First Time Property Investment - Guidance Please :-)

Lbeardedpeptides on 10/06/2016 - 16:03
Last edited 11/06/2016 - 23:45 by 1 other user

Hey OzB,

I am a long long time viewer, very very occasional poster and really just love the community here. Hence why I writing for the first time asking for some feedback from the OzB realm.

I am 29 years old from Melbourne, single, and on about 100k p.a and am hoping to start a bit of a property portfolio. I am sure I have missed the boat with the recent massive increases in prices and have no doubt there will be a substantial correction in the market the day after I sign on the dotted line. Nevertheless, I need to start doing something to offset my tax bill just a little and plan for the future. I am on a pretty sweet deal with renting at the moment and pay approx. $150 per week. I have 60k saved and have a 15k car loan.

I am eligible for the first home buyer grant but am looking at opting for an investment property to start the ball rolling as I understand that I can claim the first home buyers grant for a 2nd or subsequent property acquisition. I am leaning towards an off the plan approach in the suburban fringe of Melbourne. I suspect this is the wrong thing to do but am priced so far out of the market in many areas and am a little worried about buying a unit. Any feedback would be very much welcomed.

If I opt for a principle & interest loan can I still claim back the interest component back against my tax? If I do start the loan out as an owner occupier and change to an investment after say 12 months do you need to renegotiate a new loan with the bank? How long can you generally be on and investment only loan for before the bank will come knocking for their principle?

Thanks for your time in advance for anyone who comments.

Have a great day!!

Financial

Comments

  • supervigilante on 10/06/2016 - 17:44

    Talk to a mortgage broker. They have the time, the knowledge, and the patience to go through everything with you. They might be slightly biased (depending on the broker/brokerage firm) when choosing the mortgage for you, but at least you can get much more in return during the no-obligation appointment stage.

  • garetz on 10/06/2016 - 19:29

    "first home buyers grant for a 2nd or subsequent property acquisition"

    I dont see how this is possible, as it only applies to your first purchased property. Maybe different states have different conditions, but pretty sure you can only claim it on your first property, if its not owner occupied then you lose the ability to get the grant on any future purchases.

  • toristo on 10/06/2016 - 21:24

    The most expensive advice you can get is often free.

    Talk to a financial planner and your accountant before jumping in. I spend $1200 a year with my accountant and it's worth every cent.

  • CheapskateQueen on 10/06/2016 - 22:13
    +2

    I say this with the best intentions, but based on the questions you've asked, i suggest you spend some decent time learning about property investment, including the different types of loans, tax issues and really understanding negative gearing.

    I say the same thing often on here - knowledge is really the most fundamental tool you need.

    for example, if you think your payment type (i.e. principal & interest v interest only) has any impact on deductibility of interest, you have a big learning curve ahead of you. you should really strive to understand property investment, in order to determine whether it's the right thing for you and/or whether the property you buy is the right choice.

    also, be careful about assuming you're automatically entitled to use the first the first home owners grant for a second property, because if you can't, you're screwing yourself. there seems to be a mismatch between wanting to buy it for investment and wanting a "owners occupied" loan. you have have interest rate reasons for doing that, or you may be confused, im not sure?

    all in all, perhaps go speak to a bank and get some free google education to get some free education!

  • holoz0r on 11/06/2016 - 09:42
    +4

    Pay off your car loan in full.

    • Penalty boxer on 12/06/2016 - 00:47

      I agree - the car loan interest would offset any after-tax earnings you may gain from bank savings. So definitely swap out the savings into the $15k loan.

  • Euphemistic on 12/06/2016 - 07:48

    29 and single. Quite possible you are going to meet someone special and 'settle down' soon. Don't invest in property yet in case your situation changes and you want/need to sell too soon to make it worthwhile.

  • MustacheFire on 13/06/2016 - 19:27
    +1

    you should live in the property for at least six months before moving out and treating as an investment property. This will allow you to treat as capital gains tax free if you sell within 6 years but still have deductible interest when leased out. You won't need to renegotiate the loan if you change purpose, apply as owner occupier if you are moving in. Don't get P&I, have interest only and use an offset while you are staying there or have excess cash, you can withdraw offset for other purposes without affecting interest deductibility. Offsetting has same impact on interest as repayments.

    And remember - This is not financial advice. Get financial advice from suitably qualified people.

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