have it set up as principle and interest or just interest. Your interest rate will rise as a investment laod but you can save 500+ per month by not payingthe principle down.
Either way you still only claim the internet when doing your tax end of year.

3. With current interest rates, should I use a Fixed or Variable or partly both interests.
I stick to varible or could do mix both its a person choise.

4. What should I look at when inspecting the property at a bare minimum for narrowing down the property. 0 maintenance lol

5. What factors I should be mindful of that I am not fooled around by agent during negotiation.
Good luck they all lie and want a higher price for the seller.
6. What kind of settlement period I should be looking at.
Depends on your leave your on. If you got to move in a huŕry could do 30 days or if you have 3 months on your current place just extend it.

7. What should I be mindful of when it comes to signing a contract

8. What costs I must be aware of like insurances, rates, so I am not surprised later on etc..
Rates will be on the section 32 and depends on council and area
Home insurance depends on the house and contence anywhere from 800 to 1500 peryear.

9. This is general question: At many auctions I see there is a price range. Say 600 to 660k. Why does no one starts with a bid and wait for a vendor bid from agent. Say if one wants to buy that property for just say 540k (10% below base asking price), why can’t I see anyone bidding with that number in mind (though agent can reject). They wait for vendor bid and then I see someone starting out or it gets passed in. I have seen many times where it is told not to start a bid. Why?

Cant gelp you with that one. Dont like auctions as you cant do subject to inspections of finance

 

Thanks Ricki. After 37 views I see a reply which I have been waiting for.

It definitely helps to some extent. One more question. I heard that Investment properties must always be in trust and not on own name for legal safety. Does this mean the PPOR which will be on my name has to be moved to Trust for renting it out. And then does is also mean I will have to shell out for stamp duty again.

 

Doreen is in the middle of nowhere, I would look in thomastown or lalor or epping

 

I'd talk to a broker to find out whether or not you are eligible for a loan. It's perhaps not a great idea to apply for a home loan with only six months of work ahead and no guarantee of tenure.

You may be able to afford a mortgage though given a wage and family tax benefits and decent down payment.

Spend some time researching the area you are interested in.

You can also seek guidance from an insurance broker.

I'd consider talking to a financial adviser and/ or doing some reading about buying your first home. I'd recommend reading Barefoot Investor's book and going from there to start.

 

Money Smart by the Australian Government Dept ASIC (Australian Security and Investment Commission) is another good place to start:
Home | ASIC's MoneySmart

 

Thats bs. I has no trouble refinancing when the title of house was already in my name cos i lived there for a year first then changing to a.investment property. It was a call to the bank and then go in amd resign it was a investment loan.


To get finace for a strait out investment final approal when you sign the title you need land lord insurance. If your changing from a ppor to a investment you need to change your building insurance from.home amd contence to landlord insurance.

 

Corect there.
If you only have 6 months then moving the bank not goingto like it unless you can provide ongoing contractual income

 

Either go and speak to a person but you not going to get multiple options just a yes or no for that exact back at the bank or a broker cos he will know which borrowing agency will work for your situation amd cos the internet calcuators lie lol

 

1. Is my thinking right in terms of suburb selection?
I don't know Melbourne well enough to be able to comment on this but I'm sure other people on forum will be able to help.

2. Will I be able to get a loan with my causal job and single income
a. If yes, how should by loan be. Redraw or Offset account.
b. How should my loan be structured so it could be turned into a rental property (If I need to relocate to another city later)
Possbily - depending on how many months left in the 6 months contract and whether it's fixed 6 months contract or possible with extension. Ideal scenario is you can get the extension and get a letter from employer to state this, which will make your application stronger.

Given you're in Melbourne, I suggest you reach out to @Mitesh Dedhia or @Peter_Tersteeg - both are excellent brokers who will be able to assist you on determining which lender would be the most suitable based on your circumstances, how to structure this to turn into IP later on and also what features would be applicable to you (this will also be dependent on the selected product).

3. With current interest rates, should I use a Fixed or Variable or partly both interests
Again it's difficult to comment without knowing your specific circumstances - a couple of factors would be how quickly you can save up, how much cash you would have afterwards and your lifestyle which will then determine whether to go with Variable, Fixed or Split loan. Your broker would be able to advise once they understood your circumstances.

