Buy now or later in this market? Is there a way to hold without selling?

Discussion in 'Investment Strategy' started by OllyOliver, 27th Oct, 2021.

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  1. OllyOliver

    OllyOliver Well-Known Member

    Joined:
    31st Dec, 2020
    Posts:
    85
    Location:
    NSW
    To set the scene, my wife and I are Sydney based 30yo couple with a 6 month old. Managed to buy before this recent boom so have lucked out with growth in equity. Bought an OO semi detached in Balmain Dec 2019 for 2.3 million, and estimate it'd be now worth 2.85-9 million. We then bought a freestanding IP in Rozelle in Nov 2020 for 2.1 million, worth 2.6 million now.

    Last FY our combined income was 850k. We've both reduced our hours so that it would probably put our combined household income at 640k to 720k going forward depending on if my wife works 3 or 4 days/wk. My income won't really increase anymore in the future, but my wife has the ability to increase her income by another 50-100k in the coming years.

    We recently refinanced and have 450k in equity ready to use from our OO with a 1.95 mil loan against it, as well as 1.86 mil loan against the IP. We have 400k in offset after our tax obligations.

    We want to relocate to the north shore (mid to lower) within the next 5 years.

    With the market it is now, would it be better to sell our OO and try to upgrade now? Or wait until the market softens/turns? Arguably we've got a 5 yr window so we're not in a rush. Yes, our serviceability may reduce due to a rise in interest rates and we may have a 2nd child, but would imagine that would still be able to get financing and service a 3.5 to 4 million property.

    Secondly, is there any way to hold our existing 2 properties and purchase a 3rd OO in the north shore area? With median prices for houses in the area now closer to 3 million or more depending on the area, I don't think we would be able to service such a loan unless we had a windfall. We are happy to live in Lane Cove/North/West which has a lower entry cost, if it means we can hold our existing 2 properties, but even then current entry would require 2.6+ mil. We ran the numbers with a theoretical 5% interest rate across all the loans (possible across a 30 year period of the loans?) and even with negative gearing, would exceed our ability to service all the loans.

    Are we too conservative thinking rates would rise back to 5%, or should we focus on saving in the next few years and hope the market falls to allow us to borrow less with a lower entry cost?
     
  2. janelb

    janelb Member

    Joined:
    1st Apr, 2020
    Posts:
    11
    Location:
    Melbourne
    I have no advice to offer but hope to know what is your occupations so I can advise my kids to try for their brighter future
     
    Lee2081, Hills123, AndyPandy and 3 others like this.
  3. JJ1988

    JJ1988 New Member

    Joined:
    12th Nov, 2021
    Posts:
    1
    Location:
    Sydney
    This post seems a bit.......fishy.........Firstly a 30 year old couple on a combined 850k? That seems........questionable.

    Even if that's true, take your lower band of 650K. You would be bringing in 54k a month....

    A relatively standard 3 year Fixed loan of 3% against 1.9 Mil is around 8k a month, you have 2 of these so let's say 16k a month in Mortgage payments not including the rent you would be charging.

    This leaves you still with 38k a month coming in just from your salaries, again not factoring in the rental income form the above properties.

    I don't think you have an issue keeping both properties and buying on the north shore of Sydney, even if rates do go to 5%......

    Unsure how you came to the conclusion you cant service all of your loans......Even if the 650k was PRE tax you would still likely able to comfortably service all of the loans.......
     
    Beano likes this.