Help out a keen newbie with his first purchase

Hi all PCers,

I've been lurking on here for a couple of months now trying to edumacate myself as much as possible. I've been looking at investing in property for a while now, first back in 2013 while I was in Newcastle (wish I had bought then ) then got distracted with work/life for a few years. Now I've just moved to Victoria and would like your opinions on what I should do.

While I've tried to learn as much as I can from here, I'm still lacking knowledge in a lot of areas. I'll put a brief description of my details below, but short version is I've been looking all around Aus for an investment property. Currently I have a particular interest in Bendigo (property agent trying to sell me a H&L package in Strathfieldsaye), Gold Coast (born and bred there, parents own property there) and Geelong (Newcomb, based on what I've read on here). I'm in it for the long term (20yrs+), looking at CG and have a pretty good income so don't 'need' anything +geared right now.

I really would appreciate any help provided and I understand you will all have different opinions on what you think is best.

Deets:
28yrs old
No loans/credit cards etc
$140,000 in cash savings
First home buyer
Currently saving $800 week after tax/rent/life

Thanks again!

 

Welcome to the forum.

There are a few ways to skin a cat and more than 1 way could be a good way. Based only on your comments above this is what I would personally do.

Forget Bendigo, forget House and land. Buy established. I'd be looking in Brisbane . Within 10km from the CBD. A house. Something you can add value to later on. Appeals to Owner occupier. Shouldn't be too negative in CF. Hold it and wait.

If you don't choose Brisbane, I would be sticking to a very similar strategy as the one above in a market of your choosing which is not at the peak, or at the very floor (6 o'clock). Something that has OO appeal and you can possibly add value you later on. There is a lot more to say but this is a just a brief post otherwise I'll be writing a novel.

Enjoy the journey. Surround yourself with good people. People who have scores on the board.

Good luck

 

Thanks Leo. I have had a quick look over Brisbane. Maybe I will have to focus a bit harder there

 

Where are you living? If you're near Geelong, you could look to use your FHB grant and save yourself a ton of stamp duty. If you can buy something to develop down the track, so much the better

 

Have you sought a pre-approval yet? This might help you identify a possible target area.

 

I'm living in Sale but as I'm a Australian Defence Force member I can use the FHOG and Stamp Duty exemption anywhere in Vic

First Home Owner | State Revenue Office

 

I've had a meeting with 3 banks (NAB and the 2 Defence banks) to suss it out, but it seems they are happy to lend me far more than I would be comfortable borrowing.

Do you mean that depending how much I can borrow, you would recommend a more expensive property?

 

I think there isn't much point in saying buy within 10km of Brisbane if you can only afford to borrow 300k (doubt this is going to be the case).

I would be the same as Leo either buy as close to Brisbane for growth and it will do well over next couple of years but for sure over the next 20 years.

The issue which Jess has brought up is you would lose FHOG, this is something you may not want to claim anyway but it is something to consider.

So if you were going to claim it you would likely be wanting to buy close to where you work (Sale) which I have very little I can add to for these areas as they don't meet my criteria which simply put is Syd, Melb or Bris and as close as possible to city - very boring. Reason being I see them as 'low risk' but I am also not going to get amazing gains either (not going to see any of them triple in a couple of years). All cities have good infrastructure (jobs, public transport, schools) which all equate to a supply of money and demand from people to live there. No offense to Sale but it doesn't have the same amount of money in the economy or the demand the capitals have with limited land (there is a lot of spare land around Sale).

If I was you and considering to use FHOG it would be buy in Melbourne (inc Dandenong) or Geelong and live in it for 6 months within the first year (if rules haven't changed) and then move back to Sale. Be a pain for 6 months driving long distance but crash at a mates house during the week and go back for weekends perhaps? You would be saving about 25k in stamp duty which would be like giving you 1k a week for that 'pain'. Issue with this is I feel Melbourne is more towards the top of the cycle so got to be quick as the boat is already sailing and you are going to be swimming after it.

Overall I would go

Brisbane, best in terms of near future gains (allow to buy another IP sooner) as it is just starting to move now (my thoughts - along with other on PC) and the rental yield is quite easy to maintain but full disclosure bought there late last year - either proof in pudding or trying to drum up Brisbane so I get more gains... You decide (I don't care TBH if you don't buy in Brisbane)
or
Melbourne - Adv is FHOG but will be painful for 6 months to use it, buying towards the top end of the market (my thoughts again) so less gains in the next couple of years but will do very well over 20 years (like Brisbane) but yields are terrible in Melbourne when compared to Brisbane (e.g. 2.5% Melb vs 4.5% Brisbane).

This suits my strategy and my risk profile with a 20 year outlook (I am 31) so I look for gains first and will transition to yield when closer to retirement, you need to decide what you are comfortable with.

 

Thanks Will that makes a lot of sense to me. If I did buy in Brisbane my parents would be happy to manage the property on my behalf so benefit there! I'd be looking for something as close to neutral geared as possible. It's my first purchase and my risk tolerance is probably not as high as others.

I'm not sure if I was clear but as I'm in Defence I can use the FHOG anywhere in Vic and not have any requirements to live in it. But like you said Melbourne is a bit too high to jump aboard now, that's why I was looking to regional Vic (Geelong/Bendigo)($20k too).

