Looking to Break into The Housing Market

Hi guys, I'm going to look at land for sale today so you know I've been doing some thinking. I'm 26 years old and I want to break into the property market in the northern suburbs of Melbourne, so I'm just looking for some sound advice. I'm wondering whether I should:

  1. Buy a piece of land in a new area and build on it or wait for it to appreciate in value and then sell

  2. Buy an older house in an established area and rent it out after 1 year to qualify for FHOG

  3. Any other options?

I think it may be a good time to buy given the market today. I am a casual worker making approx. $900 p/w. I have savings of 35k and I could probably lend some money from someone I know and then pay them back when I save some more and I get the FHOG.

Any help is appreciated

Comments

  • +2 votes

    I would go for option 2.

    It might be hard getting loan approval when employed as a casual though.

    •  

      I've been a casual for a year and 9 months now hoping to become part time soon. My pay has fluctuated between $7-900. If I get part time in the next few months would this help me straight away, or do you think I need to be part time for a set period?

      •  

        If you go part time, would your take home pay drop? I seem to remember casuals get extra in their bank because leave loading etc is paid directly? Its been a long time though…

      •  

        You need to have payslips for a certain time period, maybe six months

      • +1 vote

        You normally have to be with the company for atleast 12 months. As its the same company it should be fine as long as you have a couple of payslips on your part time wage.

      •  

        Best to check with the bank directly where your salary is credited to find out how much you can borrow given your circumstances.

        Edit: oops, wei mentioned exactly the same point below.

  •  

    Good on you for thinking about various options.

    Not directly related, but if you need a bank loan you would better first find out if you can borrow and how much, given your employment situation. Unless funding is all from family / friend.

    I personally like buying older houses in better locations that I can renovate / add value to.

    •  

      Thanks for the tip. Funding for deposit would be assisted from family, not the whole amount.

  •  

    I am a casual worker making approx. $900 p/w.

    How is your employment history?

    • +1 vote

      I've been a casual at this job for a year and 9 months now, hoping to get part time in the next few months to add security to my pay check.

      •  

        Any loan that you take from friends & family reduces your borrowing capacity from the bank.

  • +2 votes

    Once you take our your expenses can you actually afford a property. By the way just because you can get a loan doesn't mean you can afford to maintain it. As for borrowing from friends or family. You need to make it strictly on a contact basis. What happens if you default and cant pay back. I wouldn't be your friend anymore. Is that worth it. I don't think so. Mates are for life.

    •  

      Yeah that's why I was thinking to get assistance for the deposit, rent out the house after a year and use the rent to help with the mortgage. The first year without renting it out might hurt a little bit but the year succeeding that would allow me to put minimal money atop the rent money for mortgage.

      What is a contact basis? It's good advice not to borrow money from anyone and just save up money myself. I will work my butt off to pay off a loan to them but who knows what may happen in the future?

      • +2 votes

        I meant contract or something in writing. At least you are thinking about it, but don't rush too quickly. Once you make the purchase its a commitment for the long term. Very costly to get out of it quickly without losing a lot of money. Good luck.

        •  

          Sound advice @debdny.

          As a landlord, you'll have more responsibilities to maintain the property in a livable condition.

          You need to factor in repairs and maintainence. Worst case, if the tenant defaults paying rent for a couple of months. You'll still need to pay the bank or whom you borrowed money from.

          The investment principle I'd like to follow is "Never borrow to invest". YMMV.

  • +3 votes

    There is no rush to buy anything. Even if you didnt end up purchasing for another year I wouldnt stress or feel any urgency as the market has peaked majorly and nobody knows where it is going. Use this time to continue saving and continue researching and go out there armed with better knowledge of how things work. Talk to brokers now (multiple) see where you stand from a finance perspective, start researching locations you like and look at price history, figure out what you really want from all this.

  • +2 votes

    Did anyone else have to read the title twice? I originally thought it said something along the lines of "break into a house"

    •  

      Yes. I was going to suggest a crow bar or brick.

  • +5 votes

    Listen I’m going to be brutally honest to you here but you should be prepared for that since your seeking investment advice on an internet bargain website and not from a licensed financial planner.

