How much $ do you need to 'get started'?

No-one will cap LMI that high for IP's. BoQ will for a PPOR, but even for a PPOR a 5% deposit isn't realistic.

 

Thank you for the feedback @Jess Peletier.

Are you telling me there is no way for this guy to get into the game without a 12% deposit for an IP?
Surely there must be away (without using guarantors) with a smaller deposit?

 

I budget for 18% of purchase price.... 12% deposit, 5% closing and 1% to cover the LMI

 

You can, but it's more like an 8% deposit which brings you up to 95% including LMI. Only limited lenders will do this.

 

Thank you for the feedback @Jess Peletier

 

It's certainly not easy. You're looking at 2+ years of absolute scrounging and living the worst possible life to get a deposit together for a 300k property on normal graduate wages for most occupations. Those guys clear about 725 a week, you'd already be scrounging to live on 375 a week and that would be without drinking, going out, traveling, insurances, a car, a gym membership, playing any sports or anything like that.

The worst part is that you'd have to do that during the prime of your life, the best time to travel, have fun and enjoy life. As they correctly say, it's all downhill from there.

 

This supposes that:

• It's not possible to find sources of fulfillment, happiness and wellbeing that do not involve the expenditure of money and/or;
• Said person has financially tethered themselves to a lifestyle involving high fixed expenses (housing, memberships).

 

It's a lifestyle that includes no sport, gym, eating out, drinking, car, having no insurance of any kind, buying no new clothes or household items for 2 years, no smart phones, limited internet, no weddings, birthdays, Christmas or similar events and no travel.

I'd love to hear the long list of sources of fulfillment that don't require any money though.

That's the point, this said person has not tethered themselves to anything and it's going to take that long.

 

If we are talking about investors, stamps are payable, but there are some states running scheme's whereby stamps are reduced. Vic stamps are reduced on OTP for example, and NSW has 5K stamp duty concessions for investors purchasing brand new dwellings , for example. At various times there are others as well. Qld was doing a 10K grant a few years back...

But if you want a generic figure where concessions are not in the mix, approx 18% is required. 12 % deposit - you can then borrow the other 88% + LMI. 4% stamps. 2% buffer. This figure can be reduced if you forego the buffer but thats ill advised, and as I said earlier if you can qualify under certain stamp duty concessional schemes the figure would be reduced a bit, but @ 18% would cater for almost any INV purchase "seed" costs.

Pre APRA, plenty of lenders were offering INV LVR's to 95% - which was basically 92% or 92.5% + LMI, so you could have gotten away with "seed costs" of 7.5-8% + stamps + buffer, but if you want to be able to select from a broad range of lenders, 18% or thereabouts is the number now.

 

I've seen builders offer first home buyers a place for $2,000, in new suburbs of Melbourne and Geelong through their in house finance. I am not sure the ins and outs of it all other than been required to living in it for 6 months - curious to hear stories of anyone has taken up one of these offers.

If you are keen to get moving in property investment then there are certainly doors open with only a small amount of cash in the pocket.

 

Walking to the top of a mountain and watching a sunrise / sunset

 

Walking the dogs
Eating well at every meal because you have the time and energy to prepare good food
Visiting family and friends
Going to the beach
The Spit to Manly walk and others
Doing laps - oval or pool
Scouring for good quality items in 2nd hand shops or on the kerb or getting hand me downs and doing them up
Studying
etc.
Some people don't know what they're missing

 

Thanks, Taku. It's a great 'starting value' to aim for (and achievable for them, I think/hope). I'm thinking that having a few more dollars may increase the location options, if they can save a bit more, too.

 

Yep, plenty of good activities are free / cheap.

Going for a walk down to the beach at 8.30pm in daylight savings months is great.

 

I know what you're saying @wogitalia - this person has just finished 5 years of uni, and still lives at home (but was hoping to move out of home soon - wants a bit of 'freedom' to just 'be', and find themselves).

I can't imagine how, if they move out, there will be enough funds left to save. It's a tough balancing act……….

I think we need to talk about priorities, and strategies, before they even worry about investing vehicles and the amount of $$$ required.

 

Great for you southerners - no daylight savings here (very, very unfortunately ).

 

Lets look at that list...

Dog - No chance at all, dogs cost money, lots of money.

Eating well - The budget allows for $2 a meal... even ignoring that, you're a graduate employee, if you aren't working your ass off from 8 to 7 then you're one of the incredibly lucky ones, throw in the 2+ hours of public transport and the last thing that you have is time and energy. You've clearly forgotten what it was like to be a graduate anything.

Visiting Friends and Family - An option no doubt, one that costs money though given it requires traveling somewhere to get there. The budget only covers travel to and from work.

Going to the beach - Again, given where one has to live on this budget, looking at $5 each way to the beach if you're lucky.

Spit to Manly - No idea what this is but I'm guessing it includes Manly... which is only 2 hours on public transport from the areas that can be afforded on this budget according to a quick google. Again, if you can get there on $5 each way you'd be doing pretty damn well.

Doing laps - Always an option, great one if you enjoy running laps. Still going to require joggers and running gear if you plan on doing it regularly, which again, are outside the budget. Pools again cost money, the cheapest one I could find near me is $7 a session, not including having to get there as well.

2nd hand shops - Zero dollars for household items in the budget.

Kerb raiding - Hardly something most people enjoy doing or a sustainable "fun activity".

Studying - Because after you've just finished a 5 year degree and this is what you want to launch into... Not to mention that most study costs money. There is no TV or computer in this budget either remember. The budget allows for a bare bones phone with very little data as well, no smart phones or tablets here.

This is a nice list of low cost activities but low cost is still a cost.

The only thing I could really think of was actually a library membership and running (which still has a cost), which is why I asked. Remember, this budget has you living in a place like Mt Druitt (based on RE.com median rents) or Armadale in WA.

There just isn't a hell of a lot that doesn't require money these days, look at that list, even those simple things all have costs to them that quickly add up. Go to the beach and visit family/friends 3 times a week and that's $30+ gone. That's 10% of the budgeted savings out the window on something like that. It's just not a good life to live. Not to mention the stress that counting every penny and missing out on life events can cause for normal people.

 

Hilarious. You even looked up the cost of a swim at the local. Well done.
Actually, I agree. Truth be known, I think this person is better off just doing the stuff on the list , living with friends and tucking something manageable away each week. Wages growth will come eventually. Will pay to keep a close eye on the markets so that when the deposit is finally there, she'll know how to time it. Like me.