To buy a live in home or to invest?

Hi all,

A few weeks ago my wife and I had our apartment burgled - thankfully we were insured. Discussions with our family took place shortly afterward and, as of Friday, has resulted in us obtaining a Family Guarantor for a Home Loan. We are very lucky and thankful for this assistance.

We are now trying to work out whether or not we should buy a place to live in ourselves, or whether to invest in a property and simply find a new (and more secure) rental. Ideally the value of the residence should be between 500-600k to suit our budget. We're obviously at a 0% LVR but I am quite eager to remove the family security (i.e. value of 20% of the property) sooner rather than later. My wife and I don't have kids yet either, which makes me think it may just be better to find another apartment (for now) and purchase a house in an up and coming suburb in NSW/VIC/QLD. But is this so-called 'bubble' likely to impact capital growth in the short-term, and is it just better to get ourselves into our own house at this point?

Any thoughts? Very appreciative of any advice you may be able to give.

 

First of all there is no bubble. Secondly, it is almost always better financially to invest first before buying your PPOR, security concerns aside.

 

Why not buy a main residence and then rent it out? You can get a CGT free property with all the negative gearing benefits while renting it for up to 6 years.

 

How long are you required to live in the residence before renting it out?

 

Hi

If you buy an IP keeping in mind that you want to live in it than you are bound to spend more.

I'd suggest you buy a place to rent with positive income coming and has growth. Bubble is inner city Apartments, try figuring out some outer suburbs that fit your requirements.

Regards

 

There is a bubble. The bubble gum I chew on the way to view my props.

And it always bursts. Hang on..my props are still there. ...

 

A PPOR costs, in most cases, more than renting as you are liable for maintenance, repairs, council rates, stamp duty, etc, etc, etc. Taking the average of your intended mortgage amount, your repayments would be around $700 per week (plus the abovementioned additional expenses) if the interest rates stay below 5%, which is highly unlikely over a 30 year period.

The goal of removing the 'Family Security' to pay down 20% of the loan will take almost 15 years at that repayment amount.

Paying an extra couple of hundred each week will help immensely if you can afford it. If not, I'd seriously consider continuing to rent and set a strict savings budget to save your own deposit before going $500,000+ into debt.

Some of the mortgage brokers and other experts on here will probably be able to advise much more forensically than I

As always, YMMV

 

No minimum.

Tax Tip 23: The 6 year Absent from Main Residence Rule

 

Ask yourself this: Where do you both want to live and what style of accommodation would suit you best. What will $500K buy in Canberra?

As much as I agree with the other posters that you will be miles ahead financially in ten years time if you buy an IP, the rellies giving you the guarantee to buy a "home" probably wont be impressed. Unless they understand exactly where you are coming from, they will resent going guarantor. This is because they are most likely (I cant know all the facts here) emotionally invested in your current living arrangements and are concerned for your immediate well-being. Unless they have already had this conversation with you, be prepared to be guilted into buying a PPOR. At least three bedrooms, white picket fence and close to good schools. If that is the case, there is nothing "wrong" with buying a townhouse or a unit and still aiming to get IPs as well.
Best wishes

 

I agree with angel. Also I won't feel comfortable with relos or parents going guarantor. If it goes bad, it can really go bad.

 

If you are prepared to live in another rental, then I would avoid using a family guarantee to buy an IP. You are putting their money at risk. Family support should be a last resort once you are independent.
Marg

 

We have gone the ppor first route, it has set us back a bit and I cant go as hard as I would like to, especially on our income. We have a couple young kids so our priorities at the moment are a little different at the moment, just never forgetting about the long term goals too inching towards it rather then giant bounds.

 

Whynotboth by mini2 posted 4th Apr, 2016 at 2:03 PM

 

Thanks for all the advice, everybody. I think, for now, we'll stick with the original plan and go for a PPOR due to the sensitivities with the Family Security. I totally agree with the sentiments users have posted above. The thought of telling our loved ones we will be moving into another apartment to purchase an IP doesn't sit too comfortably with me.

Alright, so with that behind us, I will head over to the 'where to buy' (in Canberra) thread!

Leigh

 

Why not go a little bit further and buy a duplex pair on a Single Title? PPOR one side and IP the other. 2 birds one stone and all that. Then use the three streams of income (2 wages plus Rent) to pay down your debt to 80% releasing the family of their assistance. Best of both worlds.

 

Good idea however it might present some challenges such as lower LVR (higher family guarantee required) and harder to find the suitable property

 

Granted. But it gets the OP into both a PPOR and an IP purchase in one hit. The higher LVR can be more rapidly paid down with the three incomes as I mentioned. Also provides a safety net of being able to Strata Title and sell the IP half if things become difficult.

 

Hi Leigh

Definitely POPR if it is to do with your family wanting you to be more secure - by moving to a nicer area I presume? Though houses in nice areas are quite likely to be burgled too - nicer stuff in nice areas!

Have you got savings of your own as a deposit?

If your family goes guarantor then it should be for an amount they can afford to lose. Unexpected events can make everything turn bad - as happened to a friend of mine. His parents were in danger of losing their house after he lost his ability to pay them back for a while. It was terrible for all concerned.