First home owner or first home investor ?
The first home owner scheme appears to be the entry point for young people when they get married and realize they don't have saved for a deposit. But in many cases the better alternative is to partner with a relative while still living at home and start out as a first home investor. In general starting out as first home investor while still single is a good strategy. The biggest hurdle of course is saving for a deposit of 10 to 20 % of the home price. But this can be overcome by partnering with a homeowner, such as a parent or relative. For the very first property I recommend a cash flow positive buy and hold strategy.
Is positive gearing still possible ?
Ideally we want to gear our investment capital (borrow) and use depreciation to make some losses on paper for taxation purposes, but overall we want to make a net surplus at the current interest rates. That's what we mean by cashflow positive. If we get close to this target we call it cashflow effective. If we improve a property (manufactured growth) or our equity rises due to market trends (market pricing growth) then we rate our property cashflow positive in relative (personal) terms. If a property remains cashflow positive after revaluation then we call it absolutely cash flow positive (in real terms).
How to become a first home investor ?
Most young people (gen Y) are entering the housing market via the first home owner scheme. Usually they have not saved enough money for a deposit and only start thinking about real estate ownership once they get married. Young people can get a foothold in real estate by partnering with a relative that can provide the equity for the deposit. Private partnerships can accelerate market entry by 5 years or more with significant benefits in equity gains (capital gains). It's purpose is to encourage young people to beat the home affordability crisis. I believe that many young people are outraged by investors locally and from overseas that are believed to have driven up house prices. There may be some 60 000 young people (not too many that is) that have thrown their hat into the ring and entered the market as a first home investor.
Cash flow properties
Cash flow positive properties can still be found. Explore opportunities and see the financial performance data at
http://www.cashpositiveproperty.com.au Test the viability yourself with the tools provided.
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