Hi all,
I'm 20 and currently starting the process of getting an investment loan and purchasing a rental property (15% down payment on a property up to $450,000, in Sydney) The bank I plan to deal with is TIC:TOC
As a young person entering the market, what are some things I should watch out for? During the entire process of getting loan, dealing with real estate agents, negotiating, etc.
Any advice would be greatly appreciated as doing this is a bit overwhelming for me.
Probably an apartment.
Looks like they haven't spent it on a high yield car, like some others around here.
Haha I love my high yield car, bought it for $1.4k 2 years ago and still running strong as ever (1999 holden astra). does get shit on quite a lot online but it has been great for me.
1-2 bedroom apartment in the suburbs (not anywhere near CBD)
What suburb gets you a 2 bedroom apartment for that much?
you can get that around Guilford and further out.
What house are you getting for $450k in Sydney?
the one lacking sex appeal
Any 20 year old that isn’t living at home has instant sex appeal with their promiscuous peers
Edit: just realised OP is buying an investment property. Oops.
Unemployment.
I wouldn't buy just yet theres bound to be a market correction soon
Agreed… Keep saving and wait for the market to drop (likely as soon as JobKeeper and JobSeeker are phased out). Too many people have lost jobs or hours and will be in huge mortgage stress when their incomes are no longer being supported artificially.
Fewer buyers and more sellers must equate to a price decrease.
I should mention this process could stretch out into months (lot of market research, pre approvals, finding a suitable property) so maybe prices have room to fall in that time frame? But you definitely made a fair point abut the mortgage stress, there are already fewer buyers in the market so I guess buyers can also have the upper hand in negotiation.
after the $50k new home grant
wait for MortgageKeeper and LoanSeeker
Prices go up when government pumps in money.
@[Deactivated]: Totally agree, just look at childcare centres 🤦♂️, now it's cheaper to stay at home and not work in some cases. subsidies do more harm then good
How much of a correction though? I know, I know - how long is a piece of a string.
I think it'll only be 20% (secretly hoping more). But I think there'll be less properties on the market and predatory behaviour from landlords that already have numerous properties building their portfolios.
Get a pre approval from bank first.
Have at least 10K buffer for conveyancing and other costs, in addition to stamp duty. You may not have to pay stamp duty if you are a first home buyer
I will have to pay stamp duty as it's an investment purchase, but yes, besides the deposit, I have put aside 20k for all fees (including stamp duty)
1) Study the market, what are other similar properties doing? Are they selling or staying on the market? Perhaps download some sales data in your desired area, not sure about other states but this is available in WA via Landgate.
2) Don't believe a thing real estate agents say.
3) Make sure you have safety nets in place for repayments, if your property goes untenanted, have a mitigant. If you lose your job for a while, have a mitigant in place.
4) Don't sign anything on the spot, read it carefully.
5) Make sure you can borrow the money first. Go to the bank and seek a pre-approval (means nothing for the final approval) , it can give you an idea of how much the bank will lend you if any. Please be aware that the prices COULD be dropping and the banks COULD value the property at LESS than what you are paying. This impacts your buying power.
thank you for your reply. are there any sites or services that have sales data for areas in NSW? whether paid or free.
I’d think realestate.com.au and subscribe to their email update which gives you stats re suburbs of your interest
You’re going to need minimum 20% deposit. At the 15% you’re proposing, you’ll need to buy LMI.
Could always ask his parents to be his guarantor.
20yo buying property in Sydney suggests a benefactor is in play here.
Invest in quality data to drive your decision. These days everything is done off the back of data analytics. Don't just use free resources. If you're going to spend hundreds of thousands of dollars paying for a house, it's worth spending a tiny bit of money now getting quality data to inform your decisions. Think of it as buying a textbook for your exam, or paying for upskilling to get a job. This decision is literally worth hundreds of thousands
I'm happy to pay to access data, do you recommend any sources?
look into using a buyers advocate (IMO)
Would like to know as well
RP Data Professional
Yeahhh would go in with 20% at least to miss the lmi threshold and keep a buffer. Also
Wouldn't purchase for a good 6-12 months. The property market was on life support pre covid and is now in the early stages of crumbling
I can go with 20% or close if I come down to the $330-350k range. But the options decrease significantly. And yes, a few other people have also mentioned waiting a few months. Will look into it whether if it will be beneficial to wait.
Make sure the agent/vendor discloses the current rates for the property before settlement, so you know what you'll be paying. If council has not set them for the current financial year, don't purchase as they will likely jump due to the property being valued higher.
I see, thank you.
I wouldn't go near apartments as even before the virus they were in deep trouble . Land with a decent old brick house that will cost you virtually nothing is better than the current LEGO houses . The key is land and the future tread .
are you referring to the quality of the newer apartments? are most of them a big NO NO?
I would be avoiding newer ones, especially those that have elevators and aluminium cladding.
