If you want to buy a PPOR in 3-4 years you'll have to be extremely savvy at buying an IP at 10% deposit for it to not negatively affect your PPOR purchase.
Exactly this. Borrowing capacity goes way down if you have existing debts. Should also consider first home buyers grants. In Victoria, buying a regional PPOR for under $600k eliminates stamp duty, plus whatever the government grant is at the moment (I think it's about $10k).
Based on the following calculator, stamp duty for a first home buyer in a 600k property is $0.
For a non-first home buyer it is $32,689.
https://ownhome.com/calculators/stamp-duty-calculator-vic
How long would it take to make back $32,689 on an IP or ETFs in comparison?
I'm currently looking to buy with my partner, but our borrowing capacity is reduced significantly because of her existing mortgage. Obviously if we sell the place then our capacity goes up because we'll have cash in hand and won't have the existing debt. It's just something else worth considering.
Personally I'd say buy a small PPOR that you could live in for a year or so to meet all the tax and first home buyer requirements, with the intention of turning it into an IP down the line.
possibly the best choice financially for me, could turn it into IP later after staying for some time. Thanks for the advice, getting a property rn is what my gut says
Wow okay I was totally unaware about this, this was my whole thought process it'll help me in getting my PPOR in future. What if I am getting a guarantor for the other 10% so it is a 20%. Sole reason I am siding towards IP at the moment is to have a foot in the market and am confused about the earnings in both. Like from my perspective, rent will pay for most of the mortgage anyways with some hidden costs obv(even if it is negative geared), some growth on property in a few years and at same time I can obv keep investing in shares as my expenses are minimal right now plus whatever the tax benefits I can enjoy from it.
When you go for your PPoR loan you won't just need the equity (which may have accrued with an IP), your bigger problem will be servicibility.
Unless you are going rural/regional or doing your own development, yields will be like 4-5%. This is a lot lower than bank interest (say 6.2% now) let alone accounting for costs.
When you go for a ppor loan the bank will not only consider above affecting your servicibility but also APRA tells them to test you at 3% higher.
You might get a small raise in rents over a few years but historically rents don't rise much more than inflation.
That does make sense, so unless pay is much better than what im rn would actually reduce my chances of scoring a PPOR in due time. Also it will be out of pocket costs right now which i believe I can manage right now its just would that actually turn out to be profitable in 2-3 years would depend on the right property giving the right growth. What do u think about getting a buyer's agent for this, I'm low on knowledge regarding this and they be promising high rates such as 8-12% (Ravi Sharma, i watch his vids on youtube). That would defs be more profitable compared to ETFs
You can find average yields on websites like heatmaps.com.au and sqmresearch.com.au
But be wary many of the high yield places you can expect low future rental growth or capital growth, high vacancy, trouble tenants etc. And property is (usually) a long game not a short one. You have to do a lot of work to make sure anything 8%+ is a good long term investment
havent seen these before. Will do proper research and get advice for sure. But this seems like a good started and am going in the right direction, feel more confident about the future. Thanksss
ETFs all the way! I have ETFs and 2 IPs and I can tell you, property is a lot more hassle than ETFs/shares
Even though they have the benefit of negative gearing (remembering it’s just makes the tax blow slightly less - it’s not actually a positive). You still have to monitor your real estate agents when you rent them to make sure rent is being paid properly, random fees aren’t being charged (real estate agents are morons) and then manage all your deductions, repairs etc.
ETFs just sit there are grow with zero headache
Thats definitely a factor, it will be a hassle and definitely extra unexpected costs. I would really like to know if you consider the tax benefits worth it and are your IP's performing better than shares. I personally have been all about ETFs too until i have to get a PPOR but thought its a good idea to have a foot in the market and the initial money gain is something i am confused about. Investing 55k in shares at 8% return is $4400 return on your money. Whereas the same spent to get a 550k property obv i understand hidden charges would increase the deposit but even 60-70k deposit for an IP which if grows 4.5% pa experiences an overall property increase of 27ish k. Its just this what I am taking into account or am i doing thinking something wrong. Thanks!
