Should I Buy a House Now or Wait

Lminh111 on 24/05/2017 - 23:43
Last edited 24/05/2017 - 23:51

minh111 2 min ago
Basically I have a house that I am living in fully paid off (worth around 420k) and looking for a better house to settle in. The house me and my girlfriend are looking at are around the 500k range (probs will increase drastically due to a Westfield being build near the area). The only thing is we don't have much saved up in our bank roughly 40k but the bank will be good to loan us money. My question is that is it a good idea? We wanna put our house we are living right now up for rent if we move foward. Is this a good way of doing the whole 'investment property' thing.

Opinions needed.

Home & Garden

Comments

  • tammlim on 24/05/2017 - 23:49

    If you want to buy for investment, don't. Its is a matter of time interest is going to go up. There are easy money everywhere globally and government in many countries are trying to put a lid on the prices. Australia is behind the curve in this area. With interest rate rising and a glut that will bring down the yield, why become a slave to the bank?

    • minh111 on 25/05/2017 - 00:01

      True, probs not good rushing into it then, after all it's 500k haha, thanks for that :)

  • captobvious on 25/05/2017 - 01:07
    +1

    Best time to buy a house was yesteryear. Be humble enjoy what you have now and make babies.

  • whooah1979 on 25/05/2017 - 06:42

    there is no time like the present to buy a property.

  • poboy on 25/05/2017 - 07:22
    +2

    The truth is - no-one knows what will happen to prices. If you are seeking a primary property that you wish to live in for a while - go for it.

  • Donaldhump on 25/05/2017 - 08:01
    +3

    Since you fully paid off your other place, if you move to a new place with 40k deposit, you will start paying interest again, that isn't tax deductible, but your rental will be positively geared like anything. Unless the cash is in an offset only

    You would be better off selling your current place, or transferring to a trust to release thbe cash.

  • minh111 on 25/05/2017 - 08:49

    Thanks for the reply guys, appreciate it

  • jellykingdom on 25/05/2017 - 09:24
    +2

    Has anyone asked yet where OP lives…?

    • minh111 on 25/05/2017 - 09:48

      Brisbane

      • jellykingdom on 25/05/2017 - 10:49

        I spose the alternative point is, is it a good time to sell in Brisbane? I hear (I don't know for sure) that the rents have tanked in Brisbane, and the prices of apartments have tailed off or started to drop a bit because of massive oversupply.

        Maybe now is the right time to sell, and buy that house? I don't see the apartment price situation getting much better

        As everyone else said, if you've paid the place off you can't take advantage of any negative gearing

        • minh111 on 25/05/2017 - 10:58

          Yeah true, probably better off selling the house and get the new one. I can probably say that it will increase at least 150k since there's a new Westfield being built 10 mins away

  • [Deactivated] on 25/05/2017 - 10:18

    I think you will miss many of the negative gearing benefits by living in the house you are paying off. You will likely have to shift the mortgage across to the rental IMHO.

    • tomleonhart on 25/05/2017 - 11:07
      +1

      How is Negative Gearing a benefit ?

      • tomsco on 25/05/2017 - 12:27

        Because it's a catch phrase people throw around.

        • [Deactivated] on 25/05/2017 - 12:39

          Do you really think having an income producing asset and an unclaimable loss/deduction producing primary residence separate is a good idea? Nice try at glib smugness but you are wrong.

        • tomsco on 25/05/2017 - 14:26
          +1

          @Frugal Rock:

          ¿Qué?

        • tomleonhart on 25/05/2017 - 14:44

          lol. Exactly my thought.

          But we know that he meant.

        • tomsco on 25/05/2017 - 14:46

          @tomleonhart:

          Indeed. Look, purchasing an IP can be a great investment, with the long term ROI quite possibly negating any losses which allow for negative gearing.

          But too often I see people just throw the term out there as if it's the bees knees, without understanding the implications of it.

        • [Deactivated] on 25/05/2017 - 14:58

          @tomsco:
          So you believe keeping the mortgage on the primary residence rather than the investment property is the best course of action? Spare me your world weary 'too often' pantomime.

        • tomleonhart on 25/05/2017 - 15:04
          +1

          @Frugal Rock: He's saying that you can't just say negative gearing is a benefit without knowing:

          • Total Income vs Total Expenses

          For all we know, OP could be in a positive gearing position.

