Hey guys, Hoping you might be able to give me a little bit of insight?, me and my partner are 26 years old, we are saving to buy a house at the moment and have just finished off paying our $20,000 in debt we owed from our cars & travel being young in our twenties this was my biggest mistake getting a loan for something I cannot afford. we have around $8,000 in the bank in savings looking to put 10% down on a block of land costing $125,000 in Ballarat, I always wanted to save 20% to put down on a house, we are looking to building a 4b 2b for around $340k (land included) so I will need roughly $68k even though the first home owners helps us to the tune of 20k I will still need $48k. My partner has just gone back to school studying her masters of Teaching which will take 1 1/2 years to complete, and she will continue to work 1-2 days per week. although this is a big impact going from collectively saving $3000 a fortnight down to around $1500. My concern is if I wait 1-2 years until I save 20%, interest rates & house prices will have gone up. I plan on living in it for a year and then selling before buying old properties and flipping them as I am a carpenter by trade. Should I just bite the bullet, save for 6 months, pay the LMI & put down a 10-15% deposit so we can get a home? FYI we are living in my parents bungalow for the last year now after returning home from travelling, saving and finally paying off our debts so would like to get out ASAP. Any advice would be much appreciated!
I would not buy a house and sell it within the year, especially if you're paying LMI as it's just wasted money. Also buying land that is not earning income will make it more difficult to save as well. If your income is high enough, you could look at a parental guarantee so you can avoid LMI, this would get you into the house more quickly and may be a better option than trying to save.
If I where you I would buy sooner rather than later. You can get a 95% loan and yes you will pay LMI. LMI is just a leveraging tool and you need to weigh up LMI amount v Property growth amount over the time you will wait to save enough for LMI. Why not get the land (what goes up in value) now and build later and stay ay M&Ds and save like crazy. The LMI on your loan size wont be much even at 95%. First port of call is to speak with a broker to determine your actual position and what is possible finance wise. Plenty on here to choose from
Don't be so hard on yourself for sending money on travel while you are young (even if you had to loan cash for it). You will probably look back in ten years and realise you should have done more. Not everything is about $ at the end of the day. Back to your question. If you think your property will increase at a quicker rate than what you can save it is simple math. Not that I am suggesting for a second it is a simple decision. The idea of buying the land only is a good one, if prices go up you will capture this with the land.
I agree that LMI is a leveraging tool but I also think that unless you have a financial advisor assisting you in this process it may be better to save enough of a deposit and then purchase a property that you can afford, notwithstanding that property prices may continue to increase. You don't want to over extend yourself and be unable to service a loan because you over leveraged yourself. At the end of the day, you need to be realistic about your purchasing power and crunch the numbers before you commit to a significantly geared position. I would also consider whether capital growth in Ballarat is something that will enable you to implement a property investment strategy (sounds like you are banking on capital growth if you intend to buy and sell).
I'd just be careful with financial advisors when it comes to investing in property. Every time I hear when someone engaged a FI its an unhappy ending. Personally I would stay very far away from them if I was intending to focus on real estate to grow a decent portfolio.
