First Home Buying

Hi all - first want to thank all the people that have contributed to these forums. For a novice it is filled with interesting discussions and strategies.

I am currently looking at the possibility of buying my first home. I have scrounged/saved 50K and earn about 60K pa. Running these figures through bank calculators it looks like I can borrow about 300K. Which in Darwin, NT would buy you a small unit (often in a suburb you wouldnt drive through never mind live). Anyone know how accurate these calculators are? I thought I was on a decent wage.

I am thinking now that I should possibly buy an investment property to assist me in building equity for my future PPOR. From what I understand there is no money to be made from the leasing of the property, that even with it negatively geared you likely will still be making additional payments to cover the mortgage. I suppose this leaves capital gains which likely wouldnt be realised within a few/five years or more?

Please jump in an correct my assumptions or point me in a direction/options that I may not have understood or looked at.

Hi Red and welcome to the forum

Buying your first property, whether it be PPOR or IP, is a big step and one to be considered carefully. Capacity to afford repayments will depend almost entirely on your current lifestyle- how much do you currently spend? What do you save? Do you have a buffer in case IR's move up another 2%? Can you still afford to pay the bank if the property is vacant for 6 weeks of the year?

As far as buying a property with the rent covering the mortgage is concerned, this depends on the rental return and running expenses. I'd suggest investing in some good property books to understand this a little more. Authors such as Jan Somers and Margaret Lomas explain well in easy to understand terms what's involved here. Capital gains are never assured, however, historically Australian real estate has performed well for many investors and home owners over the last 6 decades or so, allowing many of us to use the built up equity to leverage into other investments. Property has been considered a low risk investment vehicle for the average Australian for a long time, and not without good reason.

Thanks for your feedback. Suppose the best thing would be to go talk to a bank and read some of those mentioned authors.

I think buying my first home in Darwin is just out of my reach. Will have to start getting an idea of what other states are pricing at.

Red,
As a rough rule of thumb, gross salary times about 4.5 to 5 times is about your borrowing capacity so a $60k income will give around $300k to $350k borrowing depending on the lender and what other borrowings and commitments (also include dependants here) you have like credit card limits (even unused).

I would go see a broker before I saw a bank, mainly they should be able to give you a range of different lenders borrowing limits for your circumstances where a bank will just give their own limit. Then see a bank or three to confirm.

I very much agree with Jacque, read some of the books by the authors she suggested, they give a knowledge to start building on.

As to buying as an owner occupier to buying as an investor, as a broad statement you can borrow more as an investor (due to the lenders servicing calculators and I will not touch on the issue here of whether this is advisable) with the theory is the tenant pays up to 60%, the taxman may pay 20 to 30% and you pay the balance. You need to run the numbers to see if it makes sense for you or not.
Good luck
Greg

Hi red

Welcome to the forum.

If you are going to buy a property in Darwin my suggestion would be to wait because to me the market seems overvalued.

If you are going to buy interstate consider that prices in most markets have already moved and yields aren't too good. At the same time interest rates are predicted to rise and credit availability could worsen
pushing interest rates even higher

Currently I am investigating alderhsot have some in toogoom, most houses in toogoom are undervalued imho with the new mine finally going ahead in alderhsot I believe toogoom is in for a good upswing most place can be bought
270-350k in toogoom all within walking to beach public transport to hervey bay and around 15klms from the mine rent for a 300k house is around 295-320week at present