在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo
Well, it's No. 2 Son's 18th Birthday on Sunday.
My, how time flies. 'Twas only yesterday that he was that scrawny transparent baby who laughed at six weeks and did everything earlier than his big brother and sister had done.
Over the years with the asthma and the school reluctance and the chronic fatigue there have been a few dramas, but since he finally gave up the charade of going to school and has been working full time he is a changed person.
So this afternoon, he drove me (L Plates in the car windows) to his very first property inspection to buy his very first property.
He liked the first one. He really liked the second one, so he rang the Agent as soon as we came home and booked a second inspection, and fully intends to make a written offer tomorrow.
Yes, he isn't 18 until Sunday, but he is absolutely determined to buy his first property the day he turns 18 so we will be back in the Agent's office on Sunday morning resigning and ratifying Contracts if necessary.
So, being the devoted Mother that I am, instead of going out for dinner tomorrow (it's Mike's and my Birthday tomorrow) I shall be slaving away over a hot loan application for my darling son.
How nice when what I've been saying and doing over the years bears fruit.
It helps that Daughter's townhouse (further along in the same suburb) has appreciated about $50,000 since purchase in February, 2003 and she is now earning 7.07% gross yield, and No. 1 Son's townhouse (next postcode across) has just changed tenants (one week's vacancy) for the same rental but has improved about $40,000 in value in the 15 months since purchase.
So how is a skinny kid on 50% of the adult wage getting a loan?
1. He has been diligent about regular saving, understanding that Genuine Savings are the key to the first purchase
2. He is in regular full time employment and has been with the same employer since May, 2003
3. He has no other debts, lives at home (no board) and is not about to rush out and buy a money consuming car
4. He understands that serviceability will be reliant on rental income, and this unit has an existing tenant which certainly influenced his choice
5. He is prepared to forgo the First Home Owners Grant if necessary but if the tenant moves out of her own accord within the first twelve months he will then apply for the Grants and thoroughly enjoy batcheloring for six months, knowing that he is ten minutes drive or about 40 minutes on the bus from home and about 20 minutes on the bus to work.
6. Although I will put the deal to a discounted rate lender with a lenient serviceability model, he understands that if he cancels the loan this particular lender will impose break costs. Nonetheless, he is trading off buying on his Birthday for waiting another six months, and his Birthday wins!
7. He has no intention of ever selling
8. He fully intends to buy his second property within twelve months ie by his 19th Birthday.
And really, it doesn't take much but it does take something.
Good to hear Kristine!!
I wish someone had of talked to me about property investment before I was 18.
Did I read that right? You and your hub's birthdays are the same day?
A post made by a very proud mother.
And so you should be Kristine. Well done.
Well done Christine and of course your kids as well.
The seed must be planted early to grow strong.
Great news Kristine.
My son turned 18 last Sunday, and though I've tried hard I can't see him wanting to buy an I/P for at least a couple of years, hope I'm wrong.
Don't get me wrong, I am very proud of the person my son is and some of his achievments so far, I would just love for him to be working toward that first I/P.
You never know, he may just surprise me one day.
Happy Birthday to all applicable in your household (think it is 3 people).
i am thrilled for you kristine ... frustratingly i am in the same boast as kissfan - despiring that the older teens will every be interested in proprety. they have taken the stance of "it's so boring, that's all you every talk about" although we do only talk about property at the dinner table when there is something exciting to share, a purchase, sale, major reno completed, council plans passed etc ... oh ... okay ...
don't know if it helps or not when we point out that property bought us a new boat, their overseas holidays and all the little extras that their friends are secretly envious about. i guess they have it too good at home to even consider external factors.
maybe when they eventually move out of home the lightbulb will descend - can only hope
Hehe - I know where you're coming from.
i guess they have it too good at home to even consider external factors.Click to expand...Fortunately, it DOES break through - while they're "at home" (and in their younger years), everything you've provided is just "part of the deal" - or NORMAL !!!
But then, at some point, they suddenly realise that home is way so much better than (some) others' homes - and at that point (probably around age 17 or so - depends...) they really start to appreciate what you've provided when compared to their peers. And that revelation can be just the BEST buzz you've ever had.....
Happened to us, and I'm sure it has happened (or will happen) to our forum's readers. Why? We've always been positive, respectful, and as consistent as possible. We've provided "growing space" for our kids at every step of the way (top marks to my wife for much of that) - and they've been able to make their own decisions most of the way. Within reason of course.
And it (eventually) rubs off. In SPADES !! Once they realise how much better they've HAD it over the years than others, they start appreciating things at home so much more. Including the advice of parents ...
Now, ours (both in their early 30's) continue to make their own moves, while we stand back and applaud, counsel, encourage, and support them as they forge THEIR own paths in this world.
Enjoy the buzz when it happens....
