I am 31. Work on salaried income. Bought an apartment that is our PPOR couple of years ago 400K.
Interest only Loan – 320K
100% Offset – 100K savings
Our daughter is growing fast and we need to move out of this tiny apartment as soon as possible. I never bothered to improve my knowledge on any type of investment like shares/property or anything else out there. Now I am caught up in the same question that everyone asks. Should I rent/buy? I have read several articles and have gone through forums and obviously still havent arrived at a decision. Would appreciate any advice/personal preferences/suggestions you have and I am sure that will help me make an informed decision.My thinking could be wrong but I personally prefer to have some cash that is readily accessible like an offset account instead of putting all savings I have as deposit for big property. So if we have 100K offset, we would prefer only to spend 70-80K towards deposit for a new property. Our favourite properties are close to 700-800k
With my situation and based on different strategies explained in various articles, forum advises etc., I think I should pick one of the below. I am leaning towards 3rd one as I am worried about making a huge investment in property at this stage.
1. Rent a new place temporarily, look for a place to buy in the next 6 months/1 year and move in as soon as we buy. I may have only 100K deposit (stamp duty extra). With 80%LVR, I can buy only property up to 500K. – We will have to save up for several years before we can buy a house that is currently 700-800k
2. Stay in rental until I can save up with my regular income till I reach 200k. Dont make any other investments. Then use 160k savings to buy a house in target price.
3. Stay in rental I dont know how long. Use the savings to invest in something other than property that may give good returns to reach deposit target.
4. Stay in rental for at least 5 or 6 years. Use 60% of to buy another investment property. Save up to buy a house that will be PPOR.
5. Stay in rental forever.. Use saved money in just investing and forget buying a home to live in.I wouldnt be surprised if all the above options suck and I would be happy to hear any other suggestions as well
Hi
You have a lot to think about. You are in a good position, have a good asset. What city?I think you need to put your family first, Get the happy home and invest from there.
Things to consider
1) Do you have to go your PPOR so high? Could you find an area closer to 600K, don’t get to caught up with status
2) Could you get your apartment valued so at least you know your equity level to perhaps assist with borrowing….ad could you refinance it and access equity and turn it to a rental? I would be reluctant to sell if I didn’t have to
3) Interests rates low and the market could significantly move in the time it takes to save what you wantLots more knowledgeable people here can assist with much more, but I think it is more of a lifestyle decision for your family.
Wish you the best
Hi appg2
This is your working years.
This is the time where you can make the difference in your wealth.
And if you have a job allowing a reasonable degree of leverage .. you should definitely take advantage of it.Your time is now.
As I keep saying .. a wealth strategy that you can invoke and that works effectively for you is the only one you want.
You can look forward to your daughter providing much greater bills .. possibly another family member .. maybe a change in job situation for the better or worse and the last thing you want for all these people who you are providing for is to let any of them down by not stepping up to the plate and working out an investment strategy when you could.
The income you get from a property .. unless you sell it .. is additional to your salary and provides an ongoing fallback. The equity you get from your property can be a major help in all sorts of future situations .. you dont HAVE to dip into it .. but if you want to you can.
Timing is every mans worst concern .. and at the moment you are right to be worried about the property market’s long term health at current levels. However .. property is not one single market .. its lots of them .. while one area may be souring .. another may be taking off.
You also supported the idea that maybe there are other ways you can create the saving strategy to ongoing wealth. There are other ways to achieve the end result .. collectibles .. carpets .. coins .. stamps .. stocks .. bonds .. shares. Each of these has its own risks and its own rewards. You’ll have to understand the market you deal in .. and its current position.
There is no set path to an end result. However .. from experience .. I can tell you that focussing and specialising in a couple of markets and only a couple of areas makes you much more of an expert in the areas that count.
Dont take the path most trodden .. take the path that provides enough of a challenge for you to deal with comfortably. And heck .. if it lies outside your comfort zone .. train yourself till you ARE comfortable with it.
