My husband and I live in south yarra and pay pretty high rent – $380 per week for a two bedroom flat. I’ve saved up $3700 so far and intend to put away $1000 a month till I have enough for a deposit (say $15,000). I am interested in the idea of using the home purchase as an investment (but living in it for the first six months to get the FHOG), but I’m trying to work out whether we should move out now into a cheaper one bedroom place while we’re saving up. If we moved into a one-bedroom place, we could rent at $280 per week and thereby save an extra $100 per week on top of the $1000 a month I am currently putting away. The thing is, moving costs are probably going to be $2000, which will cut in to any savings we make as a result of lowering our rent. If we moved now and then moved again when we bought the new flat, and then moved out again 6 months later – this would cost us $6000(!) Should we move now or hold off till we purchase a place in a year or so?
My second question is if it’s an investment, how expensive a place should we get? As much as the bank will lend us? What would you say about buying a very cheap place in a good inner area. I have seen you can buy an old-ish but decent studio in st kilda or east st kilda for $200,000. I guess though this would not yield a rent as high as the 2-bedroom flat in south yarra we currently live in or the one-bedroom rental we could move into.
Any tips on how I could start out would be helpful – I'm currently saving the 1000 per month in a 5% savers account, but I'm sure there are better ways of investing it…
levi
Levi, you've almost answered your own question with regards to moving – it will knock your savings around & set you back by about 20 months of the additional savings (ie you will need to stay in the new/cheaper rental for 20 months to benefit from the lower cost as well as taking out 2 months of your current savings).
Many on this site (as well as the banks) would steer you away from studio units (more difficult to borrow against/lower LVR, higher turnover of tenant).
You will need to consider your own situation as to what matches your risk profile – an affordable investment (whether it be inner city unit or semi/house further out) vs max out bank borrowings (high risk if you do not have a secure job, planning for kids/time out of the workforce and are reliant on the rent to make mortgage & outgoings payments).
thank you so much for your reply – this makes things much simpler ie just staying where we are until I save enough to purchase a flat. Given studios are not a good choice, I will aim to borrow around 280,000 – if I can get a bank to agree, and then stay there for just 6 months to get the FHOG. Do you think there's any financial case other the FHOG for living in your own home – or does it make more sense to rent the whole time while trying to accumulate investment properties?
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