Investment Property vs FHOG

Hi all,

Although I may be a bit late but I am still considering my options before the FHOG gets over. Initially my sister and I had decided to pool our funds together to buy a townhouse in the west/Parramatta region. However given we are both 23 and have only been working for a year and a half and two years respectively, a 500k or so townhouse may have been a struggle to pay off and would have been more of an emotional investment as opposed to a long term wise decision.

We then decided to go for our own apartments, within the 400k range each; where we could get one brand new apartment and one off the plan/under construction. That would have given us 6 months to occupy as residents to satisfy the FHOG requirements and when the second one would  have been completed we could have moved to the second one – leaving the first one to be rented out; hence smaller mortgage repayments together in total. We have found the first new apartment in Pendle Hill – ideal location – close to shops, station, medical centre, park facing from the balcony, ground floor with a courtyard. We offered 365k. We are now waiting for the bank valuation. We hope it is valued to what we offered OR we would negotiate it.

Now for the second one, we considered some under construction apartments in Westmead area. Three bedders are listed at 450k! And two bedders at 430k. I know we can definitely negotiate on these. However as we all know, the FHOG has inflated the prices considerably. Also since we dont get to apply for a loan on an under construction property till three months before completion, there is a massive risk that i) The bank WILL value it below the asking price (as developers are going crazy at this point in time) ii) The ending of the FHOG will bring the prices down. This would put us in a situation that we have to forfeit the 42k – 45k deposit! I am gathering most developers will not agree to the contract as subject to finance/valuation of the property from the bank – which does not happen till 3 months before the project completion.

Therefore, we are considering, we make use of the FHOG on the first apartment (once hopefully the valuation goes right) AND then get a house in the west in areas such as Pendle Hill/Wentworthville/Toongabbie/Seven Hills, where there is high rental yields/has tenants and a big enough land for future growth and construction prospects. The rent would assist with the repayments and the land overtime will grown in value – given where we buy.

So since I am a novice to property investment, I'd really appreciate your views on what we can possibly do in this situation?

Thanks.