If you could not afford to purchase an investment property by yourself would you be prepared to join 3 or more like minded people to purchase an investment property?
I was looking to make my first house purchase and had no idea where to start. I gave Robert from the Property Whiz team a list of possible areas....
Kevin Musty
How do I buy my first home
Written on the 3rd of October 2009 by Robert Duncan
I live in a capital city where real estate is expensive, how do I buy my first home on an income of around $50,000 ?
The answer is you buy your first house, not your first home.
Take as an average price for a house in Sydney to be $600K and a regulation deposit of 10% = $60K
Take an average wage of $50K per annum this attracts a tax payment each pay week of $200 (ATO web site) ($10,350 per annum)
Now let’s look at cash situation from this wage.
Per annum
Per week
Wages
$50,000.00
$962.00
Less Tax
$10,350.00
$200.00
Sub total
$39,650.00
$762.00
Living expenses
$12,124.00
$234.00
Sub total
$27,526.00
$528.00
Rent
$15,600.00
$300.00
Sub total
$11,926.00
$228.00
Car payment
$4,800.00
$100.00
Total
$7126.00
$128.00
The total represents how much money is left over each week after all mandatory expenses.
Out of that money you need to consider credit card payments, clothes purchases, and some recreational expenses.
So how much do you think you could save from a $50K per annum salary.
Lets say $50 per week that is $2,600 per year.
So how long will it take you to save a deposit of $60K?
Roughly 23 years.
So what can you do to save more money?
The answer is in Real Estate.
You don’t get a tax deduction for purchasing your own home BUT you do get a tax deduction for purchasing an investment property.
A property in a location outside of Sydney (or any Capital city) will cost you much less.
Here is a scenario.
A 3 bedroom, 2 bathroom duplex in Toowoomba will cost you around $265K
You can borrow up to 95% of the purchase price for a property like this.
You would need a deposit of $13,250.00 plus stamp duty and costs = $27250.00
You would receive $13,780.00 in rent and save $100 in tax on your wages each week.
On top of that your property would appreciate aprox $30,000 each year.
So let’s look now at what your cash situation would be:
Per annum
Per week
Wages
$50,000
$962.00
Rent
$13,780
$265.00
Sub total
$53,780
$1,191.00
Less Tax
$5,148
$99.00
Sub total
$48,632
$935.23
Living expenses
$12,124
$234.00
Sub total
$36,508
$701.00
Rent
$15,600
$300.00
Sub total
$20,908
$401.00
Car Payment
$4,800
$100.00
Total
$16,108
$301
You now have $301.00 per week with which to pay off your home loan on your investment property.
Lets assume that your loan was for the full purchase price of $265,000 your re payment would be:-
Per Annum
Per Week
Loan amt $265,000
$25,587
$493.00
Less rent received
$13,780
$265
Short fall
$11,807
$227.00
So now lets take your net position above after all living expenses and from that we will deduct the short fall between your rent received and your wages:-
Total surplus from
Per Annum
Per week
Wages
$16,108
$301.00
Less loan payment
$11,807
$227.00
Total net position
$4,301
$82.00
With a growth rate of around 10% per annum your rental property in one year will be $291,500.00. That is equivalent to giving yourself a $26,500 pay rise.
Within 3 years you would have equity in your property of around $87,000
Now could you have saved that in 3 years on your wages???
If you would like a Property Investment Analysis report for your specific circumstances, please join our investors club and make a request for this report to be produced for you.
DISCLAIMER:
The scenario above is a generalized situation where a person on $50k per annum with average expenses could look to purchase an investment property. It does not take into account the personal details of every individual as each person’s circumstances are unique. It is in no way to be construed as an absolute formula for investing in Real Estate or Financial advice. Its purpose is to advise in a general way what possibilities exist and each person contemplating investing in Real Estate is encouraged to seek financial advice before entering into any contractual arrangements.