Isn't it a shame we dont hear of more wonderful intelligent kids out there with such a passion to achieve they cant wait for the birthday.
I salute good parents that make an early and consistent effort to instill quality choices in their childs lifes early and often.
Mine are 5 and 2 at this stage and my wife and I would love to tell the same story in 13 years.
It is also a pity that more adults keep procrastinating and not getting that all important first one asap. Let not the man say "what can I get from this property" but rather "how can this property enhance my future and those that follow". Education, management skills, decision making on the short list for me.
It gives you a sence of acheivement when your kids do follow advice or lets say follow your example. My daughter Tricia bought her unit with her cousin in January last year, Today at 4:00pm I got the call that her loan was approved to buy her cousin out. Her cousin today signed a contract on a 4 bedder, both these girls have only just turned 22yo.
My daughter was wrapped when the broker rang and gave her the "bank valuation" for her unit, both girls bought the unit for 190k and in just 12 months the "bv" is 240k, the place is rented out at $215 pw. I have 5 other kids and dearly hope that they follow.
Kristine, hapy birthday for the 3 of you and well done on having all 3 into property.
Many kind regards
Isn't it a shame we dont hear of more wonderful intelligent kids out there with such a passion to achieve they cant wait for the birthday.Click to expand...That's because there's not enough intelligent parents out there with a passion for property. For the majority of kids, all they here is study hard, get good grades, got to uni, get a good job. Oh pleasssseee! It’s a one way ticket to get yourself in just enough trouble.
Anyway, well done Kristine - I just wish my parents had instilled the seed for property investing when I was young, as you have obviously done.
Oh well, it's a catch-up game now, but at least I'm in the game.
I'm off….its breaky time…
On a long car trip to Sydney, my wife and I had a talk to our son the other day explained to him the difference between good and bad debt. Explained how borrowing for an appreciating asset is good and the true cost of borrowing for cars vs saving for them and how people got into so much trouble that they could barely pay off the interest on their credit cards .. yadda yadda yadda ..
My son now wants to get a credit card so he can have everything that he wants NOW and only have to pay the interest on it!
congrats to you kristine ....
I was lucky to have a fantastic grandfather that taught me alot about investing in properties,and also the ying/yang in my life
keep up the fantastic work
RAMS Same Day Turnaround
Just a quick update
Lodged the loan application with RAMS this morning at 4.15am
(Yes, I know, pathetic isn't it - children wake you up when they're born, keep you awake waiting while they're out with their mates, sleep soundly while their poor old Mother slaves away filing loan applications for them!)
Got an SMS and email from RAMS at 6.30pm - Conditional Approval!
Got an SMS and email from RAMS at 6.35pm - Valuation Ordered!
Well, I don't know about you, but for a Victorian I have to say you Sydneyites sure know how to do business!!
So I've rung my mate Greg (the Agent who yes, gives fantastic service) to advise him to expect a call from the Valuer tomorrow.
And of course, No: 2 Son has taken his Property File for Show and Tell to work today, the hot gossip of the tea room!
Stay tuned for the next exciting episode of The Famous Five and their amazing Property Portfolio!
And of course, No: 2 Son has taken his Property File for Show and Tell to work today, the hot gossip of the tea room!Click to expand...And there'll be one proud Mum who wishes she could be a fly on the wall when it happens, eh? Mate, it is great to watch the young'uns in action (even if some of the action is promoted by Mum and Dad)
I recall hearing Son #2 (about 4 years back) telling me how he tried to educate workmates (one of them was about to spend $5k on a worked V8 for their favourite toy). Son tried to put across the old chestnut re "What will that V8 motor be worth in 5 years?" "What if you put that $5k into property? How much more would it be worth in 5 years?" Got met with blank looks.... I guess Son #2 just wanted to help others, but, in the end, he ended up helping himself anyway. And that's OK. That's VERY OK.
One or two of his workmates wanted to "keep up" with what Adam was doing in property, and he gave them chapter and verse at the time. I'm not sure if any of them ever "got it" - but Adam did !!!
In the end, about 2 years ago, he left to do a "world safari" (visited 6 continents, and heaven knows how many countries, in 12 months - jeez, it was great to meet him at the Sydney airport at the end of that time - with the World situation turning down somewhat around that time......) But, for all that, he's following HIS dream, and has recently gained his Helicopter Pilot's Licence, and is in Canada now looking for his next adventure (flying a chopper).
I continue to applaud his moves (even though many of them would not suit me, they suit HIM). I try not to lose sight of that. It can be hard at times, but then, I guess it was equally hard on my Mum too, as I tried MY wings. Thanks Mum.....
In the end, it feels good when we can appreciate the goals our young'uns achieve. Even if they weren't goals we would choose for ourselves.....
