Hi,
Ok so I obviously joined this forum just to ask this question. I am the first to admit I know little about property and I'm completely open to learning and opinions anyone might have.
So our situation is that we are young (23). If it weren't for my being ill, my partner & I would have moved out this year, but unfortunately I was hit with chronic illness 4 years ago which is now finally improving. We have found a property we love in the outer suburbs of Melbourne. It is in an estate, it has full lake views and is walking distance to a shopping centre which is being quadripled in size over the next 5 years. A train station is also being built in 2010 and I already live in the suburb with my family so we know we love it.
However, as you can imagine, the property is not cheap and my partner will be doing it on one (good) wage wwith the help of a generous (40%) deposit due to personal circumstances. Also, we will not be able to move out for at least 2 years (until I can work, basically) and plan on renting the property out for that time. So, although investment for now, the property is where we want to live and regardless of anything we do plan on moving out in around 2 years. If relevant, my partner's job is very secure – the firms in England and the US still haven't fired anyone. We also don't plan on selling the property for a minimum of 10 years. My partner lives at home as do I, so we have no other expenses – we see this as ideal (no groceries, bills, rent etc). I will also have 10% of the properties current value saved in 2 years (currently have 5%) to contribute hwen we are ready to move in, which also seems good, but again, all opinions welcomed.
A little info on the property itself – it's a 20 square large townhouse on a corner. 3 bedrooms, double lock up carpot (fenced around the sides), large living area upstairs to maximise views, all the creature comforts you could want (refrigerated air con, fireplace etc). If relevant, a smaller 3 bedroom townhouse 3 properties down with a single carport and wall-to-wall is renting for $400 a week, and was picked up within 3 days of being advertised. It is being rented by a young family.
So that's where we stand.. we want to buy to live in eventually, and this seems like a once-off opportunity as all the other properties in similar positions with views etc are much more expensive, and the house we're looking at is more expensive to build without a view than to buy where it is (it is 1 year old). So, we see this as a unique opportunity. If we don't buy this, we will be waiting until later in the year (around August we've been advised) to buy.
A relative of my partner's is a builder and will be checking the property for quality as well as advising on any maintenance it might need.
Any opinions or advice are hugely appreciated. My partner doesn't know I am posting.. I want to do a little of my own research to pass onto him. I jsust wanted to say that so it doens't look like we're two blind bats considering heading into property completely uneducated – he has done a lot more reading and research than I have. It's jsut nice to have my own peice of mind & I have lurked around these forums for a while and you all seem like a very helpful and intellgient bunch.
Thank you and look forward to your feedback,
NataliePS. Please excuse my typos – it happens because of my illness.
Sounds to me like your whole plan makes alot of sense. If you have truly done the maths, and can truly afford the property, then great. Perhaps someone here can give you some advice on how to claim the FHOG.
I'd like to talk to you about something else. You need to be very clear about the motivation behind your purchase. It sounds like you have found a lovely property and have both fallen in love with it. You have a romantic relationship with the property, not an objective one. If I am right, then there is nothing wrong with this, so long as you recognise it, and realise the potential that the way you feel about the property has to influence your decision, your reasoning, even your research. Are you trying to buy a property that you love to call home? Or are you trying to make a savvy investment decision? Once you are attached to a property, emotionally, you will start to grab on to any bit of information that says "buy it" and discard any bit of information that says "slow down there". This is not somehting that you will do deliberately, it just happens subconciously. I'd like you to be aware of it. If you are primarily trying to make a savvy investment decision, then you need to somehow seperate your feelings about this property from your decision. You need to make an objective decision.
If you are trying to buy a lovely home that you love, then it's just fine to allow your emotions to cloud your investment savvyness. It would be best though, if you could actually work out how much your emotions are going to cost you (if anything).
I can't talk about the property, or it's value as I have no knoweledge of the Melbourne market. I just picked up on a strong tone of yearning within your original post.
SHi SHales,
Thanks for your feedback. We are looking for a home primarily, but as we want to rent it out first, it has to be rentable (which is why we skipped the much smaller 2 bed place for a 3 bedder). We do like it a lot because it fits all of our criteria, but my partner has warned me about what you've said above – I've fallen in love with it too much. His approach is, in the end if we don't get it, something else always comes along. Of course as you canprobably tell – I'll be a bit upset!
We've done the maths and it works, even if we do have to rent it for much less than the place down the road the repayments can still be met comfortably. It's a little more uncomfortable if we can't get tenants, but still very doable.
The main downside I see is if worst comes to worst and I don't get well enough to work, we may have to sell the property prematurely – but the way I'm going, thankfully, it doesn't look like that will happen.
Also, the exterior is quite modern (looks beachy, exterior of cement sheet) which will date. But I spoke to an architect friend and she told me everything dates, it's just a matter of how fast, which she says you can't predict.
As far as I know my partner can get the FHOG as long as it's his primary place of residence for the first 6 months.
From your research, it certainly seems that the property is quite lettable. Certain legal requirements apply in certain states. Smoke alarms, small stuff like that. Talk to a local property manager. You have ticked alot of the right boxes, but I don't know your market. Look into rental occupancy rates in the area. Be aware that the downturn will likely affect middle and upper level residential rents more than lower rents, as people look to downsize their life and expences, greater pressure will be placed on demand for smaller and cheaper properties. This may see a decline in rent of middle and higher level properties in some areas. Also FHOG is likely to stimulate demand at the cheaper end of the market. Don't know what end of the market your lovely town house is, but this is all food for thought.
