Just Bought Our First Home and Now We're Landlords until June 2019 - Any Advice?

1mmy1mmy on 20/09/2018 - 07:44

Hello

We're in our early 30s and following all that helpful advice from the politicians we've got ourselves good jobs and we have saved a deposit for a house. Unfortunately we weren't able to go back in time and have rich families and a bank of mum and dad to help us, but I guess we can't follow every instruction from Canberra!

So we have exchanged contracts on a house (building inspection and finance all good) and I am wondering if there are any experts out there who could advise me on these three areas:

1) What do you wish you knew as a first homebuyer? I've heard that we should get building insurance straight away (even before settlement)? Are there any other important things to think about and do?

2) Now we are landlords - what do landlords need to know and do? We would prefer that the tenants were not on a fixed term lease so we could give notice to vacate but they are, so they have the right to stay until next June. I have been renting since I was 18 and I don't want to be a bad landlord (oh man have I seen some absolute shockers over the years).

3) Are there any tax deductibles or government schemes I should investigate? I have seen the Victorian Government's new solar scheme but we don't live in the house yet so we aren't eligible for now.

Many thanks to the OzBargain brains trust…

Home & Garden

Comments

    • try2bhelpful on 21/09/2018 - 15:36

      Is it the best time, probably not, is it the worst time, probably not. I was absolutely shocked when my other half's brother paid $54,000 for Victorian Terrace in Richmond in the early '80s. We thought he was crazy - apparently not so much. Inner city properties are usually pretty sought after - if the OP was buying out in the sticks I would be a lot more worried. Will house prices drop by 50%, I very much doubt it - however, if they do you have a right to come back here and say 'told you so".

      • 1mmy1mmy on 21/09/2018 - 16:49

        Wow that was a good decision in the long run. Who knows what will happen in the future. Glad to hear some people have made it rich and hopefully we won't regret this. In the long run it is an easy repayment rate and we have good jobs so we don't mind too much.

        • field1985 on 21/09/2018 - 18:08

          Why do you think "in long run it is an easy repayment rate"? When you can not fix an interest rate for the "long run".

          Could you afford the repayments if interest rates rose to 5%, 10%, 15%?

        • try2bhelpful on 21/09/2018 - 18:20
          +1

          A home is an emotional thing. It is not about the bricks and mortar it is about the connection you have with it. We converted a warehouse in Fitzroy in the early ‘90s and it is certainly worth a lot more than we paid for it, but it is irrelevant to us because we don’t want to sell it. We bought a lifestyle and the house came with it.

          Richmond is vibrant and everything is close by. One of the perks we’ve found with Fitzroy is when some calamity hits public transport and your coworkers are sorting out how to get home you say “bye, bye” and walk.

        • try2bhelpful on 21/09/2018 - 18:55

          @field1985: when we bought our first house interest rates were over 20%, scary as hell if we’d lost our jobs. The interesting thing this was caused by inflation that also pushed our wages up. The price we paid for the house was swallowed by inflation. When interest rates are high that is when it makes the most sense to pay down the principal ASAP, the trick is to get the best return you can and be able to pay down a good whack of the mortgage if things begin to heat up.. The interesting thing is if you look at the house prices in San Francisco at the moment they have not only recovered from the first bubble they are currently in a much bigger one. I think everything is a tad overheated at the moment including housing and the Stock Market but I would be very surprised to see a 50% drop, especially for any sustained period. However, we will all find out in the next couple of years. The secret is, generally, to make sure you aren’t fire selling your property and I think we are in agreement on that.

        • serpserpserp on 22/09/2018 - 21:42

          @try2bhelpful:

          The standard variable rate in Australia only ever reached 17%, two years later, 13% and then rapidly declined to 10% over the next 2 years. Tired of Boomers talking about fanciful interest rates.

          Also don't listen to the property bubble burst fanatics in here.

        • try2bhelpful on 23/09/2018 - 00:24

          @serpserpserp: 17%, 20% not that much different, it was still very scary. If you lost your job you were still going to be in trouble. The point is that the inflation rate kept you ahead of the game if you could hang on so putting big chunks of money into the principle was worth it. Corrections do happen in the market, as indicated I don’t see a 50% drop but the climb, lately, has been steep.