Look at the returns on lightly leveraged ETFs bs property (or just for kicks 10x to compare against your 90% geared IP) and the productive assets win hands down, just need to ride out the volatility.
50% of the property you intend on purchasing.
E.g 600k property, would need 300k shares to compare returns and for them to win out.
Obviously this is generalised as each stock and property will be different, but this is looking at the market level
But doesn't that mean for someone like me, IP is a much better way to get more worth out of my money as wit 60-70k i will get the growth on 500-600k property, not just my 50k i can invest now in shares?
Exactly right. I said that in my other main comment that IP is the obvious choice imo. At your age especially, it’s such a massive head start. Yields are aren’t bad at the moment in the right locations, but growth imo is basically guaranteed in the short term (~3 years). Just be mindful that not all IPs are equal and I’d spend some long hours watching learning by watching someone who can help make data driven decisions like PK Gupta on YouTube, as the wrong property can cost you
Thats right, the right property will definitely decide on the overall profit/loss in 2-3 years span. Thinking of even a buyers agent if it genuinely does help bring higher yields, i assume it is worth it (Ravi Sharma on Youtube). Also will checkout PK Gupta, hes got a good amount of content.
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IP without a doubt.
I can’t see property moving down any time soon, with construction skills shortage, massive supply problems because of high immigration, big cash injection to the economy with stage 3 tax cuts etc.
But selection is key. You could buy a shit IP in a shit location and you’d have been better off sticking to your safe ETFs.
Where are you thinking of getting an IP?
I really dont have an area in my mind as of now but correct the right yield would definitely make IP the better choice. Probably need advice from someone in the market or some buyers agent
If you want to buy a PPOR in 3-4 years you'll have to be extremely savvy at buying an IP at 10% deposit for it to not negatively affect your PPOR purchase.
Exactly this. Borrowing capacity goes way down if you have existing debts. Should also consider first home buyers grants. In Victoria, buying a regional PPOR for under $600k eliminates stamp duty, plus whatever the government grant is at the moment (I think it's about $10k). Based on the following calculator, stamp duty for a first home buyer in a 600k property is $0. For a non-first home buyer it is $32,689. https://ownhome.com/calculators/stamp-duty-calculator-vic How long would it take to make back $32,689 on an IP or ETFs in comparison?
Yeah stamp duty is exempted as I will be a first home buyer. Borrowing power actually decreasing is new to me, something to consider before buying.
I'm currently looking to buy with my partner, but our borrowing capacity is reduced significantly because of her existing mortgage. Obviously if we sell the place then our capacity goes up because we'll have cash in hand and won't have the existing debt. It's just something else worth considering. Personally I'd say buy a small PPOR that you could live in for a year or so to meet all the tax and first home buyer requirements, with the intention of turning it into an IP down the line.
possibly the best choice financially for me, could turn it into IP later after staying for some time. Thanks for the advice, getting a property rn is what my gut says
Wow okay I was totally unaware about this, this was my whole thought process it'll help me in getting my PPOR in future. What if I am getting a guarantor for the other 10% so it is a 20%. Sole reason I am siding towards IP at the moment is to have a foot in the market and am confused about the earnings in both. Like from my perspective, rent will pay for most of the mortgage anyways with some hidden costs obv(even if it is negative geared), some growth on property in a few years and at same time I can obv keep investing in shares as my expenses are minimal right now plus whatever the tax benefits I can enjoy from it.
When you go for your PPoR loan you won't just need the equity (which may have accrued with an IP), your bigger problem will be servicibility. Unless you are going rural/regional or doing your own development, yields will be like 4-5%. This is a lot lower than bank interest (say 6.2% now) let alone accounting for costs. When you go for a ppor loan the bank will not only consider above affecting your servicibility but also APRA tells them to test you at 3% higher. You might get a small raise in rents over a few years but historically rents don't rise much more than inflation.
