Advice for where to buy a PPOR (turning into an IP a few years down the track) in ACT < $500k

Discussion in 'Where to Buy' started by Curoch, 27th Apr, 2020.

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  1. Curoch

    Curoch Active Member

    Joined:
    21st Aug, 2019
    Posts:
    29
    Location:
    Canberra
    Hi folks, big fan of this forum, amazing levels of advice and support! I'm a FHB who, with the current downward pressure on prices as well as buying "assistance" (schemes listed below), thought it might be time to take property more seriously (beyond REITs in my share portfolio).

    Situation:
    I have $10k in bonds which I'll sell to kickstart my deposit. I'd like to pick up a 2 bed, 1 or 2 bath, 1+ garage property in a central location with a view towards making it an IP a few years from now - so looking to target yield and a small amount of capital gains. Budget of $350k-$500k (relatively flexible if the FHLDS is going to do the heavy lifting of 15% of the deposit). I'm employed full time in professional services with no expectation of material income loss despite the virus. I have a strong credit rating.

    My preference is for it to be relatively central (CBD/North Canberra) as I'll be living in it for at least the first year or two and enjoy my current lifestyle. I expect this will limit me to apartments, or a townhouse if I'm lucky.

    "Assistance":
    • $0 stamp duty as a FHB
    • Looking to take up govt's First Home Loan Deposit Scheme (max $500k threshold in ACT, that's my ceiling) so I can put forward a 5% deposit. Note FHLDS will stop applying as soon as I move out (so will need to pay down to 80% LVR to avoid LMI in that time)
    • Entitled to DHOAS Tier 3 (4 years ARA, 8+ years Army Reserves), which equates to $359.29 per month ($4,311.48 p/a) on a loan of $475k
    Questions:
    1. Are apartments simply doomed with both the looming oversupply AND virus-hit? Noting my interest in high yield, should it not matter?
    2. Are there any suburbs you think I should be looking at which meet the requirements above (I'd be willing to consider a price/location tradeoff) OR do you have specific addresses I should zero in on? I've already reached out to Claire Corby thanks to the recommendations she's previously garnered on this site
    I appreciate I'm in a fortunate position to have both money to spend, a relatively stable income and a swathe of opportunities for reducing my cash cost (not mentioned is super-low interest rates, so shout out to Philip Lowe!)
    I'm lucky to be in this position, so I'm managing my expectations and not expecting a free lunch. I don't expect my first rung on the property ladder to be a dream home, so if any of my assumptions above are wide of the mark feel free to bring me back down to reality.
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,224
    Location:
    Perth WA
    Hey and welcome :)

    1 - if there's oversupply, your cashflow WILL be affected. Hard to have CF+ on an empty apartment.
    2 - While I understand the desire to make the most of government benefits, it's important to really consider how much of your resources will be used on this property, and if, once you move out, is it 'really' going to help you meet your goals moving forward?

    Buying a short term PPOR that then becomes one of hundreds of similar properties doesn't sound like a wise investment move to me.

    I'd rather pay the LMI and buy a good long term investment - without the location and product limitations.

    PPOR/INV strategies can work well, but it's super important to go into it with a long term INV perspective, and not focus on convenience of r subsidies. It's got to be a great INV first, and then the subsidies/benefits are just cream on top.
     
    The Grinch likes this.