My Plan A was to buy a free standing house to live in with my partner. With our current income we together can put in $7000 per month towards the mortgage. We have figured that if we get something just under $600K mark, with stamp duty and related costs, we’ll have to borrow around $500K. Under 7% interest rate, 25yr loan term, principal & interest, the minimal repayment will cost $3500 per month. If we set up an offset account and consistently put in $7000 per month in the offset account, we should pay it off in 8 years or so, according the bank’s repayment calculator. (if interest rate stays the same)

The problem with Plan A is that I am not comfortable with putting in ALL my savings towards my PPoR. I am not comfortable with putting all the eggs in one basket if u know what I mean. The other problem is that after 6 months of searching, my partner and I have not been able to find something that we both like and within our budget. Note: As our PPoR we definitely do not want to live in a townhouse/apartment, as we do not like high density living. Clearly we have to do something different.

Hence I came up with Plan B, which is to buy a few investment properties (in the $250K mark) and start building up the equity rather than wasting time looking for our dream home. We are both happy keep renting wherever we like to live in, as long as we keep building up the equity elsewhere.

I do not know whether property price will still rise as sharply as it has been for the past 10-15 yrs – it may not happen again – I do not know. But what I do know is I do not want to be priced out by the market, having no asset and passive income by the time I retire. I personally do not believe that I can make a great fortune from residential property alone while working in a full time job. But I have decided to go down this path just to spread out the risk, and not to be priced out by the market in case property price takes off in the future.

I have also spoken to a financial planner a few months ago. She assessed that I should be capable of buying 3 investment properties in 10 years. Her advice was that my goal should be to get something that will be CF neutral within 2 years of purchase, and let it pay off by itself from then on. If I can achieve that I should be safe for my retirement. That also means I will only be buying my PPoR later in my life.

So that’s pretty much about my self exploration after a few months of searching for my first property…

Back to the original questions:

1) With my budget of $250-280K, 2 BR, I found myself limited to the apartments in the western suburbs, e.g. merrylands, blacktown, auburn (prob not that likely now), while I have no problem buying in those areas as long as it makes money, I am worried that the gap between the affluent, fancy suburbs and the boring westies suburbs will widen in the long run. I did notice that in the last 3 yrs or so this gap has narrowed a bit. Can anyone advise?

2) Is it likely that the gap between houses and apartments will widen in the years to come? I guess my investment goal is to keep up with the market.

3) I have noticed a few 3-10 years old apartments blocks in Merrylands, blacktown and Auburn where the current asking price is lower than the price when new. Can anyone explain why? What should I look out for to determine whether they are good deal?

4) My sources of historical prices are mainly onthehouse.com.au. How good is it? Is historical prices worth considering when it comes to assessing whether the deal is good?

Sorry for the long post. I would appreciate any feedback.

Jason