4. What should I look at when inspecting the property at a bare minimum for narrowing down the property
If you're fairly new to the property game you may not be able to spot much of the issues. First thing see a broker to understand your borrowing capacity first then you can then start looking at suburbs/houses which fits your budget.

Then you should consider whether you commute to work via public transport of car, and then within the budget go as close to public transport if you commute via train/buses, or close to entry/exits to motorway/freeway if you go via car.

As for the home itself, the question will come down to how liveable as is once you move in and how much more work do you need to do to get the place up to your expectation.

5. What factors I should be mindful of that I am not fooled around by agent during negotiation.
Work out your budget and stick with it. Try not be lead by the agent into a blind auction with other buyers. And have a read of this which is based on my personal experience which should help:
What I learnt out of buying 7 properties

6. What kind of settlement period I should be looking at
This will be dependent on Finance, but in general 6 weeks should be OK. Discuss with your broker and solicitor/conveyancer once you have worked out which lender is most suitable for you and they should be able to advise.

7. What should I be mindful of when it comes to signing a contract
For VIC Section 32 is basically the crux you need to understand before signing away on the dotted line. Again you need to engage a conveyancer, who can review the Section 32 for you in order to advise whether there are anything that's out of ordinary.

Then apart from that consider discuss with your conveyancer whether you need to put in a Building & Pest Clause (if so how many days), and how many days for Finance.

I've covered a bit here - even though it's for QLD but considerations are applicable for VIC too:
What I learnt out of buying 7 properties

8. What costs I must be aware of like insurances, rates, so I am not surprised later on etc..
Download the cashflow calculator in my post then you'll be able to work them through one by one:
What I learnt out of buying 7 properties

Apart from that during the purchase, you'll need to pay:
1. B&P report - prob around $500 depending on the trade
2. Conveyancer - budget around $1000 to $1500 depending on searches you want to do
3. Stamp Duty - may receive concession if you purchase for price under $750K. Check details here First home buyer duty exemption, concession or reduction | State Revenue Office

If stamp duty cannot be exempted, as a general rule of thumb I would always advise to prepare about 5% of the purhcase price as the actual purchase cost to cover the above 3 items.

Then last but not least are the maintenance cost which you'll get a better idea from the B&P report.

9. This is general question: At many auctions I see there is a price range. Say 600 to 660k. Why does no one starts with a bid and wait for a vendor bid from agent. Say if one wants to buy that property for just say 540k (10% below base asking price), why can’t I see anyone bidding with that number in mind (though agent can reject). They wait for vendor bid and then I see someone starting out or it gets passed in. I have seen many times where it is told not to start a bid. Why?
Most people don't want to be the first in starting something - we're educated mentally as herds to follow and blend in, so it's probably more a psychological thing in my opinion

Or more of a face issue I guess. Let's say I know it's advertised for $600 but I only want to get it at $540 - so I don't want to look cheap in front of everyone else and get the embarassement/ridicule as vendor rejects and put their bid starting at $600K. Just my view..

Cheers,
David

 

Thanks David. That was very informative. Your link helps even more.

 

Dont forget always put it subject to building and pest inspection ans subject to finance

 

Talk to a qualified tax advisor about this. There's always the risk that a house only lived in for a year as an owner occupier, then made investment, may be deemed an investment property for tax purposes.

 

Mark wigg at Finance Market - Mortgage Provider, Mortgages, Loans, First Home Buyers
Is who i went threw with 2 my properties.

He sat down for hours explain every question.

 

Theres a fine line between what you do now and what you do in the future.
You dont really know your time frame so just buy for here and now.

 

I'm not sure what your point is. However, I strongly advise getting some qualified paid advice. You will find that the ATO just like to get paid when they find tax owing.

 

My point is if you claim it as a ip from day 1 you will pay cgt from day 1.
And why have it as a investment and pay higher interest.
So buy a house to live in cos you could be there 6 months or 2 years and reassess your finances then.
In 2 years where.you.moving. are.you planni g on just remting there or buying and.can your finances surport your.lifestyle after.you move i 2.years.
Roughly i pay $500 a.month out of pocket after rent in vs mortage out and expenses out

 

If you want to buy than place a bid.
What to do if you're the highest bidder for a property that is passed in at auction
Buying a Property That Failed at Auction | How to Win
.

 

I think it's best to buy property with the aim of keeping it for a while. If you are constantly needing to reassess, and making a constant loss, perhaps renting is a better idea.