By the way, your husband is probably right. If you miss this one, you will find another. And it may be just as good, or even better than this one. Don't let the RE agent see how attached you are. Perhaps you should stay behind! This is a buyers market, so make an offer well below their asking. They're not going to get insulted and refuse to do business, they'll just make a counter offer. If they don't take your offer, pretend to go cold for a bit, if you can stand it. Don't call them. They'll most likely call you, then you have the power. "Ohhh,, yes, I remember that place…. sorry, we've been looking at a few…., that was the place with the modern facade that's tipped to be out of fashion next year…." Find the properties faults, it will have them, they all do, and use them to your advantage in your negotations.
Good luck, congratulations on being such switched on young people, and welcome to the forum.
At first it sounds like a good plan. You seem to be able to make the payments and a house is worth whatever "the next fool will give for it" which in this case means it's worth what you will be giving for it. If you are comfortable with the repayments, then many people say you should go for it.
However, if this house is only a dream, why will you rent out your dream house ? Renters break a lot of stuff and if it's for the feeling you buy the house then you should consider this. It's like buying a new car with the smell etc, or you buy a car which has been smoked in for 2 years. Same thing, the car still drives but.. it's a bit more dodgy. Think of stuck up drainpipes, many drillholes in the walls everywhere, carpets broken, small firedamage in sometimes, the garden will be a big mess, the roof might be leaking and caused some damage inside etc.
That's what you get with renters. Nothing much you can do about it.I would personally not buy anything until 2010. You are very veyr lucky to be in the situation that you cannot move out before 2010 anyway, so why would you buy now and lose 100's of thousands of dollars just to 'hold' something ? Something BETTER will come along, a detached house on the edge of a lake, you know the thing you really want ? Fishing from your back yard ? For the same price as this house now.
Think twice, think thrice, and if you are still thinking about it think again until you forget about it. By that time it will be 2010 and you will have SO many nice houses that you will think "man.. I'm glad I didn't buy that small townhouse over there, look at this detached house with 800 sqm at the lakefront… much better!"
SHales and Scamp – thank you both so much for your help. I know, logically, it all makes a lot of sense.
We did do all the research you suggested SHales – I read your response out to my partner and he was happy I heard it from someone else. MY parnter didn;t take me with him today to re-inspect the property because he says you can see it in my face how much I love it and he doesn't want the agent to see that.
Scamp – you are the only person that's managed to make me actually believe that there will be something else I love just as much, so thank you (and my partner says thank you because I was a bit of a brick wall on that!). Picturing our dream house with burn kitchen benches, wall dents, stuffed carpets etc was really off putting. No one else has put it to me like that.
Although with how ill I am I wouldn't say I am lucky I can't move out.. but my partner does say although he'd rather I be healthy, he's glad I can't push to move out now because it's the wrong time.
I will let you know what happens.
Edit – What the general opinion on buying now, renting out & living in later vs. waiting until we can live in it to buy?
I'm guessing I know the answer, but still worth an ask.
Natalie,
Can I add something different to your thoughts. You mentioned that it is a home that you would like to live in in about 2 years and see yourself there for the next 8 or so years (taking it up to the "not sell in 10 years" comment). Without needing the details of your illness, consider if you would be able to raise a family in the townhouse. You will be in the age bracket to start a family. Should this occur, would you still want to stay in your "dream home"?
Also, think about the two storey aspect, if you become tired, will you be able to vaccuum up and down for example. I am sure you have probably thought of these things, but just in case you havent I thought I would raise them. As you circumstances change so will your "dream home" and it is true, there will always be another one around the next corner.
All the very best
Mick
Hi Mick,
Thanks for your thoughts. Yes, we have though about that. We know we dont want kids until later in life and the townhouse is definitely big enough to fit 2 kids in comfortably (though we'd probably try to move after the first one came along).
I already live in a double storey hosue so I know my capabilities there and they aren't too limited, even with how ill I still am.
Thank you for your thoughts anyway
Just to let everyone know – we had a builder inspect the property and he said it was built similar to a much cheaper builder (such as Henley). He also pointed out that the cement sheet exterior would be a lot of work, the wrong skirting board was used in wet areas (it would expand), the corregated iron panels also on the exterior were oxidising even though it was only a year old, the air conditioning was done wrong.. I could go on. Basically, not worth it, and if we did buy it it would need 5-10k spent on it for maintenance at least every 5 years.
We looked at land in the same area to build on bu tthat has also been scrapped due to very strict covenants and the property needing to be completed within 12 months of land settlement or they'll take it away.. no thanks.
Back to the drawing board..
Also still interested in what the general opinion on buying now, renting out & living in later vs. waiting until we can live in it to buy? Especially if we buy a townhouse in an inner western Melbourne suburb.
Our current mindset is wait.. not the right time to buy etc. But on the other hand it'd be easier to pay off a fair chunk while we're still at home.. does the predicted price decrease in property outweigh the benefits we may get from buying & renting out?
Basically interested in what you would do in our position..Thanks to all.. in the end, I wasn't as disappointed as I think I would have been without reading the above.
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