Live in or lease my first ever home?

Discussion in 'Investment Strategy' started by lauren1992, 22nd Dec, 2019.

Join Australia's most dynamic and respected property investment community
?

What option would be in my best favour

  1. Option A (Just buy & live in it)

  2. Option B (Buy & lease it straight away)

  3. Option C (Buy, Live for 6 months, lease thereafter).

Results are only viewable after voting.
  1. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales
    Hi I am in a very fortunate position where I have my weekly expenses at no more than $140. No rent/ no other bills. I live at my grandmothers in NSW and she does not make me pay any rent or board.
    I will be a new graduate teacher as of 2020 with a position two minutes from home (I will ride my bike to work). My pay for 2020 would be roughly $68,000 (Gross) and after about 18 months- I will then be on $81,000.

    I have been thinking for a while and have three ideas I would LOVE help with deciding.
    (Do NOT want to build a house)

    Option A
    • To access the first home buyers assistance (they waive Stamp duty)
    • Save for a year or longer and buy a house with a solid deposit, to live in.
    • One year of hard savings could get me 40K and two years maybe 80K.
    • Would rent a room out to a friend/ stranger indefinitely.

    Option B
    • Save up just enough money to have a deposit on a house where I then can rent it out and continue to live where I am currently.
    • I would have the tenants paying their rent (whether it cover my repayments or not) and I would still be in a position to add as much as I can to it on top of their payments.
    • I would move in after a year or few (pending my grandmother and her health).
    • I would forgo any first home grant/ scheme but have a rental income instead.

    Option C
    • As option B, except:
    • LIVE in the house for the first six to twelve months to gain the first home grant of waiving stamp duty.
    • After living in new home for required time move back to grandmothers and rent out my house out for possibly a year or two.. This would be until my grandmother unfortunately passes, and her house is sold.

    My questions are what are the tax implications for someone who is a total dummy in the housing market, especially renting market?
    Would I have to declare that my first home will now be an investment property to the bank? or do they not care as long as I am meeting the repayments?
    I am aware of the 6 year CGT thing, I would rent it out for no longer than two or three years.
    I have been googling and researching for hours but would love other opinions or things I may have missed or not even considered.

    THANK YOU SO MUCH IN ADVANCE!
     
  2. lifecompetitor

    lifecompetitor Well-Known Member

    Joined:
    8th Dec, 2019
    Posts:
    96
    Location:
    Sydney and Melbourne
    Option C for me.

    I had to re-read your first sentence a few times. Living in Sydney (as you do) that blew me away.

    You have an older wiser head on your shoulder for someone just finishing uni. Good for you. You will go far. Just remember to smell some of the roses along the way.

    My first place I purchased I borrowed as an OO then switched to investment after the first 6 months. Didn’t tell the bank as my broker said it wasn’t necessary and told me I would get a better rate.

    Many brokers on here will be able to give a more definitive answer but that was my experience.
     
  3. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales

    Hello, I forgot to mention I'm 27, obviously no kids! So, I have done my time here there everywhere regarding jobs and living different places and have finally realised I want an actual career and an actual home to call my own.

    Thank you for your reply!!
     
    Ketsle likes this.
  4. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
    Whats the long term plan? What happens if you cant love at your grandmothers anymore?
     
  5. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales
    Hi, well the house I buy would be one I would like to live in for a while thereafter it is leased.
    If I can only rent it out for twelve months due to being unable to be at my grandmothers I am happy to move in. If things changed I always have a place at my parents if need be.
    I’m just wondering if it is worth my while to have someone help pay my mortgage down from the start or just do it myself without the hasstle?
     
    Optimus likes this.
  6. Maximus

    Maximus Well-Known Member

    Joined:
    4th Aug, 2019
    Posts:
    86
    Location:
    Sydney
    Option C
    Not only can you help your grandmother and assuming you get along well why would you move?

    I know its insensitive to ask this but have you spoken to your parents or involved parties about purchasing your grand mothers house once she passes?
     
  7. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales
    Hi Maximus, not insensitive at all as that is a sad reality on a few years time. She now loves with my parents in their care as they’re retired. I have looked after her for five years though but the house is empty.

    I have mentioned it a few times briefly in conversation. However the property is to be left to my mother and my uncle as it is their mother. And it is valued at 700K a house two doors down sold for 850K so I think it is well out of my price range.

    I would have to win lotto to be able to stay here I think, as I would have to buy out my uncles share and maybe go halves with my mother.
     
  8. Maximus

    Maximus Well-Known Member

    Joined:
    4th Aug, 2019
    Posts:
    86
    Location:
    Sydney
    It sounds like your grandmothers property would be a good PPOR being so close to work?

    There are alot of assumptions here.
    You could possibly save and when that time should come you could buy out your uncles share and organise via contract (to ensure compliance) to pay your mum out directly over a period of time.
    They could also avoid paying an agency by you buying the property which is another saving for them.
    This would only work if your uncle is willing to sell and your mother will agree to you paying her out.
    Also this assumes that the price will not rise and should it rise you would be willing to cover the increase, also if the prices do rise and the deal falls through you may miss other opportunities in the meantime.
    My personal experience is that business and family generally doesnt mix.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    Some tax consequences of C would be you cannot claim depreciation on fixtures and fittings unless new. This prob won't change things unless you are buying a new property or will do some renovations.

    Consider timing of moving out if land over the land tax threshold. Unlikely if NSW though
     
  10. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales
    Hi thanks for your reply, I don’t feel I will be buying a new build or doing any major renovations. I didn’t even consider buying for making excess money or for tax ( I guess I don’t understand much about that though ). I Just want to make enough through rent so that I have one person covering part of my mortgage and I will be making extra decent repayments to get a good head start on the debt instead of living in it straight away. Does that make sense?

    Not sure what land tax threshold means. I will do a google! Thanks.
     
    Terry_w likes this.
  11. lauren1992

    lauren1992 Member

    Joined:
    22nd Dec, 2019
    Posts:
    10
    Location:
    New South Wales

    Yes I understand that is a really good idea, however my mother has already approached my uncle about buying out his share so it doesn’t get sticky when the time comes but he is sticking around for $$.

    As much as I would love to stay in this house I love my neighbours I feel that I would be better off just going elsewhere and cutting my losses. This house needs a lot of work as well.

    That’s why I’m wondering is it cheaper to just save for as long as I can or get into the market as soon as I can and rent it out whilst not paying my own rent here
     
  12. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
    Op, do you want to consider learning about investing and coming up with a long term plan for creating wealth? Everything youve said are short term reactions to things. If you are interested in proactive, long term investing, there is a lot of info here. You just have to be open to it.