All Topics / Help Needed! / my first PPOR

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  • Profile photo of bacchubacchu
    Participant
    @bacchu
    Join Date: 2004
    Post Count: 62
    April 12, 2005 - 1:23 pm

    Hoping to build my first PPOR.

    Is it better to buy a higher priced land and build a lower priced house on it OR buy a lower priced land and build a higher priced house ?

    Profile photo of RentMasterRentMaster
    Member
    @rentmaster
    Join Date: 2003
    Post Count: 85
    April 12, 2005 - 8:53 pm

    Hi bacchu

    The phrase goes ‘location, location, location’. i.e buy the worst house in the best street.

    However I think that might be a bit simplistic. You have to live in that worst house. But I think for long term capital gains, location is best. They are not making any more land. Maybe you can extend the house later? But you also have to consider where you personally want to live as well.

    Andrew
    http://www.rentmaster.co.nz
    Software for Landlords

    Profile photo of foundationfoundation
    Member
    @foundation
    Join Date: 2005
    Post Count: 1,153
    April 12, 2005 - 11:25 pm

    Houses tend to depreciate over time, property tends to appreciate. For your PPOR, your ability to make more than the minimum repayments should probably also be an important consideration. I did some quick calculations the other day:

    I would suggest you give serious consideration to the price you are prepared to pay for a PPOR. The difference between buying something cheaper and paying it off over 10-15 years and stretching until you can’t afford to make significant additional payments over 30 years is enormous.

    For example 2 couples, both with a maximum weekly accomodation budget of $320 are buying PPORs. The first couple buys:
    $150k over 15 years
    $312 p/w repayment
    $93,000 total interest payments

    The second couple buys:
    $205k over 30 years
    $317 p/w repayment
    $289,000 total interest payments
    both scenarios assume constant 7.07% IR.

    After 15 years the first couple have finished paying off their PPOR and start saving or investing their $312p/w.
    After 30 years, the second couple has paid off their house, spending a total of $494k.
    Meanwhile the first couple have paid off their house for $243k and also invested a further $243k (or at 6% compounding, $395k).

    Which would you rather be?

    I hope this gives you additional food for thought.
    Cheers, F.[cowboy2]

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544
    April 12, 2005 - 11:46 pm

    Hi Bachu,

    I would recommend that you do not over extend yourself. Buying a PPOR can be a costly and long event and if you bite off too much then the pain can be significant.

    Derek
    [email protected]
    0409 882 958
    Property investment advice and researched property in quality locations available.

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