Help with way forward for young investor

Discussion in 'Loans & Mortgage Brokers' started by 2129, 2nd Nov, 2016.

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  1. 2129

    2129 Member

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    Hello all just after some advice moving forward. A few details about me, I work full time on a salary of $62k including super and have 50k in savings. I own a one bedroom apartment in Brunswick East that was bought off the plan for $454,000 and rents out for $1739 a month, was settled just over a year ago. Information regarding the loan:

    Loan Term: 30 years
    Interest Only Term: 5 yrs.
    Indicative Interest Rate: 4.90%
    Indicative Repayments: $1597.75
    Repayment Type: Monthly
    Loan amount: $391,286

    I thought thought I would get on here and see what other people thought I should look at doing, I am currently living at home but after just turning 25 I would love to move out into my own place.

    James
     
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  2. tobe

    tobe Well-Known Member

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    Hi James,
    Welcome.

    If it's important to live in your own place, then turf the tenants and move in, or sell the place and buy somewhere you want to live with the proceeds of the sale.

    It's pretty difficult to afford a second loan with your current income. Long term, increase the balance in your offset account, earn more money or find an 'investment' partner (spouse) and then you might qualify for another mortgage.

    While your doing that you might find a better interest rate. 4.9% variable is at the higher end for investment loans ATM.
     
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  3. Steven Ryan

    Steven Ryan Well-Known Member

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    Welcome @Jimma.

    In terms of investing, you might squeeze out another investment property (if that's your plan) but after that, will probably be stuck.

    In terms of the personal situation, are you wanting to rent a place or buy?
     
  4. wombat777

    wombat777 Well-Known Member

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    If you haven't already, consider getting a depreciation schedule done.

    It will help with cashflow, although I am not sure if there is much benefit doing one for a 1-bedder. Does anyone have indicative figures?
     
  5. euro73

    euro73 Well-Known Member Business Member

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    In my view there is a benefit to a depreciation report on any dwelling - without one you are throwing away deductions that give you dollars back from the tax man.

    Good, bad or indifferent depreciation is a tax issue though - it will have zero impact on borrowing capacity...
     
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  6. wombat777

    wombat777 Well-Known Member

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    Yes aware of that. It does allow you to optimise cashflow with the existing portfolio. Whether that be accumulating funds in offset or paying down debt.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    True
     
  8. Do Androids Dream

    Do Androids Dream Well-Known Member

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    Seriously weigh up your desire to move out with the potential to save more money living at home for a year or two.

    It's a real gift that will allow you to keep borrowing, especially on your tight income...

    Sometimes our own desire for freedom or to own something to live in doesn't make financial sense and you have to be realistic.

    Consider ways to increase your salary through upskilling and further studies..
     
  9. legallyblonde

    legallyblonde Well-Known Member

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    I would exhaust your borrowing power before moving out... Having savings or equity but no borrowing power is so frustrating.
     
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  10. Gockie

    Gockie Life is good ☺️ Premium Member

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    Hi @legallyblonde... i'm not quite sure I understand what you meant by your post.
    Can you please explain?
     
  11. dan_89

    dan_89 Well-Known Member

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    $454k for a 1-bedder in Brunswick East? Most 1 bedders I've seen in the area sell between $360k-$400k?
     
  12. ellejay

    ellejay Well-Known Member

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    Probably means buy something now or otherwise you'll have less serviceability once you move out and have to pay market rent or a mortgage. Personally I wouldn't rush into buying something purely for this reason. The numbers would still have to make sense.

    To the OP I guess it depends where you'd want your own place to be. It may make more sense for you to rent or move into your apartment if you're looking at inner to mid Melbourne. The rent yields in Melbourne seem rubbish, then there's the oversupply risk in some areas. So I'd want to be pretty convinced of good growth in the short to medium term or else I can't see the point of holding. I wouldn't be buying another 1 bedder but that's just me.
     
