NSW Sydney First Home buyer then investment $750 to $800k

Hi All,

This is rather a very broad question from first home buyer located in Sydney. I am a first home buyer who is eligible for first home buyer grant ($10k) and concessions (stamp duty exemption of approx $30k). Also if I go for newly developed house I can get builders grant $15k.

Specifics:
- I am single in mid 30s with salary as my only income. $140k per annum
- I have $300,000 cash available- recently made in stocks. this is after tax bills (really painful to pay huge tax bill). I have wasted my last five years playing with volatile stocks and in cycles of making and loosing money, Lucky enough to recover my losses and now want to buy a house and invest in property with next 10 to 15 years in mind.
- Initial inquiry with Nab bank- $850k is my borrowing power.
- This gives me total buying power of $1,150k.


Plan:
- If I buy new first home around $750k- i can save around $50k in first home grants and concessions. Areas I am looking around are Leppington/ Austral or Marsden park side. I am going to live in first home for a year or so and then move to a rental property more closer to Parramatta etc.
- I also want to buy investment property in Brisbane city - perhaps apartment 400 to 500k with high rental yield. Property will pay for itself.
- This is my rough plan to start my journey.

Through property chat I came to know about Property Couch podcast which I am listening on daily basis- already at episode 11. There is so much to consider. I am getting the gist of it. There are alot of questions in my mind.
Considering 4 pillar of mastery- 1. Asset selection 2. Borrowing Power 3. Cash Flow Management and 4. Defense.
I am from finance background so I am ok with 3rd and 4th pillar. I need opinion/ direction on pillar 1 and 2.

Borrowing Power- I just went to Nab bank and I have been told I can get $850k borrowing power. It is my start of journey. Should I go to some experienced investment savvy broker so from day 1 I am not making any mistake or at start staying with major 4 banks is ok?

Asset Selection: This is where I am stuck and have lots of question. Important factors to consider are Location, Owner Occupied Property (OOP) attraction and Future supply. Also some other things are Land to Asset ratio and income demographics of people staying in area.
Leppington/ Austral and Marsden park sides might be good locations but future supply is quite alot and if I buy Land house package then Land to Asset ratio for town house/ terrace is most cases is 50:50. Plus I am gonna loose newly built asset value a lot in terms of depreciation of building which might negate appreciation of land if happens in next 5 years. But there are around $50k savings for me (new home/ builders grant and stamp duty concessions). I am not gonna live in it forever so I am not after bling/ shiny property. I want quality asset with potential of capital growth. If I come to established area i dont have many options and i will loose my builders grant etc. Any direction, comments, opinions from experienced members are welcome.


Another question- is it a good idea to hire buyers agent or it is better to do my own research and learn by myself. I have 9 to 5 job but it is not tough job and i like to read and research.

 

NO, go speak to a good broker ASAP, forget going to a bank directly.
They don't need to be calling themselves 'investment savvy' it's just a buzzword IMO - All the good brokers are by nature 'investment savvy'

Not a good idea to base your buying decision on the government grants, most are already factored into the purchase costs anyway. If you're looking to build a property portfolio you will need capital growth to assist in the accumulation phase, if you get no growth or worse go backwards for 5 years or more you'll be stuck waiting for growth or savings to buy to buy the next property

Also worth double checking the Stamp Duty Waiver in NSW, my understanding is it is waived for properties worth up to $650K, discounted between $650K and $800K but doesn't apply at purchase price of $800K or more.

 

Hi Lindsay.. Thanks for your input...

Regarding loan I will definitely speak to a good broker. Any direction on how to find a good mortgage broker in Sydney?

Regarding NSW stamp duty concession- it is exempted upto $800k for new constructions.. That's why I am after $750k new property as my first home... below is extract from NSW Revenue site:

"If you buy a home or vacant land between 1 August 2020 and 31 July 2021 you can apply for a full exemption if:

• the value of your new home is less than $800,000, or
• the value of your existing home is less than $650,000, or
• the value of your block of land is less than $400,000.

You can apply for a concession if:

• the value of your new home is between $800,000 and $1 million, or
• the value of your existing home is between $650,000 and $800,000, or
• the value of your block of land is between $400,000 and $500,000."

Any advice on which areas to focus on in Sydney?

 

Don't make your purchase decisions around the availability or lack thereof of govt grants or concessions. You're factoring too much into it. If the government withdraws the stamp duty exemptions or whatever else instantly overnight, would the real estate you intend to buy still be worthwhile?

I would suggest not buying the home you live in. Continue to rent while you own a property leased out. It's the best of both worlds - mortgage interest payments claimed against your taxable income, which you would lose out if you lived in it.

Brisbane is probably good for your second IP, once you got things worked out in NSW. The high rental yield is offset by the expectation of zero capital growth. ie. if you buy in Brisbane first, you'd likely never be able to have a second IP in NSW, the order in which you do things probably makes more sense.

 

Ok so seems like you're stuck on buying new then, my figures were regarding existing/established property in NSW.

What area's have you shortlisted? Have you searched the forum?
What research have YOU done for yourself?

Have you heard of rentvesting?

 

Thanks for your input Onyx... for the sake of discussion why not take benefit of such exemptions if it is my first home? Obviously going into H&L package solely to obtain builders grant would be a wrong decision from investment point of view. I am thinking to buy and live in it for a year to fulfill exemption criteria and then live wherever I want... Is this possible or something I am missing?
Any options on which areas to focus from growth perspective in $750k package?