    Firstly no bank is going to loan to you because A: you are a casual and B: you have minimal employment history. Even if you went to “part time” you’re still high risk because you have a single income that could be cut off at anytime.

    Secondly why would you invest in property when we are in a bear market? If someone said to you hey give me 400K and in a few years time I’ll give you back 360K, do you think that would be a good investment? Well that’s what’s happened in housing over the past year and no-one knows when the falls will stop. There is also record high rental vacancy rates and lower than bank interest rental yields at the moment. Does that sound like and asset class you want to go “all in” on for your first investment?

    Now I would say that if your willing to blow your life savings and risk bankruptcy to try and make a quick dollar in a falling housing market you clearly are too immature to look after investing your own money. My advice would be to put your savings into a low risk ETF until your old enough to understand what constitutes a good investment and what constitutes blindly investing in an asset class because “Property always goes up”.

    Just my two cents take of it what you will.

    • +1 vote

      Listen

      i can’t stand people that start speaking with the the word listen. It’s a good time stop paying attention to what they have to say.

      • +1 vote

        It is impolite, but there is a useful information to think about. Internet is full of useless stuff and you often need to sift through it to get few golden specks, applies here too.

      •  

        Nice straw man. Nothing about the content just about how I phrased it. Happy to debate you on any of the points I raised but I doubt you have anything intelligent to say otherwise you would have said already.

      • -1 vote

        Listen I'm going to be brutally honest to you here but that's a perfectly valid way to start a sentence and I really can't think of how else to fill up this space so I'm just going to type words for a bit so hopefully it passes for an actual comment at a glance, I think about 3 lines should just about do it, what do you guys think?

    • -1 vote

      a licensed financial planner.

      Hahaha.

      No seriously, hilarious.

      • +3 votes

        You are getting "thrashed" because you keep voting extreme neo-liberal regimes into power, namely the Liberal and Labour Parties.

        As their actions have clearly shown, their intention are to shift as much public, taxpayer money into private hands as possible by ripping off the population whilst reducing the tax burden on businesses and shifting it onto individuals, preferably the poorer individuals.

        Braindead Australians apparently can't help voting against their own interests thereby making themselves poorer so wealthier people have more money.

        Sorry comrade communist. Forgot you don't need financial advice in your ideal world since everyone gets the same wage.

        But seriously seek some help if you really believe that conspiracy crap and think financial planners are hilarious.

  •  

    I wouldn't count on paying the person back that loans you the money with the first home owners grant. It's not a cheque you receive & which you can do whatever you want with it. It basically just gets your home loan reduced by whatever the fhog is.

    This was in my case anyway.

    •  

      Me too

      •  

        I did it at least 6 years ago. Highly doubt it has changed.

  • +2 votes

    My advice is to buy a house you want to live in and can afford to live in. Think about investments later. You can do some renovations while you live there to improve the value for when you sell.

    •  

      buy a house you want to live in
      buy a house you can afford to live in

      pick 1

  • +2 votes

    I think it's a bad time to buy with low interest rates and land value growth rates slowing.

  • +2 votes

    Sorry to be the bearer of bad news but you need more money and higher income. GL

  • +2 votes

    Don’t buy land only. It will not provide you any return until you either build on it or sell it. Buying a house/apartment will give you a roof over your head and you won’t need to pay rent, or you will be able to rent it out to offset your renral costs.

  •  

    Just remember when you have mortgage repayments, it's not just them in lieu of rent payments. You also have council rates water rates and building insurance to cover as well. Take this in to account when analysing your finances.

  • +1 vote

    I am a casual worker making approx. $900 p/w. I have savings of 35k

    Come back when you have a year of full time work history (or are making more in your own business), and have at least double the savings.

    The good news is the property market is trending downwards so there's absolutely no rush to buy into it right now.

  •  

    Buying property in Sydney and Melbourne right now is a massive gamble. I’m not against it, if you want to buy a house and know that for X amount you pay now you will have one forever than go ahead. But don’t do it because it’s a good investment, because most people would tell you that right now it isn’t (or at least is very risky). Definitely don’t stretch yourself and borrow money to do it as an investment because that is asking for trouble.

  •  

    Keep at it mate, I bought first place when I was 26 on a casual job. 2 years ago now