You will make money by taking risks that other people wont .. based on knowledge gleaned that will lead to future prosperity.
And best of all .. you can do it now.
Hi appg2,
Well done for thinking of these kinds of things while still young. I would say first do a bunch of learning re property – it can be a good friend if you treat it right. Take a look at the link below as a “get up to speed quickly” reference.https://www.propertyinvesting.com/forums/general-property/4349450
Stick around, ask more questions. You are in good shape. First though, after reading through the posts in that link, consider setting up an Offset account against your current home loan. If it later becomes a rental, you will thank me. If not, it won’t hurt you anyway. Stay in touch,
Benny
Hi
You have a lot to think about. You are in a good position, have a good asset. What city?I think you need to put your family first, Get the happy home and invest from there.
Things to consider
1) Do you have to go your PPOR so high? Could you find an area closer to 600K, don’t get to caught up with status
2) Could you get your apartment valued so at least you know your equity level to perhaps assist with borrowing….ad could you refinance it and access equity and turn it to a rental? I would be reluctant to sell if I didn’t have to
3) Interests rates low and the market could significantly move in the time it takes to save what you wantLots more knowledgeable people here can assist with much more, but I think it is more of a lifestyle decision for your family.
Wish you the best
sportz43, Thank you for the suggestions.
Sorry forgot to mention the name of the city. I live in Brisbane.One problem I should have mentioned is that I dont know many suburbs in Brisbane even though I have lived here for 2 years :-( I havent started looking seriously as there were a thousand questions in my head. Maybe there is some gold available close to 600k. I will do some more research and see if I can find a good place in a good suburb
I have taken interest only loan with LVR 80% and 100% offset. If my understanding is correct, there is no equity as I haven’t paid any principal. I refinanced a year ago and the going prices in my complex has been close to what I refinanced. So I am not sure how much I would get. But will definitely consider that before applying for next home loan.Hi appg2
…..
The income you get from a property .. unless you sell it .. is additional to your salary and provides an ongoing fallback. The equity you get from your property can be a major help in all sorts of future situations .. you dont HAVE to dip into it .. but if you want to you can.
….
Hi xdrew, I definitely wont sell the property now as it hasnt appreciated more than 10-15K in 2 years. Rental income will be decent to cover the loan cost and expenses. So I guess I can just let it be and see how long I can keep it.
Thanks for encouraging to try different things. I need build my confidence up to try any of those and hopefully I do it soon before its too many years late and I ask myself the same question again.
Hi appg2,
Well done for thinking of these kinds of things while still young. I would say first do a bunch of learning re property – it can be a good friend if you treat it right. Take a look at the link below as a “get up to speed quickly” reference.https://www.propertyinvesting.com/forums/general-property/4349450
Stick around, ask more questions. You are in good shape. First though, after reading through the posts in that link, consider setting up an Offset account against your current home loan. If it later becomes a rental, you will thank me. If not, it won’t hurt you anyway. Stay in touch,
Benny
Thanks for the links Benny. I will go through them and start making some plans and share my plan to you guys and get some feedback.
Good advice on the offset and luckily I got it when buying 2 years ago and ever since have been 100% offset. Well almost. I refinanced one after buying the property to get a really low rate with a broker that was advertised as 100% offset. However after finishing settlement, I open the bank login, I see only one account and then he tells me it is 100% redraw offset where everything is one link. Anyway, have moved on to nab now with 100% offset. I have a finance question related to that I will ask in finance area to be more relevant.Now I will go to the link and do some reading.
If my understanding is correct, there is no equity as I haven’t paid any principal.
I just wanted to highlight the above that you stated, Appg. Just paying the principal isn’t the only way you can create equity. There is also capital growth which creates equity – either manufactured through renovations or through ‘natural’ CG which is the movement of the property cycle. These 2 are the types of equity creation that you want.
Paying down the principal would be my least favourite way to create equity.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
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