Managing Director of inSynergy Property and Finance Solutions Richard Sheppard tells us how…
Rarely has there been a more opportune time to start investing. The banks are again lending to people with good credit credentials and as little as five per cent deposit, or even zero deposit if they are lucky enough to have family that can guarantee an initial amount. This combined with the NSW Government’s stamp duty exemptions for new property means you could potentially purchase a $380,000 brand new home in a good growth area for less than $20,000 total deposit and costs. You may well be wondering where you can buy brand new, four bedroom homes in a good growth area for as little as $380,000 but they are out there. Areas that many economists and property advisers are tipping as one of the best prospects are the Newcastle and Hunter Valley regions.
A reasonable degree of caution is recommended though when looking to take advantage of the NSW stamp duty rebate, as it tends to attract people to potentially very high-risk long-term off-the-plan property. This is due to the fact that a higher than usual, 100 per cent rebate is offered for property that is not yet built. For a first time investor with a small deposit, it is almost impossible to mitigate the risk of long-term off-the-plan property, as it is so difficult to get long-term finance formally approved before exchanging and committing to the purchase.
A far safer way of taking advantage of the stamp duty rebate is to consider short-term off-the-plan house and land type property. This is where you buy a vacant block of land with a fixed priced building contract. This is much safer, as finance can be formally approved before exchanging and committing to the contract. With three-year fixed interest rates currently as low as 6.1 per cent, strong rents in excess of $400 per week and good depreciation tax benefits, a new $380,000 property can cost less than $33 per week.
Existing home owners with spare equity of around $20,000 can also benefit from this opportunity. Spare equity is considered any amount in addition to 10 per cent of the value of your property, so you don’t need to wait until your home is paid off. In fact, it’s usually better to switch from principal and interest to interest only and use the cash-flow benefit towards an investment property.
Richard Sheppard is the Managing Director of inSynergy Property and Finance Solutions. inSynergy provides professional property investment advice, property market research, specialised mortgage broking services and is an accredited investment property buyers’ agent. Visit www.insynergy.net.au or phone 1300 308 808.