Housing plan to tackle affordability

[money tree]

well Ive been looking for a while and finally found something that suits.

today, I am a homeowner

but, I got the property at a 9% discount to asking price, and pretty much negotiated a quarter of the reno work included in the price It took 6 hours of negotiation to seal the deal.

I will develop the property (which is easily done) until it is cashflow positive.

the discount to asking price and the positive cashflow should insulate me from any downturn.

Im going to be busy as hell for the next 6 months.....

 

[Mofra]

Congratulations money tree, given those negotiation skills remind me never to sell anything to you

 

[Julia]

Congratulations, Moneytree. Is this your first property? Where did you buy?
Keep us up to date with the renovation progress.

Julia

 

[tech/a]

I will develop the property (which is easily done) until it is cashflow positive.

Tree.
Well done
Jack Dyer once said "Bite off more than you can chew and chew like crazy"

I'm interested in your statement above.
Are you going to live there?

 

[money tree]

The house is highset, was restumped to 2.4 by the owner but he ran into a cashflow squeeze when rates went up.

The downstairs is basicly a shell. So no hardcore building work required, just throw up a stud wall here and there, put in a $2k Bunnings kitchen and a cheap bathroom, carpet & paint.....

then I need to do the kitchen & bathroom upstairs, carpet, paint again....

that will give me 2 rentable spaces, though we will live downstairs until our 6 months is up on the FHOG, then repeat the entire process on another property using the mrs FHOG

cashflow should be positive to the tune of $80 - $100 wk

 

[tech/a]

2 Rentals one property--Nice!!

 

[Warren Buffet II]

that will give me 2 rentable spaces, though we will live downstairs until our 6 months is up on the FHOG, then repeat the entire process on another property using the mrs FHOG

Sorry for disappoint your plans but you can't claim FHOG for your wife.

From the http://www.firsthome.gov.au/

Neither the applicant nor their spouse (or de facto) must have owned and occupied a home after 1 July 2000.

WBII

 

[money tree]

we aint married

 

[Warren Buffet II]

we aint married

(or de facto)

 

[tech/a]

or the applicant. (as a pair----either married or defacto),
Brother/s and sister/s can do it though.
Keep it in the family.

 

[DTM]

2 Rentals one property--Nice!!

Yes, well done moneytree, a home and an income source. Nice.

And I was living in just round the corner from you when you were living in Ryde. Hope Brisbane works out for you.

 

[keebab]

This is an interesting thread and I've been very interested reading it as it has developed. I believe that where there is a will there is a way regardless of whatever the current property climate is. I've been a renter for 7 years and hating it. I live in Sydney and for work and play reasons need to be as close to the action as I can be.

I'm self employed with extremlly sparodic income. If nothing else my goals with trading and investing have been to achieve a verified stability to my income and to build a deposit to purchase a home. Having talked with a couple of mortgage brokers my best hope for a loan is a low doc loan. Unless I can increase my deposit level to around 30%, the maximum I can borrow is around 275k. The loans could not be used for studio or certain 1br apartments because of loan security. I am eligible for FHOG as a single person. My thoughts have always been towards getting a 2-3br townhouse/appt as a PPOR and renting the additional rooms. I will deduct certain costs for home office as well.

Long story short, I have not found anything suitable within my price range and I am not sure of other options to upsize my borrowing capacity. I want to take the plunge but don't have enough experience to be sneaky!

Suggestions Tech? (no recommendations of course!)

Cheers

Mick

 

[krisbarry]

Having talked with a couple of mortgage brokers my best hope for a loan is a low doc loan.

** Be very careful of the low doc loans **

There was a featured story on these types of loans on ACA or Today Tonight, not sure which one. But the interest rates are extremely high and with the current peak in the property market you may end up owing more than the property is worth. This may be your worst investment!

 

[tech/a]

Mick.

No need to be sneaky.
Youve identified 2 things banks love.
(1) Servicability--This is a problem area for you as your income hasnt been stable over a good period of time. Being self employed you really need to pay yourself a wage and recieve a group certificate each year. Start doing this now if you dont already---doesnt have to be the same each week just must have a tax record of it.

(2) Deposit---or equity,Again a problem. Do you have a Mother/Father/Brother/Sister/Partner that can help with deposit or equity.

Some parents lend their kids $$s for deposits.They then register a caviet on the title as protection for the $$s lent.Ofcourse in return you'd enter into an agreement re return on their investment(Loan) upon sale.Details up to you.

These are your 2 biggest obsticals.You'll need to get them in order before you'll have much clout!
Just have a plan. But apply that in bold as soon as you can.

If you go lo doc--DONT MISS a payment--a bad record with a lender means you just caught leprosy--you can after a few years when you have the above (part 1) in place then apply for a "Normal" loan and then fix if you wish.
Be sure to find out the payout costs BEFORE you take out this type of loan.
Get a good finance broker.

DONT EVER over stretch yourself---if your not comfortable then your out of your zone. How would a 2-3% interest rise affect you?

Renting out the rooms is a great Idea and you can get good $$s.
I'm sure your entrepeneurial enough to gear yourself right.