Travel the world, go back to school, chase some women. Put your money in Stonks until you reach 25.
I second this. People are dying. Live life. YOLO.
People are dying.
Was that not the case pre-covid19?
I would dump the $50,0000 in shares instead.
What sort of income could you possible earn to negatively gear it? What kind of yield are you after?
Do you even know why you are getting a rental property?
Some ramblings from me…A freebie to start consider the BOQ property app. Go visit house openings on weekends as a hobby, it will get you accustomed to the BS that real estate agents spin, the questions other people ask, you might bump into other tenants and ask them what its like, and overall build your confidence as one day you will need to negotiate. Request property and strata reports from agents. Particularly strata, you may be up for a significant fee hike or special levy, which is why the unit is selling. Park your car a few blocks away - that way no one will know you drive a shitty car, and you get to check out the neighbourhood too. Ideally, buy in a building with many owner occupiers, and that are active on the strata committee. They really know whats going on in the place, not just that they are getting rent.
Biggest thing though, I'm assuming as a 20yo this is your first property, so to be eligible for first home owners grant/stamp duty exemption, I think you have to owner/occupy for a minimum of 6 months? Check federal and state conditions.
Some specifics (though based on 'back in the day' info which may not be relevant). Have at least 20% deposit to avoid extra insurance on the loan. Even though you have $50k, it would be good to show a solid/consistent savings history to further improve your loanability. Remember that your investment property requires ongoing costs, factor that into your long term budgets. Much property is bought for the tax break (granted apartment yields usually outweigh loan interest) so are you earning enough income to make that worthwhile?
It's great to see ambitious young people with their sheeet together to even consider buying. As mentioned by others, consider your motivations to buy and how it sits in your investment portfolio. Personal opinion, self education or looking to develop long term relationships with accountants/financial planners is more important than just buying a joint at a young age.
I really appreciate your reply, very useful. Thank you kind sir!
And about the maintenance and on going costs. I have already accounted for that. I can comfortably do 15% down on a $400,000 property. With $20k aside for fees (I'll have to pay stamp duty) and $10k aside for emergency costs
Make sure you see a broker if this is your first transaction. It will be beneficial to have some guidance.
Have a look at the FHLDS (https://www.nhfic.gov.au/what-we-do/fhlds/)
This may mean you do not need to pay LMI and will only require 5% deposit so you can have a buffer.
Getting the right advice could save you thousands.
There is no need to rush things.
Yes it will give you bragging rights (I was 20 when I first entered the market) but I suggest you wait another 5 years.
Enjoy life before you get tied down with a mortgage, then family etc.
You haven’t mentioned your income, are you able to service the loan?
Make sure you are signing the right contract. In Queensland, when I bought in 2010, there are two legal property contracts. One limits the distribution requested by the seller, one doesn't. Distribution is made by bank cheque, and costs you per cheque.
Get your conveyancer / lawyer involved before signing the contract. Although it might cost a little more, they will help with item 1, and any other hairy moments.
Make sure you make the contract conditional on Building & Pest inspection acceptable to you, and finance acceptable to you. The "acceptable to purchaser" is really important here.
Don't pay 15% deposit as part of the contract. If the contract doesn't reach settlement, you are likely to lose all your deposit.
Remember, although real estate agents appear to be acting in your favour, they act for the seller. They want the highest price out of you.
Schedule a settlement inspection a couple of days before settlement. Ensure that all things in the contract are completed, or get your lawyer to negotiate if not completed.
A broker may assist, but I've had one good experience, and one bad experience. The second time, my broker didn't even review the paperwork before recommending that I sign it (the LMI changed significantly from his initial advise and that stung me bad - then he had the gall to tell me I signed it, that it was my fault)
Absolutely never ever trust anything the agent tells you.
The agent is only there to get a sale for the buyer and a commission for themselves.
As you've said this is an investment, remember not to fall in love or buy because you would like living there. Think in practical terms, close to transport makes it more appealing to a renter, easy to fix and maintain with little wear and tear is better for you.
And, never trust the agent. (worth saying twice!)
It is a good backup plan if you could live there though.
I mean if the shit hits the fan and you can't get it let out etc
Buying an investment property is currently very risky. Can you afford it in the likely event you can't find a tenant or one that pays enough rent to keep your head above water? See what happens in September….
It is not a good time to buy an investment property. The rental market is very unstable. You won't know what will happen after jobkeeper finish.
I would definitely wait 6 months. The real estate market should drop by about 20 %.
After these stimulus payments cease the market will be flooded with sales.
It will be a buyers market. There is also talk about a $50,000 new home grant,
Get a prenup
No one going to ask how a 20 year old is already cashed up to buy?
What's there to wonder about? Finishes school, works full-time for 2 years while living with Mum and Dad and saves most of it because they've got practically no living costs.
What house are you getting for $450k in Sydney?