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An old idea - Suffering From Elation
A Survivor's Tale
An old idea
Gosh, the amount of interest I'm being charged on my land these days is NEGLIGIBLE. If I were making the minimum repayments, it'd only cost me $70/week.

The topic popped to mind because the Reserve Bank met yesterday but didn't cut interest rates further. The rate is already pretty low (for Australia, which always seems to have higher rates than the US) and it got me thinking on the topic again. Man, if I sold my land and bought a 2-bedroom apartment at Kings Beach, I could rent it out to someone else and the rent would cover all but about $40/week of the mortgage payments.

And this is less than the current minimum repayment on my land, which is less again than the current amount I'm repaying, which was less again than the larger repayments I was making before I started saving for vans and overseas travel.

I know Joe's not ready to commit to owning a property yet, and fair enough, but I'm still toying with the idea of buying one myself. I could manage $40/week repayments and still save tons for travel, etc - I mean, the repayments are LESS than my current ones so I'd actually be doing financially better, WHILE paying off my very own apartment in my dream town. Also, from a "girl power" perspective I really like the idea of having my own pad. $40/week seems like a safe amount too. Even if I somehow lost this (very secure) job, and despite my experience could not get another, I could manage $40/week on Centerlink.

I'm thinking maybe I'd be mad if I DIDN'T do this.

Of course, I'd first have to sell my block and then convince a bank to give me the loan solo... but really, with my good track record on repayments and with the nice deposit the land sale would net me, along with the even larger First Homeowners Grant (which I forgot to factor into my calculations; that would make the situation cheaper still), along with the fact that I've now been well-paid and steadily employed here at Reel Time for a year, I can't see why they wouldn't.

Maybe you CAN have your cake and eat it too...?
11 have fought ~ fight the power!
master_haakon From: master_haakon Date: March 4th, 2009 01:25 am (UTC) (Link)
You are forgetting a few expenses in that calculation.

Real estate agent management fees
Bodycorp Fees
Rental insurance (To protect you from non-payers and tennants that trash your unit).
Oh crap, the Stove/dishwasher/AC unit died and needs replacing etc.

master_haakon From: master_haakon Date: March 4th, 2009 01:25 am (UTC) (Link)
Also FHOG doesn't apply to investment units....
tania From: tania Date: March 4th, 2009 01:27 am (UTC) (Link)
Good point, I'd have to live in it for 6 months to make it count. Ugh. Is it 6 months out of the first year? Do they have to be immediate?

Also, I did include the other expenses, only as bills - I make enough income that I can cover rates, body corp, etc as it all arises.

The important part is that I'm not paying a mortgage that takes a huge chunk of my pay every fortnight. Large but irregular bills, I can deal with.
tania From: tania Date: March 4th, 2009 01:36 am (UTC) (Link)
Found it: "applicant will reside in the home as their principal place of residence for a continuous period of at least 6 months commencing within 12 months of completion of the eligible transaction."

So if I bought the place in May 2009, I could move into it just on or before May 2010, live there for a period of 6 months, and the FHOG would not be invalidated.
tania From: tania Date: March 4th, 2009 02:25 am (UTC) (Link)
OK, did ALL the math and averaged it out to a weekly figure. With mortgage minus rent plus property management fee plus landlord's insurance plus body corp fees ($1500/yr) plus an allowed amount for misc repairs ($1000/yr), the weekly figure comes to $100. This is what I'm currently paying on my block of land.

I didn't count rates, but then, I don't count them on my land calculations either, I just pay them as a bill when they show up. (Which reminds me, must get around to doing that once we've got the van!)

Still, that's an eminently do-able figure! :)
master_haakon From: master_haakon Date: March 4th, 2009 04:53 am (UTC) (Link)
And do you think you could commute for six months? Or offically reside there and happen to "couch surf" during the week in Brisbane?

That aside it is certainly looking doable and you would end up with something that in the medium term is probably a better investment (or home for that matter) than Macleay.
tania From: tania Date: March 4th, 2009 05:48 am (UTC) (Link)
I'd probably take option 2, yeah. All my mail would go there, everything connected there would be in my name, but I'd just rock up to it on the occasional weekend. Might get a 'flatmate' for it during that six months, that way half the mortgage would still be covered - I'm sure a flatmate would be pretty stoked to be able to rent a place and know that it was pretty much entirely theirs, but for half-price.
scoutlostthewar From: scoutlostthewar Date: March 4th, 2009 03:36 am (UTC) (Link)
You should probably recalculate them with different interest rates. They're amazingly low now, but they won't be this way forever (depending on how you arrange the loan , fixed vs variable)

But I do hope it works!
tania From: tania Date: March 4th, 2009 04:00 am (UTC) (Link)
Also a good point! Keeping the rate down for the next few years is most important to me (I hope to have kids in my early 30's, so less travelling in that phase), so a 5-year fixed rate might be the way to go...
sigmoidal_suseq From: sigmoidal_suseq Date: March 4th, 2009 10:28 pm (UTC) (Link)
Also have you figured in tax you would need to pay on your additional income from your rental income?

Also had a Serious Talk with the accountant who thinks most properties are way over-valued at the moment to compensate the grant so has advised me to wait until after June, when you'll have much more leverage as a buyer.
tania From: tania Date: March 4th, 2009 10:54 pm (UTC) (Link)
Hmm, good point. It would sure be nice to have more breathing space; I think I'd have a lot of trouble getting the block sold and finding a place pre-June anyway.

What he said makes sense; I hear that the only sector in the property market that is doing OK at the moment is the entry end, and that's apparently due to the FHOG.
11 have fought ~ fight the power!