MOST OF ALL
If buying to INVEST DONT buy because you LIKE the house.
Buy Because the NUMBERS add up in your favor---be PATIENT.

These are some of the keys that were passed to me I hope that they are of assistance to you.

 

[Singh]

Just wondering what everybody thinks, is there any area of potential growth in the near future in Sydney? What suburb and why it is worth considering if looking at buying a unit/house upto $350,000.Any suggestions...

 

[Happy]

If you cannot buy for yourself in your city to live in, you can always buy rental property interstate, with paid management.

It can be frustrating to see the number of taps replaced and light fittings fixed and locks repaired or replaced, but if it is in a driving distance, you can claim up to 5000 km a year of travelling to conduct repairs and it can be travel by car, train, bus. I don’t thing air ticket will be looked at favourably, but ask around maybe it is OK.

Getting positively geared property would be the best option.

Also retail-rental-investment with long term contract is better than private tenant, who can do more damage and there might be constant stream of them.

Smaller cities have lower property prices, of course does not apply to posh satellite cities around State Capital cities, but there are so many possibilities it is possible to start property rat-race from as little as $50,000 - $100,000, - $150,000 and that much money you can get easily without pawn-brokers involved, hence safer arrangement.

One foot in, one year later or even 6 months later, you’ll be able to get a feel for your arrangement also up to 80% value of your first property might be used can be used to claim a stake in another one.

Over-stretching no good in any market and Tech/a can give you some real life examples if you ask.
Many possibilities, even managed holiday properties can be considered, cabin in cruise ships, even parking spaces.

 

[waratah]

This is a relevant and interesting discussion.

However, I fear most have missed the point.

I'm 40, and currently reside in my 4th owner-occupied property. First purchase was a $100,000 flat in Melbourne 16 years ago. Did I do it easier back then, rather than now? I don't know.

This progressed to the nice townhouse, then the first real house, now a move interstate to a very comfortable place on the best coast in Australia. Currently cashed up in a major way and looking for that "Dream Home" on a cliff overlooking the ocean. Up here, I'll need about $2.8 - 3.5 million, I reckon. It will happen within the next 2 years.

In 1996, I left a promising career and a reasonable salary, circa 60K. Plenty of people told me I was a fool. 10 years later, I've just made 10x that amount trading.

Please forget the low-doc loans, the FHOG, the cars/mobile phones/etc., AND DEDICATE YOUR EVERY EFFORT TOWARDS YOUR PRIMARY SOURCE OF INCOME.

Your primary income is the first determinant that governs all these other issues.

THINK BIG!

 

[Singh]

Smaller cities have lower property prices, of course does not apply to posh satellite cities around State Capital cities, but there are so many possibilities it is possible to start property rat-race from as little as $50,000 - $100,000, - $150,000 and that much money you can get easily without pawn-brokers involved, hence safer arrangement.

.....Many possibilities, even managed holiday properties can be considered, cabin in cruise ships, even parking spaces.

Happy i'd like to thank you for the Reply and the advice.

The idea of investing in small city is good,but without having much knowledge of Australian cities,it'll be hard for me to select one,and also another thing i need to consider is whether that property'll be leased or not. If you(or someone else here) can give any opinion of few small cities that you think may have growth potential.I'll take it as opinion not advise.
Regards

 

[Mofra]

** Be very careful of the low doc loans **

There was a featured story on these types of loans on ACA or Today Tonight, not sure which one. But the interest rates are extremely high and with the current peak in the property market you may end up owing more than the property is worth. This may be your worst investment!

NEVER EVER EVER rely on a "plastic" current affairs show for your financial information.

I am in the home lending industry (wont mention which institution for fear of abuse) and there is no difference in the rates for low dow loans to normal loans. The only difference is the amount of deposit or equity req'd - it is higher for low doc loans due to the increased risk to the financial institution.

If you trade under a company structure than you can use your company earnings for servicing - most institutions look at the campany's annual income on your tax returns rather than on any monthly basis. If you pay yourself a salary this will be added back to your income statement and also included for servicing if you are the sole beneficiary of the company.

However, always remember that you can't eat equity

 

[Happy]

Without knowing what industry is in a city and how prosperous city is, good gauge would be to check the population according to census.
If the population is gradually growing, there must be something that holds the city together and city is growing.

Internet is great place to start; one of them is www.allhomes.com.au http://www.realestate.com.au http://www.homepriceguide.com.au
You can try agent like www.ljhooker.com

Try search engines like: msn, yahoo, google and there are more.
In a blink you’ll be overloaded with information.

Look at the prices, and supported with demographics you’ll be able to look on the Internet at many cities, a lot of cities have their web pages.
They mention their industry, accommodation, and attractions.
But they do not mention their problems, so before purchase a trip would be beneficial.

Some Australian Road Travelling guides have basic info including population and industry.
One that comes to mind is “Australian Motoring Guide” and if there were few editions you can compare population, but check if different census was used otherwise there will be no change. Census is run every 5 years.

Local library will be good place to have a look too. For small fee they can even get you books from other libraries.