        • [Deactivated] on 25/05/2017 - 15:06

          @tomleonhart:
          Nice bullet point.

        • tomleonhart on 25/05/2017 - 15:26

          @Frugal Rock:Thanks

          • <3
      • Skramit on 25/05/2017 - 14:47
        +1

        Because negative gearing a property is "good debt" that is deductible.

  • cupcake on 25/05/2017 - 11:51

    If you are going to buy one or another one, best time is right away.
    Prices are always increasing. The population of Australia is increasing too.
    If you can afford to do it, you should do it.
    No one has ever not done well out of buying property really.
    So don't be hesitant if you are ready.

  • Euphemistic on 25/05/2017 - 12:08
    +5

    The best time to buy a house is as soon as you can afford it.

    Renting out a fully paid off house while paying interest on a new home isn't the best way to go about it tax wise. If you want an investment property you'd probably be better off to sell you current house and buy you new house with as small a loan as possible, then purchase an investment with a bigger loan.

    Since you have a large amount of equity you can probably afford to borrow the full amount on your new home, then sell your current home to save the hassle of selling first then buying. Once your current house is sold, pop all the funds into your new home loan. We did that with our current home, bought first then sold, but the market was hot and selling was easy. We were prepared to pay a few months of two mortgages while selling, but it only took a few weeks.

    BUT: The feds are changing the rules, talk to an accountant first about the best strategy tax-wise.

    • minh111 on 25/05/2017 - 14:17

      Thats what my girlfriend was saying. We will be speaking to our accountant soon. Do I have to pay tax for the second house if I was to buy it? When you sold your house did you have to pay CGT also?

      • tomleonhart on 25/05/2017 - 14:59

        Do I have to pay tax for the second house if I was to buy it?

        You have to pay stamp duty when purchasing a property. if it's a investment property, you would be liable for land tax as well (depending on where you live).

        If you sell your PPOR you won't have to pay CGT.

        And again, talk to an accountant. :P

        • [Deactivated] on 25/05/2017 - 15:12
          +1

          Not true, It can depend on the value of the property and other factors, regarding land tax. There are enough factors to fill, get this, multiple bullet points.

        • tomleonhart on 25/05/2017 - 15:26

          @Frugal Rock: Hence the … talk to an accountant bit.

        • [Deactivated] on 25/05/2017 - 15:52
          +1

          @tomleonhart:
          You are on a rhetorical punctuation frenzy with that ellipsis. Was that when the OP already said he was going to be speaking to an accountant and your subsequent advice was to speak to an accountant?

        • tomleonhart on 25/05/2017 - 15:57

          @Frugal Rock: yup!

  • Skramit on 25/05/2017 - 14:59

    Why not pull the cash out of your current home as and use that to buy your new home. That was the debt becomes deductible after you move in to the new home aka good debt.

    • Euphemistic on 25/05/2017 - 15:50

      Don't think you are allowed to do that, unless your 'paid off' loan actually has an outstanding balance but you are not paying interest because the cash is in an offset account.

      eg Current mortgage is $200k. Have $60k in the mortgage account and $150k in the offset account, paying no interest on the loan because there is $210k in cash, but paying the loan balance owing down every month. Assuming you bought a new home and rented your current home you would only be able to claim the interest on the loan starting at $140k despite being able to redraw the $60k from the mortgage account. If there was no additional funding in the mortgage account and it was all in the offset you could claim interest on $200k.

      Now if the example above, and my understanding is correct, you borrow another $300k on your new home you would owe $440k and be able to claim interest on only $140k.

      A better example would be to sell, borrow $50k to get a new home, then borrow $390k for an investment property and straight away you can claim interest on $390k whilst still owing the same amount to the bank ($440k)

  • Drifta on 25/05/2017 - 22:17

    I would buy a new home straight away and take advantage of negative gearing (can do positive gearing too and make it work for you but has to be done right). Speak to an accountant/ financial advisor to help you structure your finances to either redraw money on your current home after getting it revalued - you might be able to borrow more than you think. Or they can help you setup other structures. I could suggest some but I get the feeling you might not be too confident with doing it yourself so best to get someone who's experienced to help out. TLDR Buy if you have the funds and capacity + stable job + stable life situation

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