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That folk in the road??

Discussion in 'General Property Chat' started by A&J, 24th Jul, 2015.

  1. A&J

    A&J Member

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    Hey guys, I am still new to this game so keen to hear some thoughts on how some of you experienced investors would go about this & even structures

    You have $100 grand (by end of the year in cash) ready to buy (debt free). Do you buy a PPR around the $400g-$450g (Looking at Langwarren in Vic for PPR atm) mark so repayments are manageable & so you can smash out extra on repayments to get the equity up, then in a few years time leverage to buy an IP & start the ball rolling that way.

    Or

    Keep on renting & use that $100g to buy an IP

    Or

    Can you do both from the get go?


    Thanks in advance :)
     
  2. thatbum

    thatbum Well-Known Member

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    Well its a personal choice really. The PPOR obviously will set you back in terms of investing, but then you have a PPOR...
     
  3. Blacky

    Blacky Well-Known Member

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    All things being equal I would buy the IP first.

    If you buy right it wont cost you anything monthly, allowing you to continue saving (and in actual fact should add to your income). Plus the depreciation benefits will give you a tax refund at the end of the financial year.

    Borrow as much as possible against the IP (90%) to keep your cash available. And seek alternative ways to fund the remainder without using your cash (note TerryW's thread about reimbursing yourself).

    Blacky
     
  4. WestOz

    WestOz Well-Known Member

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    Bit surprised by the answers above, perhaps there's a reason I'm not aware of/considering?

    Assuming its your (& partners) first purchase you should be eligible in Vic for 10k FHOG (First Home Owners Grant, currently 13k in WA) plus potentially further benefits >See Here<
    10k is allot of FREE money when we think how long it would take to save that after costs of living etc, its 10% of the 100k deposit, covers a large % of stamp duty etc.

    Set up the loan as interest only with offset, when enough equity + cash in the offset for deposit buy an IP.

    Buy PPOR smart for future IP, rarely ends up being your longterm home, don't fall in love with it spending lots of capital on it etc, its just a roof over your head for now, get emotionally attached to it makes it hard to see tenants in it later perhaps not looking after how you did.
    If possible let a room or two out to assist with income.
     
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  5. Natedog

    Natedog Well-Known Member

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    Strategy depends on where you are trying to get to and in what timeframe.

    What's the end goal?

    I know it's hard to think like this at the start, but it can simplify the journey, IF you know what you are roughly trying to achieve and by when.
     
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  6. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    @thatbum summed it up.

    If maximising your financial outcome is #1 priority, buy IPs now, buy PPOR later.

    But it's a lifestyle choice, too. If owning your own place is an important emotional thing, then go for it in the knowledge that it will slow your investing a bit.

    My first property was a PPOR. If I knew then what I do now, I'd have gone straight for an IP instead.
     
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  7. keithj

    keithj Moderator Staff Member

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    Whenever I come to folk in the road, I always take the one less traveled, and that has made all the difference :D

    You've given 3 solutions to a scenario. How about first telling us what the scenario is ? Wife, kids, income, outcomes desired, age, experience, job security, existing assets, strengths, weaknesses, reno skills, etc ??
     
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  8. DanW

    DanW Well-Known Member

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    The accountant next to me says option 3.

    Buy PPOR for the grant or stamp duty concession.

    You also get a cheaper interest rate if it's am owner occupier loan, and it usually stays like that when you move out.

    This also starts your 6 years CGT free main residence rule.

    Then move out after 12 months and claim all of the lovely IP tax deductions each year. The first years are always better due to higher depreciation and mortgage insurance claims. It will help your cashflow alot, especially with low rental yields.

    As long as you move back in before the 6 years is up, the 6 years will reset for another 6 years CGT free.
     
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  9. Fargo

    Fargo Well-Known Member

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    That's contradictory if it is just a roof over your head and not going to be a long term home. Depending on the area, you would probably be better renting and and let some-one else subsidise your housing you could rent a better house/area for a lower cost than buying it. A once off $10k grant is insignificant when compared to the tax benefits you can get every year, compound those every year and you will soon be way more than 10k better off every year.
     
  10. Waldo

    Waldo Well-Known Member

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    Did anyone else expect this thread to be about roadkill? Or a hit & run?
     
  11. Bayview

    Bayview Well-Known Member

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    Isn't it; FORK in the road?
     
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  12. Redwing

    Redwing Well-Known Member

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    There would be more Folks than Forks :D
     

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  13. Propagate

    Propagate Well-Known Member

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    Another way to look it it is how much rent will you paying if you went IP first? If you can borrow for a PPOR and pay interest only, and budget for a purchase that would work out similar or less compared to your rental outlay, then in terms of "dead money", i.e. interest payments vs rent you'd be about the same, but you'd have control of an appreciating asset whilst you save up again toward the IP deposit.
     
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  14. Samten

    Samten Well-Known Member

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  15. A&J

    A&J Member

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    Thanks for the replies guys so far. As for the current "scenario" as stated above -

    *Engaged about to marry late next year (possible 1-2 kids in 3-4 years)
    *(Cheating) Ex wife & child which I pay child support
    *Income $150'000 (salary sacrifice to super) plus my partners is on $65'000 (HECS debt of $18'000). Though house buying will be in my name first due to me having the deposits etc
    *Desired out come for now is tax minimization due to what I pay atm, long term is ideally positive cash flow
    *Age - late 30s, partner late 20s
    *Experience - Still some what new to property (No property in my name before)
    * Job Security - Work for the biggest company in Aust BUT whose job really safe these days anymore. I'd say yes job is secure working full time
    * Not a lot of assets as such, expect super & employee share scheme.
    * Strengths - slowly getting that team, Financial Advisor & great Accountant who is heavily into property. Debt free, saving a great deal of my pay & living well within my means. By end of the year will have saved $100'000 within 2 years
    * Weakness - Feel it is my age & being F#&ked over in the past from people I use to trust the most. Taken a few years to get back on my feet & in the awesome job I have been in for the last few years. Currently renting.
    *Reno Skills - Keen to learn

    Cheers again guys (I feel I am moving on from that FORK in the road lol)
     
    Last edited: 30th Jul, 2015
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