Where to buy on Low Income and Small Deposit

Hi All,
I am trying to help a friend out who is keen to get into Property Investing, however is on a low salary of approx $55K PA and has about $45K in savings.

Is it worthwhile starting off with a mortgage on a small regional town House/Land, or would it be better off getting a unit in a bigger city?

I recall reading a few years back that some people had suggested either Elizabeth (Adelaide) or Mt Druitt (Sydney) though with the high cost of living in Sydney.

Given that Sydney's prices have already sky rocketed in the last few years, realistically is purchasing a neutral geared property possible anymore?

Would anyone oppose or recommend a unit as the first investment (simply for the convenience of having the building and most aspects handled by strata)?

Keen to hear others opinions.
Thanks,

 

No, strata seems to come with more hassles than a stand-alone house, (I have both) and often no potential capital growth.

Firstly your friend would have to discuss his or her situation with a competent mortgage broker (who specialises in investment properties) to discover their borrowing power and therefore their budget.

Then come back and ask what location or type of property fits that budget. Sometimes buying a property that fits a very low budget isnt going to be viable, and the person would be better saving more deposit first.

 

I’ve said it before and I’ll say it again, our best (percentage wise) capital gains came from units - almost trebled in prices in around 10-11 years. Yes, we sold and locked in gains before market flat-lined. Just luck, not a prediction.

We had no strata hassles either.

Don’t be put off a well-chosen unit.
Marg

 

Sorry, you are correct @Marg4000
I wasn't being specific. There are no hassles with our tiny complex either.

"Would anyone oppose or recommend a unit as the first investment (simply for the convenience of having the building and most aspects handled by strata)?"

I was thinking that there is potential for massive issues with certain types of properties, such as high rises and anything that has been mismanaged in the past or badly built. "Simply for convenience" can be a recipe for disaster.

 

With $45k in savings what budget are you looking at? For investor's now its most likely going to be 20% deposit.

On a $250k house, 20% would be 50k + stamp duties (unless your going to claim FHB and move in there) and lawyer costs + searches. Your going to need around $60k+.

You wont be buying ANYTHING in Sydney for under $500k for a free standing house. Realistically Mt Druitt now is going to cost you $650k+ for a 3 bedder and over $700k for a 4 bedder.

Even units in Mt Druitt are over $300k now for a 2 bedder and honestly its pretty run down at that price. Your looking $350k+ for a nice neat one.

Mount Druitt address available on request - Unit for Sale #127108366 - realestate.com.au

 

That's been my general experience too.

No doubt there's exceptions to this - but the townhouses/units I've had in body corps just haven't performed nearly as well as detached houses. Dealing with body corps can be a huge PITA too.

Cheers

Jamie

 

I am about to list one of my places in 2770 for 450k. Needs a cosmetic reno but nothing extravagant. I dare say it will be the cheapest free standing house in Sydney... be interesting to see where the price ends up

 

As somebody else mentioned, the first step is to talk to a mortgage broker to assess their borrowing capacity before looking into regions.

 

PM me the link once it lists. I might be a real buyer if i see potential. If you list it at $450k I will bet it sells within 1 week at full asking UNLESS there is something seriously wrong with it or needs extensive reno to be livable. How big is the yard?

Either way its still way above the Ops price bracket.

 

Thanks All
My friend is 37, no kids or other investments etc.
As I am a bit more financially free, I thought I would try to help to get something started.
I’ll pass on the feedback. Much appreciated.

 

Hi All
Update to the original post,
So my friend has spoken to her bank,
She was advised with her current salary/spending requirements and savings, she will be able to borrow approx. $250,000.

Any suggestions?
Thanks

 

She lives in Sydney, but was looking for somewhere in AUS for under $250 K,
Perhaps I was unclear with my first post, I should of mentioned she is looking for options within her reach, its just that she lives in Sydney.
Thanks

 

$250K? She could look at outer suburbs of Ipswich. Otherwise, I wouldn’t risk my money in rural towns to be honest.

 

Probably outer north suburbs of Adelaide with that budget. Even then you're cutting it fine these days if you want something that would attract decent tenants.

 

There are plenty of options in that price range in the outer rings of Brisbane, Perth & Adelaide.

At 250k 90% LVR they would need to stump up $25k deposit, maybe $5k stamps duty, $1.5k legal, $500 b&P, initial letting fees, initial minor repairs. So should still have around $10k buffer left at the end which isn't terrible.

 

Thanks Guys,
That sounds do-able, I have offered to lend her $10K if required to avoid Lenders Mortgage Insurance, only concern is we are both unable to take time off work to organise renovations/repairs so were hoping to find something that is already being rented out and then perform some minor renovations later on down the track once we can save up some cash and also annual leave.