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What to do as a First Home Buyer with a big deposit

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Douglas Slater | 21 Feb 2015, 06:44 PM Agree 0
Hi everyone. I am a First Home Buyer keen to finally get into the property market. I have just moved to Melbourne, and i am keen to make the best use out of my solid deposit as possible. I am interested in buying a 2-3 bedroom house within 15km of the CBD as i see great gains to be made still, however, competing with the investors in those areas is proving to be rather difficult! I am seeking advice from those with investment experience. Am i best focussing all or a large amount of my deposit on one house, or am i best looking at units and perhaps splitting my deposit and purchasing two units with one as an investment? as for my approach in the long-term, i do not see a need to be solely capital gains focussed or 100% cashflow. I think purchasing 1 or 2 growth asset, as well as a number of cheaper cashflow assets can be very successful. Agree or disagree? If you feel that you can value add to my sceanrio i would love to hear from you. Thanks - Doug.
  • alexiscooper5 | 23 Feb 2015, 08:01 PM Agree 0
    Hey Douglas,
    Contact you Local Realtor, he will tell you the best property investment near by your area.
  • ElisaT | 24 Feb 2015, 03:33 PM Agree 0
    Hi Douglas,

    Splitting your asset portfolio over a range of security types is usually a good strategy. You would probably be well placed to speak to an accountant that specialises in property tax to look at the best strategy for you is.

    Also if you are finding it a challenge to get your foot in the door you may find a property buyer is useful. They have contacts and loads of experience to work for you. To choose make sure you do your research and talk to them, make sure you like their approach and that they fully understand your needs and what you are looking for.

    Of course I also highly recommend working out your 5 year plan and talk to your finance professional to ensure they are on the same track to finance your planned purchases.

    Best of Luck!

    Kind Regards,
    Elisa, from Awesome Lending Solutions
  • NeoChats | 25 Feb 2015, 08:57 AM Agree 0
    Hi Doug, you're asking all the right questions. Capital is the hardest asset to accumulate. Once it's out the door, it's very hard to get back.

    Units have the added hassle of being run by a body corporate. So you're almost subject to the personalities on the body corporate and how the entire building of tenants behave. So it is important the demographic and shape of the body corporate you choose. Also, there are pockets of serious oversupply in Melbourne when it comes to units. What out for those. Otherwise, if you pick the right unit in the right area, you can have a good growth asset with low maintenance and hassle.

    House carry lower monthly costs, and you own the land. Land is where the value is

    However, within a 15km radius of Melbourne, you are looking at a higher entry point. Houses can also be great investments, but in that radius you are probably looking at an older house with less depreciation benefits. Depending on your tax situation, this may not be suitable.

    Buying two properties means two transactions costs. However, it's always good to diversify.

    Whether you focus on capital growth or cash flow, depends on the plan that you have with your salary over the foreseeable future. More capital growth potential in a property usually means that you will have some negative gearing. This will help you to earn tax credits. The reason why people point you to an accountant is so that they can help you calculate how much tax credits. Then you can calculate your net cash flow from that property and compare it to your net cash flow on other properties which earn higher cash flow. If you are on a low tax bracket and expect it to remain that way for a while, then you will earn less tax credits. Remember to always calculate your net cash flows on a property before and after tax. Then you will know what the worst case scenario will be if you go through a period where you have no salary (something we have to factor in these days, I'm afraid)

    A great place to start as a first home buyer is to fully understand the costs and earnings on every property you look at so you can compare all your property options side-by-side.

  • Robert | 17 Mar 2015, 06:09 PM Agree 0
    If your having a problem it's good ask an advice to a financing analyst.
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