Background information: I am 24 year old home owner in Australia.
The value of my property is ~$520 000 and my current equity is $263 960.
My mortgage is variable with a current interest rate of 4.5%. I am predicted to pay it off in the next 29 years with current payments of $650/fortnight.
I earn ~$85 000/yr before tax. This means I have $2000/fortnight after tax .
My current personal debt is ~$8000 on 2 credit cards with no interest. 1 card will be paid off in August. Leaving ~$5000 to be paid off over another 2 years.
My living expenses and bills add up to ~$1900/fortnight.
I have no dependants (except my dog).
I was called by a financial planning company last week who told me I was eligible for a Governement tax rebate. I was curious so I agreed to a meeting at my home.
This led to a follow up meeting at their office yesterday which cost me $150. They tell me this upfront cost is the only cost I will ever be charged by the business. They also say they will have a life long relationship with me as a support network and with annual reviews.
The meeting was with a mortgage broker and some sort of housing planner person. They specialise in investment properties and superannuation planning. They are paid by financial institutions and not a percentage of what I would in theory spend. Also they have an agreement with a particular building company which means they only build houses with this company.
I am told there is a government tax rebate that I am eligible for which would give me $6694/year in monthly payments of $557.
The property they suggested I purchase in is a rural town (Warwick) 2 hours from the capital city. The land and newly built house would cost $365 000 - this number is supposed to include all purchase and building expenses. It is a 4 bedroom, 2 bathroom house on a 780m2 block.
I would need to use my current equity for 25% of the purchase of the property. The new property would be an interest only mortgage.
They tell me the town is developing more infrastructure and there is a nursing home being built opposite the estate my house would be built in. Promising Growth in the area? There are private and state schools <10km from the house and the CBD <7km from the house. I am told the area is a Stage 2 on the Property Clock (Is this a common guide used?).
According to realestate.com.au the area has a rental yield of 5.5%. An annual growth of 0.5%. An average rental demand. There are currently 53 other houses advertised for rent in the area.
This business evaluated my budget and predicts I will have an income of $1129/month to keep in one of my offset accounts which will drop my current mortgage life from 29 years to 11 years if interest is 7%, if I decide to go ahead and purchase the investment property. This is based on the assumption that the remaining amount (35% of the rent I'll be getting) is enough to pay for all other expenses involved with owning the investment property and renting it out. I would personally need to contribute $42/fortnight into the offset account.
I don't know whether this is a good option for me? Also I'm not sure how certain I could be that there would be consistent renters in the house.
Submitted April 08, 2017 at 10:19PM by sunraysinmyhoney http://ift.tt/2oOmyZt
