Need Advice of Buying House as Investment

Anth0ny on 20/02/2018 - 21:27
Last edited 21/02/2018 - 14:12 by 1 other user

Hi All,

So im a first home buyer in NSW, and I've been saving 65k.
Now my friend recently approached me and offer me a help to buy an investment house where he will chip another $65 to avoid paying the LMI.
He did said everything will be written in a contract where the term & condition will be specified, such as no one can sell the house without the approval of the other party, mortage fee & renting income will be split evenly.
I just want to ask everyone opinion about this, as I was thinking either doing this or buying an apartment (which is a safer option).

Home & Garden Investment Property

Comments

  • volcanoeqcycle on 20/02/2018 - 21:33
    +14

    Doing business with a friend often seems like a great idea but unfortunately it rarely works.

    • poboy on 21/02/2018 - 07:47
      +3

      E.g… I want to sell. I want to live in there in reduced rent. I want to demolish. I want to use this agent. You are not my friend anymore.

      You both will have different objectives and life stages, making decisions difficult.

  • vinni9284 on 20/02/2018 - 21:36
    +10

    I don't want to sound negative but sharing cash with another (a friend) is a little risky.
    What happens if one of you loses your job or other extenuating circumstances inhibit one to pay? Will the other bat for you?

    Even if you draft a contract from a reputable lawyer, if something goes wrong, it's not that you will immediately have liquid assets. You would probably have to go to court if there are disputes .. then it can get ugly.

    I would do a solo, buy an apartment and you will look after you…. and will still keep your friend in the process :-)

    Money causes too many issues…

    That's my opinion.

    Cheers

  • Anth0ny on 20/02/2018 - 21:42
    +2

    the other option i can do as well is to buy investment house @ 90% LVR so it means i will have to pay LMI, which i can integrate with my loan so my loan become 91.5%

    How about it?

    • vinni9284 on 20/02/2018 - 21:48

      I am currently/starting to do some research in the Investment property too and I think that LMI can be tax deductible. Don't quote me on it.
      I would buy something that you can afford and try not to stretch your boundaries too much.

      There are some fantastic brokers out there however there are some that can stretch the truth to get you through the door (and also their trailing commissions … etc) however you don't want to struggle with repayments that can cause you to lose your Edit: Investment
      If the payments are too high, then look for a cheaper place … I know it is not easy.

      Cheers

  • Anth0ny on 20/02/2018 - 21:44

    the other thing as well that made me thinking of this is because Im over 35 and i still havent got property yet, im single so i was thinking to myself, I think i can take a risk

  • atris17 on 20/02/2018 - 21:51
    +3

    Calculate what the
    - NET RENTAL YEILD
    - GROSS RENTAL YIELD
    - NET INCOME per Year = Room Rental per Year - Ongoing Cost

    Ongoing Cost =
    Adverstings
    Body Corperate
    Bank - Borrowing Expense
    Bank - Interest on Loan
    Cleaning
    Gardening
    Insurance - Building
    Insurance - Content
    Insurance - Tennant
    Maintenance
    Legal Expense
    Pest Control
    Property Agent Fee
    Repairs
    Staionary, Telephone
    Travel Expense
    Tax - Council Rates
    Tax - Land Tax
    Utility - Electricity
    Utility - Water Charges
    Utility - Gas
    Utility - Internet

    • vinni9284 on 20/02/2018 - 21:55
      +1

      Add Vacancy costs too :-)

      • volcanoeqcycle on 20/02/2018 - 21:59
        -1

        Add in the fact interest rates are at a 5000 year low and will probably rise shortly.

      • vinni9284 on 20/02/2018 - 22:04

        Add Income Protection Insurance - If you decide to take it. You can avoid direct payment out of your salary if you go through this with your Super. However Superannuation law has restrictions on Income Protection Insurance.

  • [Deactivated] on 20/02/2018 - 22:03
    +5

    nah bad idea

  • armdrags on 20/02/2018 - 23:13
    +2

    "Never mix business with pleasure"

  • AustriaBargain on 21/02/2018 - 06:31

    20 years ago would be a mint time to start investing in houses. The rent would have paid it off by now and the value would have ballooned, you can sell all your houses and just live on easy street anywhere in the world until you die.

    • djkelly69 on 21/02/2018 - 20:13

      380 years ago would be a mint time to start investing in tulips. The tulip juice would have paid it off by now and the value would have ballooned, you can sell all your tulips and just live on easy street anywhere in the small geographic area within walking distance surrounding you until you die (at the age of 35).

  • djkelly69 on 21/02/2018 - 09:27

    Are you aware you will be burning your first home buyer stamp duty concession/exemption if you do this?

    • Anth0ny on 21/02/2018 - 19:03

      how am i burning it? if i buy it, i still gonna claim first home buyer stamp duty exempt as im buying property less than 650

      • djkelly69 on 21/02/2018 - 19:16

        You said it was to be an investment property, which I took to mean it would be rented out, meaning you won't be living in it. One of the requirements for the stamp duty concession is that you live in the property for a period of 6 months commencing within 12 months.

        You also cannot claim the FHOG for an investment property, but as long as ypu dont live in it you wont burn the FHOG.

        • Anth0ny on 21/02/2018 - 19:36

          i will live in it for the first 6 months then moved out

        • djkelly69 on 21/02/2018 - 19:59

          @rafael: Ok, well you didn't mention that earlier.

          Are you planning for both names to go on title? Have you spoken to a bank to see if they will actually lend to you under this arrangement?

        • Anth0ny on 21/02/2018 - 23:37

          @djkelly69:
          no…only my name will go on the title. but we will sign a contract where the caveat will explain all the details of both party ownership and both party sharing the mortgage cost, rent income, etc.

        • djkelly69 on 21/02/2018 - 23:47
          +1

          @rafael: Ok, sounds… interesting.

          All I am going to add is to make sure you get a good property lawyer to draft this 'contract' and both get independent legal advice.

        • Anth0ny on 22/02/2018 - 13:12

          @djkelly69: thank you for everyone input

  • altomic on 21/02/2018 - 09:34

    I’m going to disagree with what everyone else has said and strongly suggest you do not invest with a friend.

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