There are two major hurdles for first home buyers:
- Deposit and/or
Many young Australian’s have not saved enough money to pay the normal 20% deposit that they believe is required for a home. In addition, they feel that their income is not sufficient to support the ongoing cost of holding a property.
The issue is that these potential purchasers are not well informed. They have spoken to their bank, their friends or in some cases their parents who are not full-time property professionals. Often, we find that our clients do not understand the options available to them.
Indeed, an increasing number of Australians are concerned about their capacity to purchase a home.
Many have given up hope completely, while others are praying for a market correction. Given the efficacy of building wealth through property and wide spread belief that the market may slow, but will not correct, both of these options are not good enough!
Here is an example of what it costs to purchase the home that you will occupy:
The average cost of a home in Melbourne is $665,000. Assume our first home buyer is looking to purchase at this value. A 20% deposit for this home would be over $120,000. The cost of the loan for this property on 4% interest on a 30-year term would be approximately $40,000 per annum. Add to
this cost, council rates and other annual fees associated with being a homeowner (I have assumed $7,000 per annum) and to own this property first home buyer would need to pay $890 per week.
Many young Australian’s are only paying between $250 to $500 per week for their current rental property.
- How many first home buyers have $120,000 saved?
- How many first home buyers can afford $890 per week?
It is easy to see why so many people believe they can’t afford to enter the property market now. The good news is that there are other options available to first home buyers that can enable them to;
- Live where they want to live
- Buy property and get their foot in the door now
- Pay around $50 (plus their rent) per week rather than $890
Did you know that if you purchase a property for investment purposes and then rent where you want to live, you are likely to save a considerable amount of money, enjoy your life a lot more, pay less tax and all without losing out on capital growth!?
We call this strategy Rentvest. It works really well for some PAYG clients who can use the tax benefits available for some categories of property to help fund the purchase. In some cases, our clients pay less than $50 per week to hold a property.
If you would like to find out more follow this link to book a FREE consultation.