澳洲Australia property Excited about my first IP - but need your


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


Hi all

I've been reading alot on this forum lately and decided it's finally time for me to post - so hello!

I'm ready to purchase my first IP - it's been a long time coming, but the time is right for me now.

A bit about me to put this post into perspective:
  • Living at home
  • Stable job
  • Decent salary
  • Savings of around $70K
  • Currently, no other loans

Here's what I'm thinking of doing - please let me know what you think.

1. Apply for an interest-only loan, and use the minimum amount of my savings for a deposit (don't mind paying mortgage insurance as long as it can be added to the loan amount - is this possible?).
2. Purchase an IP in Western Sydney - likely to be a 2br apartment between 300-350K
3. Move in immediately for 6 months for FHOG (and I also read somewhere that CGT exemption is better in this scenario)
4. During that 6 month period, I will have to pay the interest on my own, BUT is it possible to setup an offset account and put in the rest of my savings into this to reduce the interest repayments during this time?
5. 6 months later, move out (either back home, or purchase a home with partner) and rent out the IP - and withdraw from the offset account, using it on the first home deposit.

I'm sure there are flaws in my plan, so if you could point them out to me, or make any suggestions it would be GREATLY appreciated.

Cheers
hongsta  

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Sure you can setup an offset like you asked in point 4.

I think it pretty much sounds about right  

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Re: point 3.

IF you don't nominate another PPOR, AND you move back into this place within 6 years, then it can be CGT-exempt. But as soon as you live in another property that you own, you can only nominate one of these as your PPOR; only 1 can be CGT-exempt.

Typically called the "6-year rule", there's heaps of previous discussions.

Google search results

Sounds like a good plan to me.  

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It all sounds good to me with one exception.

You say you are thinking about spending $300-350k on an apartment in Western Sydney? That seems kind of expensive. Can I ask whereabouts in Western Sydney you are thinking? What kind of rental return are you expecting from this apartment? If it is a newer one, then be careful of things like elevators, gyms or pools in the complex as this will only increase your expenditure.  

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Thanks for the replies!
@jaycee - thanks for confirming :)

@wobbycarly - after moving out after the initial 6 months, I don't plan on moving back in (doing it for FHOG only) - however I will keep it as the PPOR for the 6 years, whilst living in (and paying off) another house to qualify for the CGT exemption when I sell. I will do more research on this - thanks for the advice.

@skater - I'm thinking Parramatta to Blacktown including suburbs on the trainline. You're right though - 300+ in Blacktown would be a bit steep, so the range is probably more like 270K - 330K depending on the suburb. Any thoughts on which areas I'd be better off looking at?

Cheers
hongsta  

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Check with your state requirements for owner stamp duty concessions. In some states you have to reside in the property for the first 12 months to qualify.
Marg  

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hongsta said: ↑
@wobbycarly - after moving out after the initial 6 months, I don't plan on moving back in (doing it for FHOG only) - however I will keep it as the PPOR for the 6 years, whilst living in (and paying off) another house to qualify for the CGT exemption when I sell. I will do more research on this - thanks for the advice.

hongstaClick to expand...
if you are living in and paying off another home then you do not qualify for the exemption.  

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hongsta said: ↑
Welcome, I will have a go at the bits that I think I can



1. Apply for an interest-only loan, and use the minimum amount of my savings for a deposit (don't mind paying mortgage insurance as long as it can be added to the loan amount - is this possible?).Click to expand...
yup, many lenders will allow you to add or capitalise LMI to loan, but not all


hongsta said: ↑
4. During that 6 month period, I will have to pay the interest on my own, BUT is it possible to setup an offset account and put in the rest of my savings into this to reduce the interest repayments during this time?Click to expand...
once again, yes, but choose your lenders with this specific purpose in mind. Som lenders wont allow IO on PPOR and some lenders have funny offsets that dont work properly for this purpose.


ta
rolf  

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If this is going to be an IP in the future then just make sure that you are making your purchase decision based on IP terms, rather than those for a PPOR.

If the numbers stack up then it could be a good deal, even if you "wouldn't want to live there".

I guess what I am saying is don't settle for a sub par investment property just because it is more convenient/comfortable for you to live in for the next 6/12 months.

Have you ruled out other parts of Sydney already on the basis that they are not convenient enough for your work etc?  

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Ed Barton said: ↑
if you are living in and paying off another home then you do not qualify for the exemption.Click to expand...
This may be a dumb question, but can I live in and pay off the second property without it being my PPOR? And then switch it over after I have sold my IP?

BuildingBlocks said: ↑
If this is going to be an IP in the future then just make sure that you are making your purchase decision based on IP terms, rather than those for a PPOR.

If the numbers stack up then it could be a good deal, even if you "wouldn't want to live there".

I guess what I am saying is don't settle for a sub par investment property just because it is more convenient/comfortable for you to live in for the next 6/12 months.

Have you ruled out other parts of Sydney already on the basis that they are not convenient enough for your work etc?Click to expand...
Hi BuildingBlocks, yes that's one of the reasons - both my GF and I work out west. You make a good point though, I agree that it shouldn't be the main factor in my decision. Perhaps I should purchase the IP and save the FHOG for later??

So much to think about... :)  

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hongsta said: ↑
Perhaps I should purchase the IP and save the FHOG for later??Click to expand...
Not sure about NSW Hongsta but I believe here in VIC, once you purchase any property (whether you use the FHOG or not) in your name, you forfeit it on the next one.
Also, it applies to both parties so if you get married and you've used it once before, you're partner no longer qualifies for it... Does that makes sense.

I'm not up on the latest so perhaps someone else can clarify..

cheers

B.D  

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hongsta said: ↑
This may be a dumb question, but can I live in and pay off the second property without it being my PPOR? And then switch it over after I have sold my IP?Click to expand...
the only dumb question is the one that doesn't get asked.

the answer is no.  

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Hongsta said: ↑
This may be a dumb question, but can I live in and pay off the second property without it being my PPOR? And then switch it over after I have sold my IP?Click to expand...
Ed Barton said: ↑
the only dumb question is the one that doesn't get asked.

the answer is no.Click to expand...
I would suggest that "Yes, you can", BUT the 2nd property would be subject to CGT for the period the 1st was exempt.

You can only have 1 CGT-exempt property at any one time, and you have to have lived in it. The only exception to this rule is the 6 months overlap when you buy a PPOR before you sell the previous one.  

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wobbycarly said: ↑
I would suggest that "Yes, you can", BUT the 2nd property would be subject to CGT for the period the 1st was exempt.

You can only have 1 CGT-exempt property at any one time, and you have to have lived in it. The only exception to this rule is the 6 months overlap when you buy a PPOR before you sell the previous one.Click to expand...
Yep! Thems the rules. :D  

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Thank you everyone for your input so far, it has been immensely helpful. One other thing that popped into my head last night in regards to this step:

hongsta said: ↑
5. 6 months later, move out (either back home, or purchase a home with partner) and rent out the IP - and withdraw from the offset account, using it on the first home deposit.Click to expand...
Because that place would have to be my PPOR (for FHOG), when I move out after 6 months and rent it out, can I negative gear the shortfall on interest repayments, even though it is still my PPOR?

Cheers
hongsta  

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