Hi all,
I earn 90k a year, currently have an investment property that i still owe $300k on(15% paid) and have $100k saved up (offset). I am currently living with my parents and i am looking at getting my own place and using that offset to placing a 15% deposit on a 550k house.
Am i overextending? Any advice would be appreciated.
Negatively geared. Investment property is worth $470k.
Don't forget the 25k stamp duty +LMI
Job security. Relationship prospects. Jon prospects. Other assets?
With the information provided, sure, mathematically you can.
I am permanent full-time. Job security looks good for at least the next 8 years. Single. No other assets.
Guessing you are young and thus living at home still. If so, go ahead with your plan.
If your 40 years old and still living at home, different story
I am 27.
Good on OP for capitalising on the advantages of living at home to save money to enter the property market with potentially 2 properties. Many people i know around that age stay at home due to 'cost of living' and to 'save', but ultimately spend those savings on holidays and partying anyway, hence net savings close to $0. I think this is the best method for the smart young individuals.
Treat staying at home as a priviledge and hence use those 2-3 years to build substantial savings whilst remaining frugal, then enter the market ahead of most people. This is better than parents giving their children a lump sum for their house deposit without having to work for it.
It's not the sexiest social stigma and may cost you a couple of roots.
But staying at home is one of the best ways of saving money even if you contribute to the home expenses.
Whats wrong with staying at home? Hes the one laughing all the way to the bak when hes set himself up. While everyone else who became 'independent' is still stuck trying to save a deposit. Then blame it all on everyone else, except themselves.
Lol
Oh god
At a glance.
$300k + ($550k - 15%) = $767k loan principal.
$767k @ 4% over 30 years, monthly = $3,660
A person on $90k = approx $6k / month NET.
Does that sound like a sustainable proposition over 30 years?
How much is the rental income?
But sounds like over extending to me regardless.
However I assume OP will also expect wage growth in 30 years as well.
I have excluded the costs of buying (SD, conveyancing, moving etc).
We don't know his expenses.
I assume his income of 90k encompasses all income.
OP doesn't need to worry about over-extending himself, no bank will lend him that money. It's evident even at a glance.
If nothing changed over 30 years it doesn't sound comfortable, but over time you get promotions, parents may pass on inheritances, you may get made redundant and get a nice fat payout and start another job on more money the next week, you might get married to someone pulling a good wage.
Thing about real estate is that once you have that asset, as long as you've bought well, it will continue to appreciate in value.
470k property @ 4% yield = $1550 income per month
Changes your figures to:
$767k @ 4% over 30 years, monthly = $3,660 - $1,550 = $2110
A person on $90k = approx $6k / month NET.
Does that sound like a sustainable proposition over 30 years?
35% of net pay, not accounting for any tax deductions/depreciation and the likelihood of a 3-5k tax return, the likelihood of rising rental income and salary and that OP appears to be mature for his/her age and head screwed on the right way.
Go for it OP… if something doesn't go according to plan, presumably you have the option to rent out the second house and move back in with your folks and save more.
If you want it to be super easy, you can initially rent out your second place while staying at home to rebuild your savings buffer and allowing tax return / depreciation of 2 investment properties (~10k) hit your savings account in August and move in a bit later when savings is rebuilt. (assuming you're also on good terms with your folks and there's no pressure there).
What's the valuation on the investment property?
$470k
Huh, I would've never thought Saoirse Ronan would hang out on OzBargain forums.
Sorry, I don't actually have anything valuable to add in terms of financial advice though.
I'll see myself out…
Lol….negs….did anyone not observe OPs username?
At this point in time, you have $470k asset + $100k savings less $300k debt = $270k assets/equity
If you bought a $550K home on top of this, you will need a loan of at least $750k ($470k + $550K less equity)
Remember you have to factor in stamp duty and a few other misc costs.
Getting a $800k loan on a $90k income is unlikely going to happen.
Thank you for the advice. I've come to this forum to get a reality check. I would like to be smart and strategic with my money if I can. I also realize, I don't want to be in a situation when money is too tight that I cannot enjoy life because I'm trying to meet targets to pay bills and expenses.
May not get the loan. Talk to a broker. Are you in Sydney?
470k house
300k loan
376k to maintain 80% - LVR
76k useable equity
100k savings
176k useable equity and cash
Take 20 out for stamp and LMI
156k useable equity and cash
780k house at 80% LVR
Now you just need to calculate servicibilty on your income which is going to take a hit due to negative hearing.
If he’s looking at buying a HOUSE for 550, then no, he is not in Sydney.
Ummm plenty in western Sydney at that price. There are stand alone townhouses by the dozens in and around the new airport. Listed prices are 570 call them up some willing to drop 20k.
A townhouse is not a house, and 570 is not 550, but thanks for playing!
In Melbourne.
A financial advisor doesn't cost much. Thought about income protection insurance just in case, for example?
Too many eggs in the one basket. If the market comes off the boil & drops a mild 10%-15% then where are you = Probably approx Zero equity!
Just do it, the freedom is worth it alone. But do take into account the new utilities bills you'll be paying too
Best to buy a house that you can rent out some rooms which will help pay the cost.
So some extra bathrooms are great or a granny flat, rent out the house and live in the granny flay your self.
or buy more investment properties but positively geared.
Positively or negatively geared? What's the investment property worth?