HOW TO BOOST YOUR AFFORDABILITY TO BUY A HOME
New home buyers struggle to afford to get into the real estate market so they either continue to live home with parents for longer or compromise on their dreams by buying inadequate cheap properties.
It’s all about having the deposit to satisfy a lenders requirements and having the income to service what can become a crippling debt. Even the various ‘first home owner’s grants’ that are offered from time to time by the state government will not make a lot of difference when the price for real estate continues to be driven up by a flood of cash rich investors and buyers from overseas.
If a household is sacrificing more than 30% of their gross income in mortgage repayments they are generally considered to be in ‘stress’ and currently 18% of households nationally are ‘stressed’. *
The obvious solution is to add more income and the simplest way to do this is to let a tenant do it for you. Rental income can become the key to affordability.
Using a rough rule of thumb a unit worth $450,000 will give about $450 rent per week** so just imagine how much this will help you to make those repayments. And because this is now an investment property suddenly all of your expenses become tax deductible including such things as council rates, water rates, building insurance, Property Managers fees, Emergency Service Levy, all repairs, the interest component of your loan and even certain future upgrades to the property ***.
Then add to this your claim for depreciation to the buildings, fixtures & fittings. A brand new unit that costs $450,000 might entitle you to a deduction in your taxable income in the first year of up to $12,800 and up to $55,040 over the first 5 years. ****
And for the deposit you need to search out all the great deals available from lenders that do not require you to have a minimum of 20% deposit. Home Start will accept as little as $3,000 (subject to their normal lending criteria).
Put all of these factors together and now property ownership can become a reality and possibly even a money making proposition. *****
Of course the problem is that you won’t be able to live in this house immediately but if have purchased in a suburb with projected capital growth then each year should hopefully own more of the property until you have an asset big enough to refinance to buy the home you have always wanted.
The alternative is to waste it all in renting with no return.
***** If you want more details then ring Mark Nielsen on (08) 8186 2777
* Australian Bureau of Statistics survey 2013
** This is a rough guideline only. You will need to consult an experienced Property Manager in the area to verify.
*** You will need to consult a tax consultant for obtain information relevant to your situation
**** Approximate figures supplied by BMT Tax Depreciation Quantity Surveyors in their brochure, ‘ Maximise the Cash Return on your investment property.’ Every property will need to be individually assessed to produce a Tax Depreciation Schedule that can be used by your tax consultant in preparation of your tax return.