        • serpserpserp on 23/09/2018 - 10:21

          @try2bhelpful:

          It is an interesting point, the average wage for a male in Australia was $530 gross a week, so that is about 27k a year before tax. in your example, a house in the 80s in Richmond probably cost 50-60k, even at 20% interest rates (that never happened) that is 12k a year and really only 4-6k above what people were already use to paying, so a 10-20% of wages soaked up on the increase. Not really "to the wall" that a lot of people talk about. I have sandbagged to the conservative side here too remember.

          People who actually lived in areas they could afford were probably a lot better off.

          These days if people had repayments double they'd be in deep poo poo given a lot of new homeowners already use 50% a week of their wages on home repayments. Plus the idea of "smashing principal" of the home loan these days is not a 2-3 year horizon but a 10-15 year horizon of pain.

        • try2bhelpful on 23/09/2018 - 11:31

          @serpserpserp: as I indicated the issue is if someone lost their job and, as I also indicated, inflation swallowed our home loan because we were way in front of the curve. I think you are just reiterating what I said. I’m not saying “well, we had it tough” what I am saying is it isn’t as cut and dried to put the money in the loan if you have a better investment option, after tax. You can then take this money and pour it into the principle when the time is right. I do think we had a golden age for buying housing. We kept well ahead of the curve and had our place paid off in about 5 years by pouring all of one wage and some of the other into the loan. I would also dispute your average home cost in Richmond, however, happy to have the URL pointed out as I can’t find one, the house prices in Fitzroy were certainly much higher than this. Also, my wage was less than the average, then again I am female. The other thing to keep in mind is we didn’t have the “incidentals” that soak up so many people’s money today so pouring money into the loan was not a hard decision.

        • serpserpserp on 23/09/2018 - 18:53

          @try2bhelpful:

          Going off the earlier example of the early 80s property I thought it was a fair approximation, although at the end of the 80s median Victorian home prices had doubled from the start of the decade to almost 100k, so might have found a small terrace in Richmond for 60k.

        • try2bhelpful on 23/09/2018 - 19:36

          @serpserpserp: would be going, we paid over $80k for a one of a pair in GlenHuntly. Fitzroy places we looked at were $120k plus.

    • 1mmy1mmy on 21/09/2018 - 16:45
      +2

      Thanks mate but I didn't ask for Melbourne property market advice. I think you fell into the wrong forum topic.

      • 1mmy1mmy on 21/09/2018 - 16:47

        I'm not sure how to @ people but I was writing to Field1985.

      • field1985 on 21/09/2018 - 18:19

        I wasn't giving "Melbourne property market advice". These are national issues, but don't take my word for it…

        https://www.afr.com/real-estate/sydney-prices-fall-faster-th…

        https://www.news.com.au/finance/real-estate/buying/experts-w…

        “At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

        “There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

        “That’s higher than any other country in the world by a long way.

        “There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

        Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

        “As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,”.

        Like I said.. pay down your capital as fast as possible. This is the best advice you will get, given the economic outlook. Good luck

        • greatlamp on 21/09/2018 - 20:14

          Fundamentals still exist, Australia has one of the highest population growth rates in the OECD, and one of the lowest unemployment rates.

          Noone is going to sell their homes cheaply when they have no pressure to.

          If luxury apartments 90min from Melbourne crash in price, that would be understandable. That won't have any effect on the prices of McMansions in the leafy suburbs with access to 3 different types of public transport

  • TheMindsetTraveller on 21/09/2018 - 13:22
    +1

    "" 2) Now we are landlords - what do landlords need to know and do? We would prefer that the tenants were not on a fixed term lease so we could give notice to vacate but they are, so they have the right to stay until next June. I have been renting since I was 18 and I don't want to be a bad landlord (oh man have I seen some absolute shockers over the years). ""

    Regarding point 2, be mindful that you are subject to capital gains tax since you will not live in the house when you take ownership of it and will not be able to claim the 6 year exemption because of that.

    https://www.ato.gov.au/general/capital-gains-tax/your-home-a…

  • matthewperk on 21/09/2018 - 15:49

    Regarding your #2 you can actually move them out earlier than the end of their fixed lease.

    "The landlord, a member of their immediate family (including parents and parents-in-law) or a dependant (who normally lives with the landlord) will be moving in." = "60 days notice"
    https://www.consumer.vic.gov.au/housing/renting/ending-a-lea…

    In the meantime, landlord insurance, fix anything that you need repaired that you want repaired (i.e. don't fix things you want to completely replace once you move in).