 

Not really... I am after growth and it was my way of obtaining savings since I am first home buyer..

[/QUOTE]
What area's have you shortlisted? Have you searched the forum?
What research have YOU done for yourself?

Have you heard of rentvesting?[/QUOTE]

Yes I had initially shortlisted Leppington/ Austral and Schofields suburbs but not feeling comfortable considering population demographics (not high income earners) and plenty of supply in short/ medium term......

Other areas I am looking are St Claire/ St Mary in connection to Western Sydney Airport... Any other areas you want to suggest?

Yes rent vesting is what I was about to do without knowing that there is such term thanks for referring to it and i searched a little bit about it

 

Yes I read each discussion on this forum on Leppington/ Austral area and I am listening to Property Couch podcast and doing standard search using real estate website.....

 

All members could you please suggest a good mortgage broker based in Sydney? Thanks

 

In isolation, nothing. If your dream house happens to be just under the threshold, then absolutely go for it. But it's not always like this - people will often make decisions they otherwise wouldn't have based on piddly little amounts of money.

E.g. your dream house is 850k, the house you KNOW in deep in your bones will have the best CG is 950k, but to get a measly little grant, you buy the crappy house for 750k to eek under the threshold. You've now make a crappy decision on the basis of some chicklet scraps that mean absolutely nothing over the span of a 20-30 year timeframe.

Big picture thinking is important. I always have this saying: don't let the small drive the large.

 

Fair point and makes sense... thanks

 

Read this:

Strategy: Rent where you live and Buy Investment Properties

Then follow it up with the first response from Redom.

Then proceed to pick your jaw up off the floor.

 

Two quick points from me, focusing on asset selection and parking finance for a moment. I am going to sound like a grandfather, but here goes:

1) Jaybean is bang on a few posts up. An important insight about investing for small tax concessions while being stuck with secondary assets for many years or even decades.

2) Be careful with Rentvesting. I have seen a lot of people do this and regret it. The problem is not rentvesting as a concept - this can be sensible if done properly. The issue is that the way it is framed it ushers people into purchasing secondary assets in secondary areas (while living in a nicer area). This is a lot of capital to tie into areas that you may not wish to have your wealth locked into.

I have seen people purchasing multiple investment properties but none they want to live in, and when life moves them on (babies etc), they are left with a bunch of investment properties in QLD and no where to live. Consider rentvesting, but buy in an area that meets some of your future lifestyle requirements. The beauty of real estate is that it should give you choices, so choosing an asset that has multiple functions is not a bad way to think about the future, particularly if starting out.

 

Wow thats gold level free education.. Big thanks mate..
Now my question is can I actually own property on IO loans? Or the end game is focus on capital growth and make handsome gains in next 10 to 15 years? How about if market goes into some stagnation phase for few years (anything is possible)
I can understand that there is risk everywhere but remember the reason I want to invest/ buy property is that I want slow (but less risky) returns over a period of time.. otherwise stocks/ CFDs are always there to provide me adrenaline rush...

 

Any feedback or comments are gift to me mate...
Can I actually own IP which I bought on IO loan? Sorry if I am confusing it....
Effectively you are saying- secure the location wisely even if it is IP... and don't just focus on few concessions...

 

1) Yes you can own property on IO loans.

2) The "Or" bit is not mutually exclusive.

3) Stagnation is possible yes.

 

If you understand that property investing is a slow game then you shouldn't worry about the few years of stagnation that you hypothetically posed may happen, it might not happen either but even if it does, it shouldn't affect your long term focus.
You're in the right place to learn before you start, which is great!

 

Yes, put another way: choose carefully anything you can't change later on (location, aspect etc).

Touche regarding the IO loan comment. P&I is a better long term strategy.

 

Please be aware that it's very easy to convert your loan from Interest Only to P&I if you need (just a simple request), not easy to switch from P&I to IO (full application required)
Need to weigh up benefits of each strategy with your broker before choosing one or the other,

Saying a blanket statement like 'P&I is a better long term strategy' may not apply to you and what you're looking to achieve.
For example - If you have non-deductible debt (Owner Occupied) and deductible debt (Investment) it typically makes more sense to have the Investment debt on IO to maintain deductibility AND to use the additional cash flow to pay down the non-deductible first. However if you buy and owner occupied place that you intend to convert to an investment property in the future it may not be advisable to pay that debt down either and instead stash the additional cash in an offset account against the loan.
It's something you need some credit and tax advice on, to map out a plan that suits your specific plans.

 

@Lindsay_W and @John_BridgeToBricks
Great discussion......

I am going to keep researching further. So far I have come to this conclusion (which might change with further research)

1) I need a good broker to discuss how should I structure my loans based on my goals and brining tax element into equation. Also need to consider how much I want to be interest rate sensitive in longer term.. because everything change and in future interest rates can increase and if I am on IO loans only- I will be too much exposed.
2) Read and read and research and become more informed about Asset selection and then finally go to a buyers agent as informed client and get professional advice before buying.

Add anything else you guys think I should do.... and share your comments on what I said above.

- Please recommend me a good broker based on your personal experience.

Thanks.