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Lily | 09 Sep 2013, 06:34 PM Agree 0
My name is Lily, I am 20 years old, looking at purchasing my first investment property, I am juggling between buying a brand new apartment or buying a house and renovating, I'm not too sure wehre to start and what i should look into before locking myself into a long term contract. I currently make just over 60k a year looking for property up to $400 000. I am looking within the Fairfield area, so Fairfield, Merrylands, Liverpool, Smithfield in Sydney NSW. ANy advice will be highly appreciated. Thnk you in advance!
  • Neil | 09 Sep 2013, 08:55 PM Agree 0
    Hi Lily,

    Im Economist for a real estate firm in adelaide, Buying a brand new apartment can be great due to the tax depreciation, what i have been doing for alot of my clients is buying older, better made properties, that in most cases just need a facelift and a few capital improvements. Now make sure you run your numbers very well, i have seen people go wrong at this point. RULE ONE CASH FLOW POSITIVE this allows you room to breath. Then this can increase your borrowing power for investment property number 2. Most of the time im finding 25% rental yield after all costs.
  • Lily | 10 Sep 2013, 11:29 AM Agree 0
    Thanks Neil,
    So lets say I buy a 2 bedroom unit for 365k and the repayments on my loan is $460 per week but the unit is rented for $420 per week. So per week i will pay the $460 + $100 extra with lump sum payments of $1000 per month. So basically paying approx. $3250 per month instead of the minimum regular payments of $1850. Will I be negatively geared and able to borrow and buy again in 6-12 months time?
  • Eos Property | 10 Sep 2013, 03:54 PM Agree 0
    Hi Lily,

    Just running some numbers for you.

    Anticipated rent $420 X 50 (I allow 2 weeks vacancy) = $21,000

    Interest only (?) costs = $24,000 (rounded)
    Other costs @1.5% = $5,500

    At this point your property is negative by $8,500.

    If your loan repayments at $460/week are interest only then you are entitled to claim $8,500 off your taxable income. If your taxable income is $75,000K you'll reduce your tax payable by $3,000/annum (approx)

    The issue of when can you go again - banks will assess you for your income AND your security position. In other words do you earn enough to pay the loans, property costs and living expenses on your income. The other, equally important aspect is how much security (usually equity) can the bank 'hold'when giving a loan. The bank is keen to look after the interests of their shareholders.

    As you haven't indicated what your loan against this property would be a more definitive answer is hard to give. Note - the bank will also consider other property/ies you may have, home loans, car loans etc

    Hope this helps.
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