Buying First Home in Other State

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  AT1013 on 04/09/2023 - 00:18

  If you are not going to live in the house for at least 6 months within the first 12 months, then no you can't use the first home super saver scheme. That being said, you can still buy a house in Melb and rent it out as investment property. You just can't benefit from the first home super saver scheme, and most likely any other first home buyer schemes. Your loan will be most likely be an investment loan as well.

  In the grand scheme of things, do you feel getting into the property market earlier will provide you greater returns in the long run than the amount the first home buyer schemes can provide?

  What you want to do is rent-vesting, and it's very common. Maybe consider to stop salary sacrifice into your super as well if you are unsure. You can always do a personal super contribution before the end of financial year if you change your mind again.

  • 

    Savethebuck on 04/09/2023 - 07:46

    Thanks for the suggestions. I will check about the rent vesting but is there any tax benefits form it? Yeah I stopped contributing for FHSS this year.

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  AngoraFish on 04/09/2023 - 00:48

  +3

  You're better off buying and living in a cheap Sydney apartment, building up your equity, and then selling out and trading up when you have the opportunity.

  "Rentvesting" very rarely makes sense for a first home buyer on an average income.

  You say you can afford the mortgage but there are a lot of additional costs from owning a rental property that you almost certainly haven't taken account of such as repairs, agency fees, some utilities charges, landlord insurance, council rates and higher investor interest rates.

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    Savethebuck on 04/09/2023 - 07:59

    Thanks for sharing details about the additional costs. Based on my research if own piece of land in a property then chances to build the equity are more. Additionally apartments that I am getting in my budget are old one’s in Sydney. They definitely need renovation and don’t want to pay strata fee and other extra costs. Also in rent vesting I will also get some tax benefits. But I will do the calculations again and check which is better for my circumstances.

    • 

      KaTst3R on 04/09/2023 - 09:49

      +2

      apartments that I am getting in my budget are old one’s in Sydney

      You mean the safer ones? The ones with no builder defect?

      • 

        urahara on 04/09/2023 - 13:51

        Are there any like those ?

      • 

        Savethebuck on 04/09/2023 - 22:32

        True. I was looking some site inspections YouTube channel builders. old apartments are far better than newly constructed ones. But I am more inclined towards property with land

    • 

      AT1013 on 06/09/2023 - 21:32

      Considering that it's your first home, you also have the benefit of the "6 year rule". So there won't be any capital gain tax for up to 6 years.

      Do your own research about it to see if it's suitable for your situation.

      I think rent vesting it's more common these days. First home buyer can't afford where they want to live, but doesn't want live where they can afford. So they buy somewhere they can afford and rent it out, build up equity, and it most likely will be negatively gearing to start with. As your income grows, or if there's a partner to help buy the next house, you buy something better and if you either sell the investment property to fund the next house or keep it to keep growing assets.

      • 

        Savethebuck on 06/09/2023 - 22:09

        Thanks for the suggestions. I did not know this rule, just saw about the 6 year rule. For that also seems to be first you need to be stayed there as main residence for some time as well. But will check further.

    • 

      mariahwerk on 06/02/2024 - 20:08

      I know this is 6 months ago but the "tax benefits" are more for high income earners e.g. 150k or 200k+ as they sit in the higher tax brackets. If your budget is 600-700k then I assume your income isn't in that high bracket either. To enjoy the tax benefits, you need to make a 'loss' on the property and you will be out of pocket first before you get money back. I am also keen to have a calculation spreadsheet if anyone has one - I am in a similar situation.
      And for any first home buyer schemes you definitely need to live in there for 6months first before renting it out. See if your work allows that flexibility?

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  Duckie2hh on 04/09/2023 - 09:47

  Recommend QLD. Much better value than Melbourne, especially if your budget is only 500-600k.

  • 

    Savethebuck on 04/09/2023 - 22:34

    Thanks for the suggestion but I have friends in Melbourne that’s why more interested in Melbourne than other states

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  Euphemistic on 04/09/2023 - 12:13

  First home buyers subsidies likely have some restrictions on it becoming your principal residence (living in it) very soon after buying. This is ti stop people buying with government assistance and then renting out.

  Either buy somewhere you will live now or just keep saving.

  • 

    Savethebuck on 04/09/2023 - 22:36

    I thought the same but property prices are getting higher and higher so thinking to enter into market as soon as possible.

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  Ocker on 04/09/2023 - 12:27

  +1

  It's a brave person that buys a property and then rent it for a couple of years. Even more-so if the buyer lives interstate and needs to rely upon other to do property inspections.

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    Savethebuck on 04/09/2023 - 22:37

    I have some reliable friends in Melbourne that’s why I am preferring to buy in Melbourne. But agree with your point