Should you use First Home Buyer Assistance Scheme and First Time Super Saver Scheme?

Dilleen Property Group 2023

Beginner investors may have looked into government implementations such as First Home Buyer Assistance Scheme (FHBAS) and First House Super Saver Scheme (FHSSS) to help them enter the property market faster. These implementations are created by the government to help property buyers save money during the process.

What are these implementations for?

In NSW, First Home Buyer Assistance Scheme (FHBAS) allows first-home buyers to get a full exemption from paying stamp duty when they purchase an existing house below the value of 650K. By not paying stamp duty, the buyer can save a large amount of money on their first property purchase. Similarly, the First Home Super Saver Scheme can help buyers save money by allowing them to build a deposit inside their superannuation as well as get a tax cut. This means the buyer can pay up to $15,000 pre-tax money to their super account and then use the money from their superannuation as their deposit.

Are these implementations useful for property investors?

To use these benefits, you will have to purchase the property as an owner-occupier. Depending on the state you plan to purchase in, these benefits may only apply to new build properties. Although the idea of not having to pay for stamp duty and getting tax cuts may sound attractive to many investors. These schemes tend to hold investors back from growing their portfolios because they get caught up on the idea of saving money. Property investing should not be about saving money, rather, it is about making money.

Buying a property as an owner-occupier will risk you getting emotionally attached to your property. This is because you will have to live in the property for the first 6-12 months after your purchase. This will limit you to only purchasing in areas that are convenient for you, for example, you will be influenced to pick a suburb that is close to work or an area that you’ve always wanted to live in. Additionally, you will be prone to pick a property with an interior design that looks the most appealing to you. These should NOT be the focus when selecting an investment property to purchase. The facts and figures behind the property should be more important if you’re looking to build a long-term portfolio that will generate an income over time.

It is easy to get stuck with not knowing what to do next when you’re trying to save money by using FHBAS and the FHSSS. It is likely you’ll save $5000 - $8000 by not paying for stamp duty, however, there’s a higher chance that you’ll pay $50,000 extra to purchase a property that you are emotionally attached with. This can mean buying in an expensive suburb that you want to live in, buying in the wrong market that doesn’t catch growth or buying in the wrong state that’s not in the right place of the property cycle. It is important to also take into account that during the several months of living in the property, you will not be able to rent out the property, meaning that you will have to fully cover your mortgage repayments for that time frame. If this amount was put into perspective with the rent money that you could be collecting if it was rented out, the amount can surpass the stamp duty fee that you are “saving on” by using the schemes. This large amount of expenditure may also affect your finances and make it difficult to grow your portfolio within the next 12 months.

Conclusion

Property investment should be about making money, taking action by entering the market and actively purchasing properties. It is more beneficial to purchase properties below market value, with a good rental return and located in a metro area to ensure that you are able to get instant equity without having to wait for the property value to gradually increase over time. By reducing the amount of emotional attachment you have to the property, you are able to purchase properties that match the criteria and achieve better results. If you’re looking to build your portfolio and require assistance or have an inquiry about what investment strategy to use, feel free to contact us here to learn more about our services and investment strategy.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.