Feeling good for you, Kristine - I guess you got to hear all about the "show'n'tell" anyway, did you? (Yeah, right - sons don't give that much - at least not enough to suit most Mum's desires - so let me qualify that statement...) I guess you got to hear A LITTLE of what went on at Show'n'tell, eh?
Thanks guys, it's post like this that give me hope. I've got 3 kids, with some hard work on our part we might be able to get some financial education into them.
The eldest is almost 13 and she wants more credit on her phone. When we tell her she has to use her money to buy, she tells us "so and so's mum pays for her phone".
The spending is easy they pick that up with no help from us, the saving is harder and the investing is even harder.
I too feel compelled to congratulate Kristine and others, these young adults with these attitudes will be set for an easier life. God knows it's hard enough without going through uncertain financial stress.
My son started an apprenticeship in January, $266 per week. He was over the moon, so excited, so rich he would be with all this money every week.
He left school after completing yr 12 last year, had never had a part time job. We gave him $100 per month and he mowed the lawn, various household tasks in return. So $266 per week seemed like a fortune.
Last week he told me in an injured tone that did I realise ( ) he was on $7 per hour, the lowest of the low pay and that money just doesn't go any where.
Welcome to the world!
5. He is prepared to forgo the First Home Owners Grant if necessary but if the tenant moves out of her own accord within the first twelve months he will then apply for the Grants and thoroughly enjoy batcheloring for six months, knowing that he is ten minutes drive or about 40 minutes on the bus from home and about 20 minutes on the bus to work.Click to expand...
Would you mind padding out the logic behind forgoing the FHOG. I presume on your calcs, there is more to be gained from the tax deductible interest rpts and depreciation, then getting the FHOG at this point, and paying IP stamp duty.
I am also a little uncertain about whether one can apply for the FHOG at a later stage for a second property (first PPOR), if one already owns an IP.
Further, would love your insight into how to do the swap from IP to PPOR within 12 months, so as to gain the FHOG. I am trying to help my partner's 20 yo son with all this.
Hi First Bruce
It's all in the engineering of the deal.
Son has enough savings plus long term insurance investments to be able to complete the deal himself with a 90% loan, but because he is on 67.5% of adult wages serviceability is the big issue.
It is more important to be able to factor in another $160 per week rental so that means that the loan is structured as an investment loan.
If he was buying as an owner occupier, the range of borrowings is from literally nothing to about $106,000. With rental income, borrowings increase to a range of $75,000 to $181,000.
Tax rebates are not really an issue, only a small number of his dollars are taxed and even then only at 17%, and there is precious little depreciation as the building is approx 40 years old. For the value of the kitchen cabinets, the quantity surveyor would cost more than the benefits to be gained.
As I understand it, the rules for the FHOG are that the property must be occupied as the Principal Place of Residence for a period of not less than six months and the period of occupancy must commence within 12 months of settlement of the property.
So if he has a good tenant who wants to stay on, he will have to make his own decisions at that time. But if, at the 9 month mark when the tenant and landlord are asked their intentions and the tenant isn't going to stay, then Son will take the opportunity to occupy the property and apply for the FHOG at that time.
By that time he will be earning 80% of the adult rate, plus will have saved a bit more, but as we all know the cost of living is a big shock when you're paying the mortgage and the electricity and the food yourself, so probably six months or so would be about the limit for him anyway as he would still only be 19.
No: 1 Son didn't qualify for the FHOG at all, Daughter scored the $7,000 - thre wasn't a minimum time of occupancy then but she and a mate lived there for a while laughing themselves silly, staying up to all hours, eating MacDonalds and chocolate for their dinners.
So the baby of the family actually has to leave home to qualify for his grant. There is no pressure on him, we will see how the year unfolds. Nice if he can get it but the rental income is actually far more important.
On the other hand, I'm working on a FHOG application at the moment, and believe me every cent of that grant is critical to the success of the application. For them, income is great but savings are non-existent. The grant will literally get them in the door.
Everybodies circumstances are different. There are no set ways of doing things. I helped Son plan this from when he first started casual work, we knew how to make the plan for the best result and he knew that Genuine Savings would get him the best chance of the highest possible LVR so that he retained options for the first year rather than having to comply with the conditions of the grant which would have created an onerous burden on him as he is on such low wages.
Thanks for the comprehensive explanation Kristine.
I had been in doubt whether a young person could purchase an investment property and then a PPOR later on, then claim the FHOG for the PPOR.
At least in Qld, it appears if you already own an IP before a PPOR, you are not eligible for the FHOG, as indicated by this:
Further, I suppose it would be advisable to claim the house as a PPOR at purchase, so as to avoid the higher stamp duty with an IP. As you say, the tax deductions won't help a lot when on a small salary, even with the rent added.
Might I also offer that your young son could always ease the burden by getting a renter or two in with him, which I am sure you have thought of already.