    I've just done this with my tenants after breaking up with my ex who i was living with.

    • 1mmy1mmy on 21/09/2018 - 16:51

      Hmmmm I thought that meant you could end the lease with their permission (if fixed term) or even without their permission (if periodic). Will look into that.

      Sorry to hear about how you came to gain that knowledge. Hope you're all good now.

    • picklewizard on 21/09/2018 - 16:59
      +2

      This is wrong!

      The heading directly above this is "Not before the lease ends: Reasons a landlord can ask a tenant to vacate"

      There is another heading: "Before the lease ends: Reasons a landlord can ask a tenant to vacate" which does not list this as a reason.

      Trust me, as a former landlord of a property that I purchased to move into, you cannot boot a tenant who is not in breach of the lease.

      • 1mmy1mmy on 21/09/2018 - 17:33

        As I thought.

        And as a tenant - good!

  • picklewizard on 21/09/2018 - 16:56
    +1

    Hey, I did the exact same thing buying my first home.

    They didn't leave the house in fantastic condition - and the real estate agent wasn't a lot of help. They tried to tell us the condition report of the property wasn't valid as it was from the start of the lease, and we bought the house halfway through the lease. We stood our ground and were able to have the matter resolved.

    The only advice I can give in this instance is to not take the agent's bullshit!

    Otherwise, be prepared for a long wait! It felt like an eternity before we got in!

    • 1mmy1mmy on 21/09/2018 - 17:35

      I will take your advice! 14 years of renting… I am an expert in not taking shit from property managers!! I think that is the only really useful/helpful commentary I've been able to add to the Ozbargain forums so far.

  • Neptunesblood on 21/09/2018 - 17:30
    +1

    Being a landlord sux if a body corporate is involved.

    • 1mmy1mmy on 21/09/2018 - 17:36

      No body corporate in this case. Sounds like you've been stung before?

    • Thenarrator on 22/09/2018 - 08:44

      whys that

  • Cul8r on 21/09/2018 - 19:43
    +1

    1) I wish I never bought a unit, even without body Corp (owners corp instead) it’s still a massive pain in the backside. Can’t do anything to the front without approvals or alignment to the other… also land allways appreciates more.

    2/3) speak to an accountant or financial advisor before proceeding here on the tax implications. Capital gains is the killer, be very carefully about claiming anything, don’t make plans until you have discussed with a professional.

    Get the right insurance, do you need landlord? Do you need the property too? Do you need contents? All important considerations and all unique to if you opt into moving in or letting it out.

    As far as being a good landlord, keep out of the way, and consider maintenance requests that are not trivial.

    • 1mmy1mmy on 21/09/2018 - 20:09

      Yes I think a financial advisor/planner and accountant will be required. Thanks for your input.

      It's good to have an idea of the types of types to pose. People have had some very useful info (including you - thanks!).

  • budgetman on 22/09/2018 - 08:03
    +1

    Get Landlord insurance.

    In my opinion Terri Scheer is the most comprehensive.

    https://www.terrischeer.com.au/

    No I do not get a referral etc, just helping a fellow landlord.

    I haven't bothered to read all the comments above so forgive me if this is a repeat.

  • DiscoJango on 22/09/2018 - 16:59
    +1

    power read the title as "… now were warlords until 2019"

    • 1mmy1mmy on 22/09/2018 - 19:20

      Warlords with no war… Quite relaxing in the end…

  • cryinoutloud on 22/09/2018 - 18:30
    +1

    Make sure you have the relevant documentation to prove that you are living there before you move in. Then you will ensure that your interest rate comes down to owner occupier as soon as you move in.

    I just signed up to energy Australia and will send the bank the welcome pack a couple of weeks before I move in.

    • 1mmy1mmy on 22/09/2018 - 19:22

      Cheers. Good advice. The homeloan is the only thing we have sorted.

      That bill idea is clever btw.

      • cryinoutloud on 22/09/2018 - 21:56

        Your home loan will be an investment home loan because you have tenants, and so your interest rate will be higher. When you move in (or at least can prove you have moved in) then the home loan will be changed to an owner occupier home loan and the bank will offer a lower interest rate.

  • Farrba on 23/09/2018 - 18:57

    is it true if you have an existing rental property, and its now revalued at double what you originally paid for it, then that increase in valuation can be used to purchase a residential property, but the interest is claimable on the first property?

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