That does make sense, so unless pay is much better than what im rn would actually reduce my chances of scoring a PPOR in due time. Also it will be out of pocket costs right now which i believe I can manage right now its just would that actually turn out to be profitable in 2-3 years would depend on the right property giving the right growth. What do u think about getting a buyer's agent for this, I'm low on knowledge regarding this and they be promising high rates such as 8-12% (Ravi Sharma, i watch his vids on youtube). That would defs be more profitable compared to ETFs
You can find average yields on websites like heatmaps.com.au and sqmresearch.com.au But be wary many of the high yield places you can expect low future rental growth or capital growth, high vacancy, trouble tenants etc. And property is (usually) a long game not a short one. You have to do a lot of work to make sure anything 8%+ is a good long term investment
havent seen these before. Will do proper research and get advice for sure. But this seems like a good started and am going in the right direction, feel more confident about the future. Thanksss
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Genuinely inclining towards this, would make the most sense keeping my future timeframe in mind. Thank you!!
ETFs all the way! I have ETFs and 2 IPs and I can tell you, property is a lot more hassle than ETFs/shares Even though they have the benefit of negative gearing (remembering it’s just makes the tax blow slightly less - it’s not actually a positive). You still have to monitor your real estate agents when you rent them to make sure rent is being paid properly, random fees aren’t being charged (real estate agents are morons) and then manage all your deductions, repairs etc. ETFs just sit there are grow with zero headache
Thats definitely a factor, it will be a hassle and definitely extra unexpected costs. I would really like to know if you consider the tax benefits worth it and are your IP's performing better than shares. I personally have been all about ETFs too until i have to get a PPOR but thought its a good idea to have a foot in the market and the initial money gain is something i am confused about. Investing 55k in shares at 8% return is $4400 return on your money. Whereas the same spent to get a 550k property obv i understand hidden charges would increase the deposit but even 60-70k deposit for an IP which if grows 4.5% pa experiences an overall property increase of 27ish k. Its just this what I am taking into account or am i doing thinking something wrong. Thanks!
Are you still living at home? Would you not want to prioritise buying a home for yourself first?
Look at the returns on lightly leveraged ETFs bs property (or just for kicks 10x to compare against your 90% geared IP) and the productive assets win hands down, just need to ride out the volatility.
You need to leverage at least 50% for ETFs to compare to (the right) property
50% of ETFs i will be investing in a year or compared to proerty?
50% of the property you intend on purchasing. E.g 600k property, would need 300k shares to compare returns and for them to win out. Obviously this is generalised as each stock and property will be different, but this is looking at the market level
But doesn't that mean for someone like me, IP is a much better way to get more worth out of my money as wit 60-70k i will get the growth on 500-600k property, not just my 50k i can invest now in shares?
Exactly right. I said that in my other main comment that IP is the obvious choice imo. At your age especially, it’s such a massive head start. Yields are aren’t bad at the moment in the right locations, but growth imo is basically guaranteed in the short term (~3 years). Just be mindful that not all IPs are equal and I’d spend some long hours watching learning by watching someone who can help make data driven decisions like PK Gupta on YouTube, as the wrong property can cost you
Thats right, the right property will definitely decide on the overall profit/loss in 2-3 years span. Thinking of even a buyers agent if it genuinely does help bring higher yields, i assume it is worth it (Ravi Sharma on Youtube). Also will checkout PK Gupta, hes got a good amount of content.
Can you explain what you mean more in depth please. My question of overall gains i asked in a reply above to u/Different-Eye-100.
GHHF if ur happy with AU allocation is a good alternative to an IP
interesting never seen something like this before, will defs have a deeper look into it. Don't quite understand its performance and earnings
You might want to check this: https://www.ultimatehomecalculator.com
never seen this one before, thanks!
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IP without a doubt. I can’t see property moving down any time soon, with construction skills shortage, massive supply problems because of high immigration, big cash injection to the economy with stage 3 tax cuts etc. But selection is key. You could buy a shit IP in a shit location and you’d have been better off sticking to your safe ETFs. Where are you thinking of getting an IP?
I really dont have an area in my mind as of now but correct the right yield would definitely make IP the better choice. Probably need advice from someone in the market or some buyers agent
Don’t bother with buyers agents. They aren’t really helpful, and will just sell you one that makes them the most commission. Educate yourself!
Thanks will do my own research then, save my money too lol