Newbie seeking some basic property advice

Discussion in 'Introductions' started by TazCaz, 24th Jun, 2017.

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  1. TazCaz

    TazCaz Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    49
    Location:
    Melbourne
    Hello,

    I am VERY new to the property market as a solo purchaser and don't have any knowledgable friends or family to ask for advice (and finding online information incredibly confusing), so please be kind...

    I'm currently living in Melbourne and looking to buy a property in my home state of Tasmania. I'm trying to decide if I should buy an investment, or move back home for a while, get an owner-occupier loan and then rent out/airbnb after about 1-2 years of living in the property (I'd be looking to move overseas at that point).

    Initial consults with my broker show my borrowing power is higher on an owner-occupier loan (around $430K v $530K if I can find a job down there on the same salary I'm on here). I am not eligible for the FHOG (I bought a property with a partner about 13 years ago in NSW that we ended up selling when we broke up). For an investment, the rental return I'm looking at would be around $300 pw. If I bought an investment, I would need to be renting elsewhere (as opposed to living at home with family), though in a couple of years, I imagine I will be overseas, as mentioned.

    I'm looking for either help on this forum or some links to super easy-to-understand information that I can research myself on the below.

    And yes, I know this is all terribly basic, so please only reply if you have the patience to offer some genuine assistance to a newbie trying to get their head around a complicated topic. I would really appreciate someone being kind enough to explain it to me in simple terms (which would no doubt also be helpful for future newbies searching online for answers to similar questions), but am also more than happy to continue doing my own research if someone can point me in the direction of resources that don't assume you know what all the property jargon and financial terms mean. Once I know a bit more, I'll be brave enough to venture out into the big kids' playing area of this forum! I will also speak again with my broker and a tax accountant, but I just want to equip myself with some basic knowledge so I know a bit about what I'm talking about. I wish they taught this stuff in school!

    So...

    - Do you need to tell the bank you are moving from an owner-occupier to an investor loan, and vice versa?

    - What are the benefits/downfalls of either an investment or an owner-occupier situation in terms of loans?

    - What are the tax benefits and implications in each situation? What kinds of things can be claimed?

    - what are capital gains tax, negative gearing and positive gearing and how would this benefit or not benefit these situations?

    - I also read something about a "6 year absence rule to avoid capital gains tax" – do I need to know about this?

    - I'm reading a lot about principal + interest and interest only loans – what does this mean? Are there benefits to one over the other?

    - Does depreciation have to be considered when buying property?

    - What does having an offset account mean and is it a good idea?

    - I know the decision is ultimately mine, but are there any other things I need to consider going down one path or the other?

    Again, I do know this is all basic stuff that I am sure can all be found online – and I have been doing my research. I'm just really after someone to explain it all in simple terms. I promise to pay it forward when I emerge on the other side of this more knowledgeable than I am at the moment.

    Thanks in advance!
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Hiya

    You will get a bunch of useful stuff shortly.

    Mine isnt so much useful in answering your questions,more like questioning

    1. wht do you want the property(ies) to do for you specifically

    .2.Why tassie?

    t
    arolf
     
  3. TazCaz

    TazCaz Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    49
    Location:
    Melbourne
    Hi Rolf,

    Firstly, in answer to "why Tassie?" - it's because I was born and raised there, and all my family is still there, and despite me having lived all over Australia and other countries, Tassie will always be 'home'. For a long time it was also an affordable option - and though that's changing quickly - it's still more affordable than other cities. I will always have ties to Tassie, so no matter whether I am living there or renting a place I own while I am overseas or interstate, I will always return there.

    As far as I what I want the properties to 'do' for me. I'm not trying to make a ton of money. I simply want a place I would be happy living in that would also make enough rental return to pay off a mortgage (hopefully with no gap) should I not be living in it.

    Does that make sense?
     
  4. Trainee

    Trainee Well-Known Member

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    10,256
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    Wanting to live in tas is no reason to buy a place there now.

    Wanting to make 'some money' is a poor goal.
     
  5. TazCaz

    TazCaz Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    49
    Location:
    Melbourne

    Hi Trainee, not sure why wanting to own a place in Tasmania as either an investment or somewhere to live isn't reason enough to buy a place there now? That's kinda my whole point - I do want to buy there now.

    Also not sure where I said I want to make 'some money'. In fact, I specifically said I'm not trying to make a ton of money. I'm simply looking for a place I'd enjoy living that could also be rented out to pay off mortgage payments when I'm not in town. Not everyone buys property in order to make as much money as possible. For me, mortgage repayments are as much as the rent in currently paying so it makes sense to put that money into paying off my own home rather than someone else's. If my property increase in value over the years - great!

    If there's anything you can add specifically to the questions I've asked, I'd love to hear!
     
  6. Trainee

    Trainee Well-Known Member

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    If you dont care about making money, then buy whatever you want and just try to pay it off as soon as possible.
     
  7. The Y-man

    The Y-man Moderator Staff Member

    Joined:
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    Posts:
    13,437
    Location:
    Melbourne
    Probably - and they will likely find out when you change your postal address.

    Interest rates higher on Investment Loan

    If you live in it, you can't claim anything. But you get tax free profit on sale.
    If you rent it out - you can claim all "expenses"
    Residential rental properties


    CGT = tax on prfits when selling property
    neg gearing = offsetting you worked income with losses on income producing investments
    positive gearing = something often talked about and rarely seen.

    Yes - if you move out and want to sell you property after renting it out for a while.
    Treating a dwelling as your main residence after you move out

    Basically if you can get IO you can borrow more. But you will need potentially pay more in the future (as you will have less time to pay off loan).

    Yes - you don't want a property that depreciates too much (bit like buying a car for $200k and find it is worth $100k 3 months later). But if it does, make sure you claim what you can from the tax man.

    Yes. There are some posts on this - have a search - asked many times. Otherwise come and sit down over a coffee with me and I'll try explaining.

    VIC - Ad-Hoc meetup (Melbourne East)

    Up to you - do you want to go and live in Tassie or stay where you are? It's a personal choice.

    The Y-man
     
    Elvis likes this.
  8. TazCaz

    TazCaz Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    49
    Location:
    Melbourne
    That's the aim, Trainee! :) Just trying to get some answers to specific questions, as per my post.
     
    Invest_noob likes this.