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Hello everyone!

Discussion in 'Introductions' started by Lewisz, 6th Feb, 2016.

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  1. Lewisz

    Lewisz New Member

    Joined:
    6th Feb, 2016
    Posts:
    2
    Location:
    Rural victoria
    hello every body!

    My name is Lewis and I live in rural Vic in a low wage full time job, I'm 19 but I feel property investment is a better investment then cars and bikes haha. I have a rough plan but being so young I have no real understanding of the tax system.

    My goals are to pay off a 30year morgage for a cheap house as fast as possible by living at my parents/ other place while I rent out a house. I would then place a majority of my income into that cheap house. along with the people renting it, the repayments will be very large.

    Half way through that houses morgage being paid ( or sooner if possible) I would want to buy another cheap house to use as a perminent recidency using the investment propert as collateral. This house would be paid off slowly until the first house is payed, then all that first houses income would be paid towards my permanent recidency. I would then sell both and get a much better house, all being paid off within roughly 10-15 years from me starting this whole venture.

    If this is a dumb idea please let me know, and if there is anything I am forgeting( grants, tax deductions ect..) I would love to hear. I'm happy to show my math if that helps. Any other people's experiences would be great to hear.
    Thanks for listening!
     
    WattleIdo likes this.
  2. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    18th Jun, 2015
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    2,458
    Location:
    Sydney & Gold Coast
    Welcome @Lewisz. Good to see at 19, you're already thinking of your financial future. Well done! Property can definitely be an effective vehicle for wealth creation.

    I reckon it's worth reading some posts here about interest only vs principal and interest, paying off loans vs not and see what you think. You can generally create a more significant outcome if, rater than focusing on paying down debt from day one, you focus on accumulating (more) property initially.

    Refining your approach will be helped by getting a bit clearer on your goals :) Think about things like how much passive income you would like to have in x years and you can start to build a plan backwards from there.
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    18th Jun, 2015
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    2,787
    Location:
    Perth WA
    Hi Lewis,is great to see you looking into this so young! you're in the best place to learn :)The structure of what your proposing isn't what any one here would suggest (using an ip as collateral and paying down deductible debt isn't ideal) but with a bit more information you'll be well on your way.
     
  4. WattleIdo

    WattleIdo renovating Premium Member

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    Location:
    Central West NSW
    Great to see you have a plan - I'm sure things will get altered and adjusted along the way to suit circumstances. Main thing is to get the first one under your belt and get yourself into the position that expenses are well-covered. Welcome aboard.
     
  5. Travelbug

    Travelbug Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    313
    Location:
    Sydney
    Great planning Lewisz. It's great to see someone so young with a financial plan You will find your goal will change over time but that's a great start.

    The way you discuss you will structure it will do you no favour tax wise. There are better ways to do it to save you a lot of tax. Please discuss your plans with a mortgage broker.
     
  6. Xenia

    Xenia Adelaide Property Manager Business Member

    Joined:
    21st Jun, 2015
    Posts:
    2,347
    Location:
    4/136 The Parade Norwood, South Australia
    Hi Lewis
    I bought my first property at 19, it was $120,000 everyone was telling me I was an idiot to spend so much, it was when Adelaide median prices broke the $100,000 mark and the sentiment at that time was that the average house is now unaffordable and they will never go up any more, poor first home buyers waaaa waaaa !

    Fast track 25 years, I still have that house in Adelaide western suburbs just valued at $850,000 (it's had some improvements since purchase).

    Imagine if I didn't buy it.
     
    BigKahuna likes this.
  7. Lewisz

    Lewisz New Member

    Joined:
    6th Feb, 2016
    Posts:
    2
    Location:
    Rural victoria
    Thank you for the replys everyone, they're very helpful! My main goal out of property is to eventually own a $400-500k Home fully paid for as fast as possible. If that means living in more modest homes for a long time then I would be fine with that. The goal was never really to create a huge passive income but I am very open to those ideas!

    I feel that if I plan my finances around having a low wage (30-40k per year) I better not create more debt than I can handle incase there are significant economic changes. My local market is quite affordable due to being rural( a good entry level house can be bought for 150k) but I have been concidering the Ballarat market for some time( mabey as a second IP eventually)

    Keeping in mind my cautiousness towards large debt due to small wage, which strategy would you all recommend I follow and focus on learning?
     
  8. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
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    Location:
    33°41'24.7"S 150°55'34.3"E
    If on a low income, aim for cash-flow positive approaches where the interest on an interest-only loan and other outgoings for the property are covered by the rental income.

    Cash-flow positive is preferred but near-neutral cashflow where the shortfall is no more than say $50 to $70 per week is worth looking at.

    The general aim is that rental yield ( aim for 5% + ) should exceed the interest rate you are paying on the loan.

    The tricky part is finding a good balance of high interest yield where you will still get capital growth in the value of the property.