Millennials, This Is How Long It’ll Take You To Save For A House Deposit.

Millennials, This Is How Long It’ll Take You To Save For A House Deposit.

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It’s no secret that housing affordability has tightened over the past 15 years and this trend is likely to continue.

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The Australian Bureau of Statistics (ABS) shows the average weekly income is $1,608.40 and the average price of residential dwellings in Australia is $679,100. That means $136,000 would be the 20% deposit that’s required.

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QUESTION: How many years would it take you to save $136,000? Even halving the deposit to 10%, how long would that take?

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1.         Convert your Super into a SMSF. And buy through a SMSF. Turn your Super            balance into a SMSF – and then buying property in your SMSF – is one way            that you can create an instant deposit (takes anywhere between 2-4 months            to have a SMSF completed and finished).

2.         Set up a joint venture SMSF. You need a minimum of $90k as a SMSF             balance (up to four people in the SMSF) to buy property.

3.         Save your deposit 30% sooner. First Home Super Saver Scheme. The recent             Budget, handed down in July 2017, set out new rules, enabling people to             save 30% faster for a deposit. It’s called the First Home Super Saver
            Scheme. It can help you save for your deposit 30% faster.

4.         Get a financial ‘gift’ from friends and family. Depending on the location of             where you buy, this ‘gift’ can be repaid in under 3 years. OR – used
            (recycled) to buy your 2nd property.

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       4 ways to save for your deposit sooner, faster.

       5 ways to shrink the deposit you need.

    2 ways to make it easier for us to get lenders to say YES to give you             the finance you need.

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Do you see yourself here?

•        Anyone feeling ‘locked out’ of the property market

•        Those wanting to speed things up and enter the marketplace 1, 2 or 3 years               earlier.

•        And definitely, this podcast is for the mentally flexible; people willing to look          past their current knowledge about building wealth with property

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Occupation: Digital Designer and Fashion Editor.

Where they live: Paddington Sydney.

Goals and objectives: Chase their career goals in Sydney, and invest where they can afford.

Where they invested: Fitzgibbon and Redbank Plains (Brisbane).

Price of properties: Fitzgibbon Brisbane $351,950. Redbank Plains Brisbane was $321,800.

Rental returns: $351,950, Rent $350 - 5.1% yield $321,800 - Rent $330  - 5.3% yield

Bottom-line results: That’s $94,000 potential equity, while Jason and Stacey build their careers and live in Sydney… a place where they could not afford to buy. Their original deposit for their FIRST property was mostly gifted from their parents. That ‘gift’ was used to buy two properties. Their parents were in a position to be able to wait for the deposit to be paid back at a later date. So, they will be in a position to repay the ‘gift’ back at three years (they will have to refinance to do this) OR, depending on their parent’s sense of urgency, Jason and Stacey may use the equity to purchase their 3rd property.

Referecne: ¹ˉ²http://matusik.com.au

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5 ways to lower the deposit AND make it easier for Banks that will say ‘YES’ to your loan application. This could mean, you start buying 1 to 4 years earlier!

#1. By RentVesting. What is it, exactly? It’s an investing strategy. Simplified, here’s how it works:

•        You purchase a property.

•        You tenant it.

•        You claim maximum tax depreciation on it (new properties can get $20k tax               back)

•        And you rent where you live.

•        And then to build your property portfolio, you repeat. Steps 1, 2,
         and 3.

•        And repeat. Steps 1, 2, and 3.

A RentVesting strategy adds another income (rent) to your financials and this means you are more likely to hear a ‘YES’ from lenders.

#2. Buy a duplex or a dual occupancy property.

Similar to choosing a strategy like RentVesting, carefully choosing what you buy is also another way of making it easier for us to secure a “YES” on your behalf.

A duplex is two separate houses, on separate titles. It offers investors the chance to create $100k instant equity, even before market growth. You must include in the build contract prices all costs to get separate titles, meaning you buy one property, but end up with two.

Wise investors often buy a duplex as a RentVestor. That is, they would rent out both properties and pay rent themselves where they live.

Don’t wait for the end of the year to get your tax back Ask your accountant to prepare a ‘tax variation form’ for the ATO, and get your tax back every week (your employer gives you a lower tax rate).

A dual occupancy is two separate houses on one title. And while this kind of deal may not offer red-hot instant equity as a duplex can offer, typically, dual occupancy properties offer excellent positive cash flow, from day one.

Again, a super smart investor would buy a dual occupancy as a RentVestor, and have their accountant prepare the ‘tax variation form’, as in the example of the duplex pair.

#3. Set up a joint venture and buy with a partner.

Give up the idea that you need to do it alone. Set up your joint venture with a like-minded associate and use an agreement, set out by a lawyer. Make sure both of you get income protection. That is, protect yourself against a loss of income and have your JV partner do likewise.

# 4. Get the first home buyers grant.

This is a no-brainer. And, pretty much, everyone has heard of this. Currently in Queensland the First Home Buyers Grant is $20k until 30th June 2018. Conditions apply and the amounts vary from State to State but you can search the internet to find out how much you may be eligible for.

#5. Get the Stamp Duty Rebate.

This is a little more complicated than the First-Home Owner’s Grant, however again, the conditions vary between jurisdictions. This applies when you’re either buying land or an existing dwelling up to the value of $550,000. A first home buyer (in Queensland), will save almost $30,000 between the First-Home Owners Grant and the Stamp Duty concession on the purchase of a new property. Amounts and conditions vary between States and Territories.

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#1. The type of dwelling you apply a loan for will make ALL the difference to the banks.

Here it is again, Duplexes and Dual Occupancy – that you RENT out – will make it incredibly easy for banks to say YES to your application. WHY? Because you have two incomes with, in the case of dual occupancy properties, just one lot of council rates. This means, that you’d need to be renting out BOTH dwellings; not living in one, and renting out the other.

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Since you haven’t won Gold Lotto, you will need to display and exercise discipline and save. Yep. Just spend less that what you earn and save.

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For those wanting the full strategy, join our NEW podcast, How to save for your deposit sooner, faster.

 
 

References: https://www.corelogic.com.au/resources/pdf/reports/housing-affordability/2017-05-CoreLogicHousingAffordabilityReport_May2017.pdf