Should You Use The FHB Grant

Hey there. My name’s Ben Everingham, and I’m the director here at Pumped on Property. And in today’s video, I’m gonna talk about should you use the first home buyer’s grant or actually buy an investment property first. Then as an investor myself that’s picked up over $8,000,000.00 worth of property since I was 24 years of age, and who started by using the first homeowner’s grant to get my first investment property, I just wanted to share some of the insights.

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So, the first thing I wanted to touch about today … And in today’s video, we are gonna look at what is the first home buyer’s grant, where are you at right now, the benefits of using that grant versus the benefits of buying an investment property first, and what a great incentive I believe the first home buyer’s grant actually is.

So in terms of the first home buyer’s grant, it is basically an incentive for first timers like I was at age 24 in the Sydney market, in markets all around Australia, to encourage those people to get into the marketplace and to make it more affordable for those people to enter the marketplace. So sometimes they give an incentive towards constructing new buildings. Sometimes they give an incentive up front as a cash payment. And sometimes they give you an incentive such as free stamp duty, etc.

So, the first home buyer’s grant can be very, very powerful, especially for those of you who are just getting started and finding it difficult to save that huge amount of money that you actually need to get into the marketplace. So it can be very, very helpful.

At different times in the market, first homeowner’s grants come and they go. Generally, it’s an incentive by the government to encourage certain percentages or types of people in the market to come back. And what it generally does to the marketplace is it pushes the price of entry level housing up. And then those people that are in entry level housing, as their housing price increases, they sell those to first timers and they jump into the next bracket. And it can actually stimulate the economy in a really good way, which is why I think the first home buyer’s grant has been reintroduced at the moment.

So the second thing you need to consider in my opinion is where are you right now? And that means, getting a really good idea of your current financial situation. What are you earning in your job? Are you looking to buy with somebody else? Have they used the first homeowner’s grant before? What’s your capacity to save? What type of savings do you have at the moment? And then getting clear about your goals. So, when do you wanna buy your first property? How much can you afford to spend on that property? How much can you save? And how long is it gonna take you to enter the marketplace?

And then also asking the question, which is extremely important, which is can you actually afford to buy where you wanna live? Because again, the firs time buyer’s grant has levels associated with it. And sometimes you get a full concession. And sometimes if you’re purchasing property at higher price brackets, that incentive isn’t so big.

So you’ve gotta identify, can you actually afford to live realistically where you wanna live, and is that type of product that you can afford in your local area the one that you should be putting your money into? Because remember, it’s probably not gonna be your dream home as your first home. It’s probably not gonna be the place that you or your family or your future family spend the rest of your life. It’s really a stepping stone into the marketplace.

So as an investor, which you are now, it’s important to make sure that you get great long term capital growth out of the property that you buy. And for me, that means really targeting high quality markets like Sydney, Melbourne, and Brisbane, or high quality sub markets like Wollongong, Newcastle, Sunshine Coast, Gold Coast, etc. It’s really about timing the market. So again you don’t wanna buy somebody else’s profit. If the Sydney market has gone up by 80% in the previous five years, then you’re probably spending a lot more money than you need to right now.

So an example of this is if the Sydney or the Melbourne markets have had a really, really strong run, you know I’m not saying that run is gonna end, because if you look at the long term history of the last 46 years, the Sydney and Melbourne markets on average have done over 9% per annum each. If you look at the last 10 years, they’ve done over 7 1/2% per annum each. So, you know, maybe things won’t look as good as they do right now in the future, but I expect over the longer term trend over the next 15, 20, 30, 40 years that the trend of strong price growth in those areas will continue over time.

But again, if they’ve had very, very strong stage of the current cycle, maybe it isn’t the best time to buy in certain areas. And maybe it’s worthwhile considering other marketplaces that are better stage of the timing cycle where you can ride the wave of growth up a little bit, and then leverage off that into other properties. So these are the things that you’ve gotta weigh up.

I also think it’s important to consider capital growth and cash flow and maybe to even consider buying something that you could add a little bit of value to longer term so that you are the one that makes money from the property you buy and you’re not just waiting on the market to do its thing. But there’s some of the things that I look at when I’m considering buying.

So for me the benefit or the major benefit of the first time buyer’s grant at the moment is you can really get into the marketplace. In Melbourne and Sydney right now or in New South Wales and Victoria, there’s really strong stamp duty concessions. So stamp duty is a huge cost in Australia as property prices have gone up. And if you can avoid or limit the amount of stamp duty that you need to pay, then all of the sudden, all of the rest of the money that you’re saving or that you have now, can be put into the deposit, which means you can maybe buy a slightly better property in a better location, or you can put down a larger deposit and avoid a bit of lender’s mortgage insurance and those types of things. So, it’s a fantastic incentive. For somebody that has sat down and looked at where they are and where they’d like to go, and that can afford their local market, I think it’s a really interesting opportunity to consider going down that direction.

And for those of you in Queensland and Brisbane at the moment, there’s no real first home buyer’s grants as of 2017 that support the purchase of existing homes, but there’s really strong incentives for considering buying something brand new or building something brand new. So again state by state, there’s different benefits and negatives associated with each option.

For me as a professional investor and as somebody who owns a company that buys about 70 or $80,000,000.00 worth of property per year for people, the benefits of buying investment property from my perspective is you come into your first purchase with your investor hat on. And that means that you focus on capital growth, you focus on cash flow, you focus on understanding the market, and you focus on buying a high quality property.

Now, in some instances, the market where you live is the right market to be investing in. And so, leveraging off that first home buyer’s grant is fantastic. For those of you looking to hold for the next 15, 20 years, it doesn’t really matter where you buy right now, because long term, even if you’re overpaying a bit today, it should pay off over a long enough period of time.

But the benefits to me of buying an investment property is one, all of the expenses on your investment property are tax deductible. Two, you can choose the marketplace that you wanna target. And three, you can target the specific type of property that actually makes financial sense to you.

The other benefit is, you can continue to rent and live in the place that you’d like to live in the lifestyle and not have to sacrifice location where investing in a property you can really just focus on cash flow and somebody else pays your rent, which obviously goes towards the cost of holding the property and makes it a lot easier to hold for you on a week to week and an annual basis as well.

But the last thing I wanted to finish off for on the video is I think the first home buyer’s grant is a fantastic incentive. I used it to buy my first property, which was a unit in Miranda in Sydney. My wife used it to buy her first property, which was a house on the Sunshine Coast in Queensland. I think it’s terrific that the government supports people like myself and you guys to get into the market. And I think the benefits flow all the way through society because home ownership is something that’s important, and it’s also the easiest way that the average person can achieve financial independence over a 15, 20 or 30 year period of time, or really set themselves up and their family up for the lifestyle they’re looking for in the future.

So, thank you so much for your time and attention. Go out there and make sure you make a smart investment decision. Even if you’re buying a place to live in yourself, make sure that the numbers stack up. Make sure that the market makes sense. And take advantage of those grants while they’re available to you as long as you’re keeping that investment hat on while you’re doing that.

So, thank you so much. For any of you that are looking to potentially buy a property in Queensland, that’s the marketplace that we specialise in at the moment. I’d love the opportunity to have a one on one strategy session with you, which will be run by myself or my brother, Simon. And in that session, we’ll look at where you are and where you’re looking to go, and explain some of the benefits of investing or potentially buying your first home up here. And then we can talk about how we might be able to support you to do that as well if that’s something you’re interested in. But it’s a free, no obligation session where we just add as much value as possible so that you can put yourself in the best long term position.

So thanks very much for your time and have a great day. Good luck. Bye.

Ben Everingham


Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.