Hi from a first-time poster and neophyte investor seeking thoughts and suggestions.
I am curious how the experts here would recommend investing $300K in inner-city property over the next 12 months. (I'm just after property advice, folks – please, no guidance to buy shares or invest in other platforms!)
Currently, my partner and I rent. We have zero debt. Combined gross salary around $110K. Can comfortably make repayments of $3,000/month. We both qualify for FHOG.
We have been through a full spectrum of alternatives, from the favoured buying a 550K house to live in with about a 30% LVR and offsetting the loan with the remainder and pay off the loan in less than 10 years, to outright purchasing a 230K apartment to live in and using the remainder to invest in another similar apartment aiming for 8% yield, to fully leveraging and buying a bigger house (seeking bigger land and a capital gain sweet spot) or multiple apartments (with the aim of positive gearing and generating a wage-replacing passive income stream after 10-15 years; maybe looking into running some serviced apartments), and so on. We don't fancy pottering around the property on weekends and are manually unskilled anyway, so rennovation options are not preferred. Decorating, yes. Taking out kitchens and walls, no.
We believe the market may have some room to fall, or in any case that downside risk exceeds upside. This has affected our actions to the point of paralysis, however, so now we just seem to keep inventing and considering new options over various time horizons. Hence, still renting. Admittedly, we're in a very fortunate position, but we don't want to blow our future by making our next move a really stupid or unfortunately timed one (e.g. dipping into the share market circa November 2007, oops). Plus, we're not out to make squillions by building a profitable business or capitalising on the Next Big Tax Dodge or anything like that – we are somewhat unambitious and quite socially conscious. Or maybe just conflicted.
What do you think? Should we just make a decision and pull the trigger or keep researching, thinking and waiting? Given all our options are fairly conventional, is there something interesting we haven't considered? (We'll leverage any home equity into shares, of course.)
Thanks in advance for any tips and advice.
Hold onto it – it will go alot further at the end of the year. You are in a good position, so long as both of your jobs are secure.
…and then at the end of the year what strategy would you suggest? Presumably assuming the market has slowed or fallen 5-10%?
James you sound like a smart and sophisticated person … there is an old and very famous saying …
If you think it will or your think it won't your are probably right …
I am a researcher and if you read and study the market globally nobody knows what is going on … I believe that companies like GM in America should be allowed to go broke … I believe that the CEOs of these companies should be thrown on the street for fleecing money from their books for years … I believe that people that run scams like storm financial services should have all their monies conferscated … look at all the failures that tax payers and unsophisticated investors are paying for today and our children will be paying this off for the rest of their lives …
If you believe that the market is going to fall by another 10% then don't buy … inner city is risky but inner fringe is strong but that also depends on what floor, how big, aspect, street, inclusions, builder like Meriton v's Mirvac, parking, body corp fees, etc … proper investing is a science and not all properties are equal …
Most important point is only invest in the top 5 best streets for valuation and resale value … whats the first question an agent asks you when you are selling … what street do u live in? …
And finally from me … whats the big deal if you get it wrong James and drop 5% don't get greedy trying to pick the bottom of the market after all its your PPOR
D … good luck to u and yr partner.
james237 wrote:…and then at the end of the year what strategy would you suggest? Presumably assuming the market has slowed or fallen 5-10%?Depends.
Ultimately you are looking for a PPOR right? Something to live in long term? Long term you are never going to loose that much. Eventually wages will inflate, the economy will recover and houses will be worth what they were last year again. Know ones knows how long it will take but my money is on atleast 5 years.
Ultimately, for a PPOR buyer, only 2 things matter. Do you think the house is worth what the vendor is prepared to let it go for (as you will no doubt lowball) and can you afford the repayments? You seem like you don't have to worry about repayments, so you just have to be satisfied with the price you pay.
I don't think anyone can judge the bottom perfectly. I will buy when I feel like I am getting a good deal and I can afford repayments on that deal for interest rates of up to 12% or so.
Thanks both – I really appreciate your thoughts and suggestions. It seems we're roughly on the right path, we just need to figure out what we believe is a fair price and of course actually find a PPOR we're happy to eventually own.
ummester wrote:I don't think anyone can judge the bottom perfectly. I will buy when I feel like I am getting a good deal and I can afford repayments on that deal for interest rates of up to 12% or so.I don't know if we're trying to pick the bottom – we're more motivated by a very strong desire to stop renting. But, yes, there's a strong sense of conflict about entering the market now that stems from years of sitting on the sidelines while prices skyrocketed to potentially unsustainable levels.
I probably don't have the intuition/experience to judge a good deal. Is it relevant to think about potential rental yield? Current yield in the area we are looking at most only seems to be about 4.5% (for 2-3 br villa/townie). I would have thought closer to 5.5% or more would indicate a better deal?
We are factoring in interest rates of 9%…that seems to fit with our overall risk profile, but maybe it's still too low?
If we buy a PPOR, what are your thoughts about purchasing an investment property for yield versus purchasing an investment property for capital gain versus offsetting the PPOR's mortgage? What factors should influence those choices?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