    Last edited: 6th Nov, 2016
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  13. legallyblonde

    legallyblonde Well-Known Member

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    Hey Gockie,

    @ellejay is right. Whilst I don't think people should rush purchases... You should make the deals whilst you are able too! On average income borrowing power runs out way too quickly! If OP can handle staying at home until borrowing power is exhausted it would be great for their investment journey.
     
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  14. Gockie

    Gockie Life is good ☺️ Premium Member

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    Ahhh. I understand! I had interpreted what you wrote differently. I was thinking "Why would you want to put yourself in a position where you can't buy anymore?"
    But yes.. if its inevitable, you might as well do it while living at home, instead of after you move out and your serviceability further decreases.
     
    Last edited: 6th Nov, 2016
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  15. albanga

    albanga Well-Known Member

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    I have to brutally honest and say an OTP purchase for a first time investor is not a great strategy. You are now basically at the whim of market forces and a 1 bedder in a peaking Melbourne Market is not going to be kind to you.

    The issue you now face is selling it will likely mean the loss of money.

    When did you buy it in its development? Or better yet, how much stamps did you pay?
    Also did you use the FHOG or was it purely an investment meaning you still have that up your sleeve?

    Me personally I would thank I found this forum, sell the property, hopefully the loss is Minor and then reload with a new strategy.

    What do you do for work? Are you handy and do you have handy people that could help you renovate?
     
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  16. 2129

    2129 Member

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    I do think now after having the apartment for just over a year that I did get led astray by a mortgage broker to buy OTP, after tax it is essentially neutrally geared but thats not much help especially if prices don't go up, which Im worried they wont for a while in that area. Stamp duty on the property was about 2.5k and I didn't use the FHOG.

    Im an audio engineer in television so not the highest paid job, I am handy and would love to renovate. Living at home is fine but would love to put in place a good strategy to get into my own place sooner rather than later whilst still being financially savvy.
     
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  17. albanga

    albanga Well-Known Member

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    NEVER buy an OTP purchase recommended by a mortgage broker. For that matter never buy any property recommended by a mortgage broker, there job is mortgages NOT property purchasing.
    Yes a fair share, particularly those clued up on this forum know a lot about it but if you want expert advice on what to buy, then seek an experienced buyers advocate.

    Let me take a stab in the dark here and suggest this broker fixed you as well for a few years??
    This is rogue brokering at its best and the reason that industry does sometimes get a bad name.
    The MB gets huge kickbacks from the developers to help sell their stock.

    This then goes 1 of 2 ways. If the valuations don't stack up come completion then it's likely the broker won't be taking calls for a while and let you try and find someone to try and help you out of the mess.
    Number 2 is the valuation does come in at contract at which stage the broker will fix you for 3-5 years so you cannot break and they get a clawback after realizing you have a dud property.
     
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  18. albanga

    albanga Well-Known Member

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    Before saying to sell, what can you tell us about this property?
    How many apartments in the building?
    Have any recently been sold that match yours? If so what did they sell for?

    Without knowing the full picture I do believe Brunswick is a good suburb choice but it's growth is going to be indicative on the above. A single bedder already has limited growth, if it's a large development then im afraid you will see almost no growth from today.
    I have no doubt the MB sold you on the brilliant tax deductions blah blah but as suggested all that may do is help you break even on cash flow. Even then though I would say once Fees are accounted for the property is negative.
    So it's highly likely you are holding a negatively geared property with little chance of capital growth......

    If so then you need to crunch the numbers. If you were to sell then what is the outcome. How much would you realistically be left with?
     
  19. 2129

    2129 Member

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    I think selling will be the best way forward Im lucky that the property is quiet good being in a side street not on a main road its large with a good layout and it has two large parks either side, a few one bedders in the area have sold for over 400. If I could sell it and take a bit of a loss use the 50k in savings I currently have and what ever I get back from the apartment and either buy another investment or just be really smart with the house I choose to live in.
     

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