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Estate Planning

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First Home Buyers

We met Michael and Sandra when they were in their mid-20s and had been dating for some time. They were looking to take the next step and purchase their first property together. Michael was on $80,000pa and Sandra was on $90,000pa.

Keeping up

Whilst they both worked full time they also wanted to enjoy their lifestyle. They were renting and spending approximately $450 on rent each week. Meanwhile, they had accumulated $80,000 in cash for a deposit, and were unsure whether they should rent their first property out as an investment property to reduce their tax position, or whether they should purchase it and live in it. They were looking at a property to the value of $550,000 and expected to rent it out for $480 a week.

How We Have Helped

Michael and Sandra had a good budget that they were quite diligent with and this definitely assisted them in achieving their savings. After stamp duty costs, they estimated they would need to borrow an additional $490,000. We weighed up the pros and cons of having an investment property vs. a principle residence, and the effect this would have on their situation, plus the potential cost of LMI which would need to be discussed with the bank.

We weighed up the implications on First Home Buyers Grants, Taxation, Cash Flow, Long Term Capital Growth and the general implications of holding an investment property that would be difficult to sell quickly if they were to find themselves in financial difficulties. We also identified the need for personal insurance once their property was purchased, to protect them against the possibility of not being able to meet their monthly repayments due to an unexpected illness or injury.

Once we presented the couple with some scenarios on what each strategy may look like, they were able to make a decision on what was best suited to their lifestyle, and decided to continue to rent and purchase an investment property. We then referred them to our internal mortgage broker who assisted them in establishing their loans and found the right loan structure for them. Our advisors then provided them with advice on the recommended insurance requirements based on an analysis of their needs.

Finally, we assisted them in reducing the principal on their loan in as short a time as possible, in order to make their property positively geared to later draw on for their next property. 12 months later, Michael and Sandra have $200,000 debt remaining on their property and are starting to plan for their next investment.

The Moral of the Story: Proper Estate Planning Can Reap Rewards.

Davies Wealth Management
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Testimonials

I really appreciate the independent, highly personalized service I receive from Davies Wealth Management.

Testimonial Author 1
Kyle L, retired Certified Public Accountant
13.4%

the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments Zillow, August 2020

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684 SE Monterey Road
Stuart, FL 34994

772 210-4031

DaviesWealthManagement@TDWealth.Net

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