Tax and legal advice
Property

What prospective property investors need to know about First Home Buyer's Grants

By Bianca Dabu

One first-time investor heeded the advice of many successful property investors and decided to start his business of creating wealth through property early on in his life. He's is looking into using his First Home Buyer's Grant to start building his portfolio — but is it actually the best way to begin an investment journey?

After renting for four years, Smart Property Investment Show listener Sam Wright wanted to get into the property market—particularly in Queensland—to be able to put his money into an investment instead of a "black hole." However, buyer's agent Paul Glossop advises against jump-starting an investment journey through the First Home Buyer's Grant without prior education, especially because data usually changes pretty quickly.

"As of most recent changes, the First Home Owner's Grant in Queensland for buyers who are going to be building or buying a new property has increased by $5[,000] recently, so that's at $20[,000] as far as a grant's concerned for first home buyers. So, Sam would be entitled to that $20[,000] if he or she was to buy a new or off the plan... On top of that, there is also an $8,750 Stamp Duty Exemption up to that amount," Paul explained.

"The unfortunate part on that side is if you're gonna buy established, essentially, the First Home Owner's Grant is abolished. So, it's only applicable for people who are buying new or off the plan. You still get the Stamp Duty Exemption so there's still incentive to buy and get into that new home as an owner occupier at this stage."

Smart Property Investment's Phil Tarrant agreed that the necessary caution must be observed when using the First Home Buyer's Grant, and while it does help a budding investor jump-start building their portfolio, one should still have enough money to sustain their journey.

"What I'm assuming here from Sam's note—it looks like they just want a place to live in. So, [he is] saying, 'I don't have much money, but I'm paying rent, so I could probably show to a bank that I have cash flow to be able to pay for rent, and therefore, I should be able to service a mortgage.' But, the problem here is savings... The First Home Buyer's Grant, you get it once it's all set and done. It's a rebate back from the government so you still need to find the money," Phil said.

"You need to have genuine savings or equity or cash or someone going guarantor effectively to make sure the bank is going to be having security on what you're buying," Paul explained further.

Find out how prospective property investors can find their way through that "make or break" first purchase through First Home Buyer's Grant and mortgage lending:

Is there a particular mortgage lender that would be best for first home buyers?

Phil Tarrant: Everyone's circumstances are different... That said, my response to that is [to] just go and speak to a mortgage broker.

Paul Glossop: Speak to them and speak to a few and then ask them what their advice is and get comfort as well.

What should prospective investors keep in mind before starting their investment journey?

Paul Glossop: You're saying you're renting and you're sick of it because your money's going to some landlord who's actually making money, [and now] you've perceived they're making money out of you, and you want to buy instead of rent. That's all good and well, as long as the numbers work in the long term. When I say that, I mean, you can go on rents and you can buy elsewhere and that money might be working better for you. Just because there's a home owner's grant in Queensland specifically that's going to be incentivised doesn't mean that's the best place for your money to start working.

If you're renting and your actual investments are going to work harder than your rent is, then sure, it makes sense to tip your money [into your own property] instead of into rent... because it's gonna go up in value. But a lot of people get caught in that trap. Just because there's a little carrot dangled, they think all of a sudden, [that] it's a licence to print money, and instead of paying rent, they're gonna pay a mortgage, but if that property doesn't increase for five years, then you effectively probably would have been better off renting or chucking your money into an investment that's going to work harder for you.

What would be your most important advice for first home buyers?

Paul Glossop: Oils ain't oils—do some research rather than just thinking, "Because there's a grant, that's going to be twenty grand in my pocket rather than someone else's and, all of a sudden, I'm going to make money out of it."

Phil Tarrant: Just because you can get a First Home Buyer's Grant in Queensland doesn't necessarily mean that that's the best place for you to buy. Now, I would say you've only saved a small amount already... So, number one, can you actually afford to live where you want to buy—in Queensland? You know, there's a lot to be said about renting where you want to live and buying where it makes the most sense for you... You can realise the benefit of being a property investor and holding property long term [without putting] a lot of strain on yourself because if you need that First Home Buyer's Grant in order to have enough money to buy a property, maybe it's not the right time for you to be doing that.

Should First Home Buyer's Grant be a deciding factor for prospective investors?

Phil Tarrant: Just because you get something for free doesn't mean you should do it. A lot of people have found themselves in a lot of problems with First Home Buyer's Grants... If you think you can get your First Home Buyer's Grant and quickly turn it into an investment property, I'd definitely be speaking to an accountant and make sure you know what all the rules and regulations are around it because you don't want to be caught out and it's not the right way to behave... You need to do everything you possibly can to try to understand what you're trying to achieve in property and where the properties are best suited to meet the objectives you have in terms of investing in property.

Tune in to The Smart Property Investment Show's Q&A session with Paul Glossop to know more about accountancy and money management platforms, how you can better prepare yourself at tax time, and more answers to some of the most frequently asked questions about property investment.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
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Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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