Hi everyone, just thought I would ask for some advice on what may be the best road to take on buying a first home…
Background:
My girlfriend and I already have 3 investment properties (WA and QLD) which are borderline neutrally geared (after tax). We want to buy our own house to live in and feel now is as good as any to get into the Sydney market.We have our hearts set on building a new home in a delfin development in Sydney (small blocks, but we really like the area). This would estimate to be a $600,000 purchase. We would need to withdraw equity in another property for the deposit (ultimately decreasing our cashflow) or will probably have to sell an investment property to comfortably afford repayments as we are both only $40-$50k income earners.
The other option is to go for a cheaper house ~$350-$400k which means we could comfortably afford repayments and definately keep all our other investment properties. But we miss out on our dream of building a new house and buying land in the development we like.
I think I already know what the financially wiser decision is, but just wondered what other investors thoughts are.
Cheers.
Hi quicksilv
You didn’t mention how old you both are. Not that it really matters but I have seen many young couples go all out to build the home of their dreams, land themselves in enormous debt and leave themselves open to the potential interest rate rises. Get this one ” PPOR are Lifestyle decisions” not investment decisions.
There really is NO HURRY for buildig your dream home. A slower more realistic approach would be to buy smaller, build your IP cash or portfolio THEN buy the home of your dreams CASH!!!!!.
Have a look at my other two posts from today and you may get a bit more of where I’m coming at from an investment perspective or PM me if you want to discuss further.
Also have you read Steve’s latest book 0-260+ Properties in 7 Years? it is a great read and talks about some of this stuff.
Warm Regards
SueMIT | Owen Real Estate
Email MeThanks for your thoughts Sue. We are both 24 and still live with our parents, hence the need to buy a place to live.
I can see your point that a PPOR is definately a lifestyle purchase. I guess I’ve realised it comes down to what is our ultimate goal… to have full financial freedom or to be only half-way there. Buying a more expensive place will definately set us back a few years on that goal.
I didnt even know Steve had a new book out. I better go and get it!
Sue we should ask Steve for a commision. I have been advertising his book as well. But the point is, he is really making sense .
As it is the newest book that I know off, Steve has taken the change in the property market into account.
I think Sue is completely correct. You have to choose what you want. But be careful, when you make your choice. I know of several people who build their dream houses, only to realise very quickly, that it was their dream house, but totally unsuitable for their kids.
Also you two are still young. In my experience things are much more fluid = (circumstances change more often) until the age of 30-35. So my advise would be to live in something cheaper and continue investing.
There may also be a way to have the best of both worlds. Some of Steve’s mappers actually sold their properties to have more cash available. So you could consider to rent in the area you like and continue to invest.
Happy decision making and good luck.
Thanks Bridgebuff, I’d say the obvious answer is to be long term financially free we have to sacrifice now but if we dont mind taking a bit longer then its ok.
I’ve thought about renting vs buying and the trouble is, to rent in that area or a lot of places in Sydney is paying $400/wk to someone elses mortgage worth it ?
Perhaps I should do some sums on selling a property (losing potential capital) and not renting vs keeping that property (accumulating capital) and renting.
Why not buy something cheap that you can do up and make some money. Do it a few times (if it is something you enjoy and can do yourselves – even better) and make some profit while you are young and don’t have any children.
Once children come along (if that is what you plan) then you could look at settling somewhere more to your liking.
Wylie
Hi Quicksilv,
I would go the cheaper house, if any.
Your idea of your “Dream House” will change so many more times as your life and circumstances change.
Investing and income are important but control of expenditure is worth some thought..Have fun! [specool]
$400 / week may sound like a of money but have you considered how much the interest on your loan of $600K would be.
Remember when you purchase your own PPOR not only is the interest not tax deductible but also you have the additional expenses of Rates, Body Corporate (if applic) and general upkeep.
With renting you pay your rent and that is it.
Imagine what ou could do with the extra cash when it comes to buying more IP’s
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Good point Richard.
Remember Quiksilv. Most properties have a yield of about 5% but costs of about 10%. If you rent you do not get the capital appreciation, but that is only a problem if the property prices go up.
Wylie’s idea certainly has a lot of merit as well.
You have to way it all up and make a decision that BOTH of you are comfortable with.
Good Luck
So you have to make a call
Hi everyone, I think we have made a decision not to sell an IP as we would definately regret it in the future.
Renting is looking more and more difficult as rents are definately on the rise in Sydney (I know dont always believe the news when it comes to property but in this case I think its generally true).
We will probably go down the renno route or might look for potential subdivision blocks! To make some more cash to afford the dream home more comfortably in the future.
Thanks for the helpful comments!
You must be logged in to reply to this topic. If you don't have an account, you can register here.