I'll definitely look closer at Brisbane now, I have a bit of local knowledge there and am generally on the Gold Coast once a year.

I have no interest in Sale, it's too small and only has two main industries after agriculture (Defence/Offshore oil).

Understand that that suits your strategy. It seems we have similar goals tho

Thanks a lot for your input.

 

And I would try and keep as much of your 140 as you can. Borrow 88% and keep the rest as a buffer. For the cost of a PM, I'd just pay a PM and not have your parents worry about looking after a property. Would be great if one of your family members was handy to do maintenance for you.

 

Im guessing you dont want to live in it since you are looking beyond the 30km radius lol. Have you considered living in it and using HPAS and DOHAS with the FHOG.

 

Man this property investment stuff is really all one big code...

 

Haha. Yeah I have looked at the Defence Home Ownership Assistance Scheme (monthly subsidy) and the Home Purchase Assistance Scheme ($17000 lump sum before tax).

It would mean that I need to live in it and it's just not worth it. My rent in sale (renting a room in a mates house) is $100/week. DHOAS would be about $325 a month. The rent/capitol growth I could get from an IP far outweighs the benefits of buying is Sale with FHOG, DHOAS AND HPAS.

 

When I started here on PC, many people used to ask Newbies about their Goals and what they want to achieve. I think thats a starting point to provide you with an idea of what to buy and where.
What are your Goals and create a plan working backwards from your Goals.

With regards to your questions-
If looking regional Victoria, why not try new developments in outer Melbourne suburbs for ex. Melton, mickleham, wyndham etc - not truly regional but close to regional prices.
Still plenty of room for growth.
In 20years time(part of your long term strategy), highly likely they'll be part of Melbourne.

 

Yea I understand. Im also looking at purchasing my first IP. Im looking around the moreton bay and logan region which should break that 30km from work (Enoggera). Im currently paying 250 a week in a fairly new 4 bedroom in upper kedron with a gf and child. If only the FHOG and defence entitlements benefitted everyone

(For the people reading - Defence requires you to live in your house if it is located within 30km of work)

 

True that's a great idea, but I'm finding it hard to do. Basically I want to be able to retire at 50 with a cashflow of 100k/pa. But I have no idea if that is reasonable or not. If I can have that and 3 Ferraris then sweet haha.

I spose my short term goals would be to invest somewhere that will have CG in the near term, enabling me to further expand my portfolio.

 

I've pretty much narrowed it down to Brisbane. I've had a look around the city and seems there are a few options. (looking around $600k max, but flexible).

If the gurus here could once again impart their knowledge, what would you go for? And where? (feel free to add options in that I haven't thought of)

1. Buy an old Queenslander as close to the city as I can on a reasonable block 400m+. I am worried it might be hard to rent out something like this due to condition. Example: 1632 Creek Road Carina Qld 4152 - House for Sale #125776430 - realestate.com.au

2. Buy a renovated Queenslander/house as close to the city as I can on a reasonable block 400m+. Example: 39 Evenwood St Coopers Plains Qld 4108 - House for Sale #125442730 - realestate.com.au I quite like this one.

3. Buy a not so flash house on a massive block and hold. Example: 113 Cardiff Road Darra Qld 4076 - House for Sale #125659938 - realestate.com.au

 

Whoops sorry, didn't read your post properly lol. Yeah they all sound good and are in decent location. You may need to do more analysis to determine vacancy rates, median income over the last decade compared to rest of QLD, renters % (the lower the less competition), etc.

 

All good options just from the 3 with my skill set and ease of not doing anything besides rent and wait I would be 2, 1 then 3.

If you want to renovate now you could go 1,2 3

 

First post since joining the forum today.

Fellow newbie also hailing from the glitter strip. And same age funnily enough.

Have you considered using a buyers agent?

Some advice in terms of research/education, property podcasts on stitcher/itunes are great to wrap your head around market fundamentals.

I've currently living in Perth and have acquired a PPOR at the start of this year basically for free through builders finance for a house and land package. No deposit required upfront with $15k FHOG, $20k HAF grant and another $10k rebate from the developer as the deposit. Not expecting any major CG medium-long term as it's a H&L package in an area with ALOT of supply but I still believe it was a good decision as we near the bottom of the market in Perth and should see as a minimum the $45k in grants back as instant equity according to comparable valuations. Making the most of the doom and gloom over here. Disclosure* I sell land for a developer and came across this deal which I've never seen this good in years in the industry. With that being said it pays to look into building or OTP as a first time buyer and could give you a boost into the next purchase by retaining more of your cash. Just be very careful as inherently OTP stock is located in heavily oversupplied markets. So make sure the deal is too good to pass up and do it in a market like Perth where some developers are selling below replacement cost.

In this case I saved my deposit for my first IP in Brisbane - Moreton Bay Region near the new Uni which settles next month.

I've studied a Bachelor majoring in property, spent two years as a research analyst and been in sales for going on 4 years now and still wasn't confident enough to buy something without the help of a buyers agent for my first go. It's a great way to see how professionals do it and repeat yourself.

Apologies for the essay hopefully you gain something out of it.