What would you do?

Hi guys,

I'm just wondering what you guys would do if you were in my position.

- I'm 25 years old. Living in Melbourne.
- Income of approx. 120~160k per year at the moment (Just started 3 months ago), with an increase to 160-200k at the end of the year and then 200-280k the following year.
- Savings rate 70%~80%
- Can borrow up to $1 mil (Based off CBA Loan borrowing Calculator)
- Savings - 10k
- Debt = 16k Personal loan + 5k Credit Card + 12k HECS.
- Living at home with dad (parents separated) in a 1BR Unit. Unit was bought for 210k in 2010. Valued at around 240k with 90k left on the mortgage. Dad's retired so he's only paying IO @ 5~5.5% payments atm, but I was looking at refinancing his mortgage to PI as it's the same monthly repayment as IO.

Mum wants me to buy a house this year possibly and put it under my name and rent it out to her. She has around 200k of savings and will be putting that towards the deposit. Mum was thinking about buying a place in Springvale, but I suggested her to check Frankston. She also doesn't mind living in Hampton Park.

My question is what would you do in my position? What are my options?

I've thought about maxing my concessional super contributions for starters. Getting a 0% Balance transfer card to consolidate personal loan + CC or just pay it off using equity from Dads.

Option 1 - Buy house for mum for around 500~700k. Put my head down and pay it off in 7 years.
Option 2 - Buy house for mum and IP, rent out dads unit (200~250 per week), find a place (2BR) to rent.

Thanks!

 

Learn to save.

 

@TimberSaw

Its a very nice gesture you would like to do this for your mum, and we can relate.

Before you go do this, I would recommend clarifying your goals as a first step as to what your long term goals are, and whilst doing this for your mum as an initial step is a good thing, you need to figure out why you are doing what you are doing.

I would also suggest building up your savings, and paying out the personal loan etc.

We ourselves started at 24, and our driver was to have a place to call home ...from our experience, you do need to have a plan for where you are heading, and with income like yours it would be good to plan ahead.

 

You are only three months into a new job. It would be insanity to take on any more debt at the moment as you are only considered permanent in most jobs after six months. I think paying off your current debt should be a priority, along with saving up for a decent deposit for a home of your own. I would wait a while before taking on a mortgage and take the minimum you need to buy a decent property.

If your mum wants to live in your home and you are happy to have her (and pay rent to help you pay off a mortgage) that's one thing. I'm not sure I would be buying her a home as you probably will want a home and family of your own one of these days! If your Mum can afford rent at the moment then it's not urgent you buy her a home.

 

His mum is putting in 200k of her own money to buy a house in his name. So what he’s calling his mums house is actually his own?

 

Thanks for taking the time to reply guys, I really do appreciate it.

I agree that the first step towards my goal is to pay off the debt and then start saving for the next 12 months while educating myself by reading books and scouring through somersoft and PC.

In regards to my job security, I've already passed my probation period and know that I'll have a job till the end of my apprenticeship (2 years). The industry is also very healthy and has at least 10-15 years of work left if not more.

As Gypsyblood has pointed out, the house is technically an IP for me. Mum will be putting down 200k of her own money as a deposit. She'll pay rent and I will just have to pay the difference between mortgage and rent. I have no interest in living there as I'm pretty comfortable living with dad.

 

I'm curious as an aside which industry you're in? Great earnings there!
Sounds like paying down the debt first and then re focusing on what your goals are, great opportunity to do well financially though

 

This can get very messy, especially when/if he meets someone. How will it impact on future when wanting to buy a primary residence etc.... just saying.

This is exactly what my partner did and what can I say.. from experience, money and family does not work because things can change.

MTR

 

So your an apprentice earning 120-160k a year? I too would love to know what industry/trade.
My opinion only, save some money, let mum rent somewhere else in the meantime, then when your ready buy your own place/investment an encourage mum to do the same. My opinion is the best way to do something is on your own, full stop.

 

True. I assumed it’s cultural too. Like the family acts as a unit especially the parents with their children and vice versa in my culture throughout your life. That comes with benefits and responsibilities both. And a partner might not feel welcome to enjoy the same benefits or give the same sacrifices as that family unit has done in the past.

 

Yes, I would like to know this to?

 

Ditto.

 

@TimberSaw - are you a lumberjack?

 

And can you get me a job

 

I did some research into this and I can't really see how you can earn so much as an apprentice in either carpentry or Timber & Composite Machining even in your final years. Please advise if your company is hiring

In regard to your situation rentvestor is always best before eventually buying your PPOR for cash. Another option to buy a H+L package, live in it for a year and use the 6 years of absence to rent it out.

 

I'm not familiar with the Victoria market, but why would you consider H+L package as a variable option? For me personally, I am not a fan of anything that's a cookie cutter approach or OTP properties at the moment and feel there are better options.

 

I assume it's legal right?! 200-280k after 2 years in the job?!
Damn! I think I am in the wrong field. I thought I was doing ok.

 

Wow! This thread has a lot more replies than what it had the week I posted!

I'm an apprentice carpenter working in the rail industry, I was working on residential before hand and kind of fell into this job by sheer luck, haha..
A standard work week for me is 56-60 hours. All over time is paid at x2 rate.
Breakdown of my pay looks like this:
$25.80 x 80 hours = 2064
$5.70 x 60 = 342
$38.25 x 6 (Travel allowance) = 229.5

= 2635.5
x 52 = 137k

--

I have no interest in owning a PPOR for the next 5 years. I like having the option of relocating closer to work. Are you able to elaborate why a H+L would be a viable option. I thought they were a no-no from what I've read.

I'm currently reading a Michael Yardney book that I borrowed off a workmate while reading PC and SS during smoko and lunch breaks, haha! I might sit down with a mortgage broker after I've paid my debt off

 

Hey,

how's your portfolio looking now?