在澳大利亚 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 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 wife and I are about to purchase a house in the Nowra NSW area.
We are entitled to the FHOG, however we are currently caretakers for my Mothers house, which is much nicer than any house we will afford to buy.
We are currently paying her a reduced rent of $200 as we only have access to 2 of the 5 bedrooms, and the house is still largely used by the wider family for Christmas/Mothers Day/Easter etc.
Mum is in a nursing home and for her to leave the house empty would be financially crippling for her, as well as not having a "home to go to" would not be good for her mentally. I also understand if she sells the house and deposits a large wad of cash into the bank she will be under heavy tax scrutiny.
Long story short we dont really want to move, and we can't really.
We are not sure whether we should.
1) Buy with the FHOG, move to the house for 6 months and do some renovations, fix up a few things, and then after the 6 month period rent out the house. (We are looking at a $280-300k Purchase with $300-$320/week Rental return). During this time we would have to continue paying the $200 to Mum as per the reasons above.
2) Buy and rent it out immediately, I understand if you purchase an IP you can still use the FHOG Later (Assuming it will continue for a few years yet?).
Basically I wanted some advice regarding this.
I have calculated that If use option 2 I will receive rental income of approx $7800 minus costs. As well as being able to claim tax deductions against the property immediatly.
If I use option 1 I will receive $7000 FHOG and approx $9k in Stamp Duty Concession.
So The obvious choice would be option 1? But Am I missing something.
I also wanted to know what people think about the recent comments in media about the drop in house prices. I understand this is mainly regarding Capital cities, does any have knowledge of the Nowra are and feel that this will also affect us.
Also, wondered what you would think about our ability to be approved for a loan given our incomes of approx $110k combined.
I could go on all day with questions but if anyone can recommend a course of action to get started that would be great.
I wouldnt mind speaking to a professional about this but my account didnt seem interested in discussing it, would I be better to speak to a financial advisor or someone else all together?
Thanks in advance,
Mcoleman said: ↑
I also wanted to know what people think about the recent comments in media about the drop in house prices. I understand this is mainly regarding Capital cities, does any have knowledge of the Nowra are and feel that this will also affect us.Click to expand...I have owned a 4/2/2 IP in Worrigee for about 12 months and I would say CG has been minimal since 2009 due to the availabity of land in the area but in other areas such as the Nowra CBD prices seemed to have gone up since I bought.
I believe the Nowra/Shoalhaven has good prospects due to projected growth in both population and employment over the near term as reported by several media outlets.
My decision to buy in the area was influenced by the fact that sometime in the next 2 years I will be moving to the area (yet to decide if the IP will be my PPOR) however given the predicted growth in the region and the current 5.8% gross ROI the decision was still somewhat sound.
Another forum member (Devo76) is quite active in this area and will surely post some comments once he stumbles across this thread.
Do you have any siblings?
If it were me, I would continue to rent at 200pw and use my income to purchase an IP strictly for economic purposes. Some of the best buys are in areas that you probably wouldn't want to live in (too far, not the nicest areas etc whatever) and so by staying where you are, you have the benefit of reduced rent, which then improves your ability to borrow/maintain your IP, keeps your mother emotionally healthy (shes your mother - you only get one so look after her imo), and then use your future IP portfolio to purchase the remainder of your mothers house at the time of inheritance and use it as your PPOR.
I also strongly believe that the first home owners grant can be a problem for many people because you look for properties that you want to live in, rather than properties that suit your bottom line, and also, many of the properties that you want to live in are also being chased by other first home buyers and that grant money simply pushes the price of those properties up for the exact amount as the grant, which means that you don't really benefit from it - the seller does. Plus you're forced to live in the place for at least 6 months (or whatever it is).
Seems to me that you're about to get the best of both worlds - living where you want to live, where you will own, plus a portfolio built on foundations of economics and not emotion.
2 Brothers, both living away, and un-interested in living in the region and the family as a whole is very happy with the current situation.
My Only fear will be lack of approval with only $11k (Despite fairly high incomes for the region) saved and not using the FHOG. Although we have saved that $10k in under 6 months since we decided to get serious about money.
I guess the bank(s) will tell us the answer to that this week when we go in.
I have two ip in the cbd and I'm developing a third.
Yes you are right. Central Nowra does hold up better than say worrigee. It always has due to being central and also being landlocked on all sides so new land releases are minimal.
Where as worrigee has endless land and you compete with everyone else for both rentals and sales. But it has seen good CG and will again.
As far as softness in the market goes. Things have definitely slowed . This is to be expected. If the greater market stalls then so will Nowra.
Difference being Nowra does not have as far to fall.
Nowra is still known as an affordable area compared to surrounding areas. Prices are roughly at or below 2004 levels. And rents are around the 5.5 average.
My point being the majority of the air has already gone from this ballon so while the market will go down if the greater market does. I think any ground we give up will not be as bad as many others.
That's assuming values actually due significantly drop.
Went to broker today, looks like with my relatively small deposit I will be forced to use option 1 and be limited to a purchase of around $250k.
There is still plenty of houses in the region for that price and If i play my cards right I should still be able to approach $300p/w rent.
Only problem now is that I will be forced to use the FHOG and change PPOR for 6 months, So I will lose 6 months rent and tax deduction on interest.
But I guess any start is better than none.
Unless I continue saving for another 12 months and buy with a $30k deposit. But if the $250k house rises in Value by 5% Thats $12.5k I will have made anyway. Plus any improvements I make. I guess I should go and read some posts about the tax deductability of changing a PPOR to an IP and when is the best time to carry out renovations and improvements to the house.
Why don't you purchase a property as an IP and save your FHOG for later on when you can actually live in the property?
If you can continue living in your Mum's house for $200 per week I would suggest that is the way to go and save your money for another deposit.
Check with Morgage broker how much you can borrow for investment property on interest only loan with offset account.
I would actually keep renting and saving money while you can. I don't know anyone who things prices will rocket away in the short term future, so your buying power can increase with your savings. The more you save and wait while prices stay down, the less you will have to borrow when you do purchase.