Feeling nervous

Hi All, so, you may recall that I split with partner of ten years a few months ago. We owned a house in Chermside West, a renovated 70s double story, 3/2/2. We paid 650K about 4-5 years ago, when market was strong. Despite my initial reservations (what does a newly single early 30s woman want with a big house/mortgage?!) I have bought him out. It saved me from having to move during a really difficult time emotionally, and deal with selling in a slow market and potentially losing money.

Obviously, I am praying that my decision eventually pays off. My mortgage has now nearly tripled, and I’ll be looking to rent two rooms out. I’m feeling very overwhelmed and intimidated by the numbers. Not to mention the seemingly endless fear mongering news articles about how the housing market is doomed. The new mortgage is doable, but a lot more than what I’m used to.

So, I guess I’m just hoping to hear from those with experience in real estate. Have I done the right thing? Any tips to manage a much bigger loan on your own? Am I likely to come out on top in years to come? My solicitor told me I’ll always be fine holding onto an asset. I hope she’s right. Any advice is greatly appreciated. Sorry for rambling. My anxiety and fear of the unknown is keeping me up at night :’(

 

I'm not experienced enough to give you any real direction, but I can say that the media is based mostly in Sydney...where some of the biggest pricing drops are happening.

That would account for a large part of the negative media....I wouldn't stress too much about that.

The general consensus here (a much better gauge) is that Brisbane is in a good position to grow. How much that is or when it happens is all speculative but generally speaking, of all the markets in Australia, a house on a big block in Brisbane should be one of the best.

 

Generally speaking it does pay off when a person holds to an asset and manages it well. Think about it. We still need a roof to live under, we are not getting any younger. Markets go through ups and downs, it is a natural part of the economics (See here for some information).

On other hand, make sure you have collected as much information as possible. It seems to me that you are already doing just that, having contingency planning in place. Not sure if renting out rooms is the best idea at the moment. Flatmates are often added stress, think about what headspace you are in. Your health is important. Usually the biggest asset we will ever have is ourselves. If not having flatmates means the mortgage is still manageable but there is more peace of mind and relaxed environment, I would definitely ditch the flatmates. On other hands, if the company will add more buzz to a house that feels empty, then I might consider it. A lot of moving parts, I would put myself first regardless.

 

I couldn’t see a reason why you have to worry much MissMel. I can recall your previous post. I don’t know the pain of your personal matters, when it comes to property, if you haven’t overpaid much, you shouldn’t need to worry much. It might take bit longer for you to get out even if you have overpaid. Well maintain the property in same condition and look after your heard and follow.

Good luck.

 

Personally I think in terms of value for dollars you probably overpaid. But long term it should be a fine asset to hold.

Re market crashes shouted by the media its all nonsense .

 

I agree with @wylie that you have done the right thing.

As said, you have the option to rent it out and rent something cheaper yourself.

Don’t be scared by fear-mongering of “crashes”. You say you can afford the mortgage while living there, so you won’t be forced to sell. During a downturn, prices do fall for those who have to sell, or choose to sell to upgrade. Most owners simply hang on.

I am sure, from your post, that you will be ok.
Marg

 

Head down, backside up, and work hard for the next few years and pay back as much as you can.
maybe contact @Rolf Latham or one of the other mortgage brokers on here to see if they can reduce the financial stress a little.

You'll be right I reckon. You are still hurting from the split and emotions are taking over at times.
Perfectly natural, but fight those negative thoughts, sit down and look at the situation objectively, as though it was someone else you were giving advice to.

 

Sorry to hear, the emotional roller coaster of a breakup makes it hard to stay positive sometimes. I am no expert on the Brisbane market, though i base my forecasts on economic & supply/demand data. I can say that the data backs the media for Sydney and Melbourne in a very strong way..

Here's what the media and their analysts are noticing: in Syd and Melb the delayed completion of major apartments and the pending completions from the suburban housing boom are going to both hit at once and lift supply even further in these cities over the coming year. Slowing economic stimulus through the drastic drop in new build applications is going to wipe $15bn+ from the construction industry and really hurt jobs over the 2 year horizon, which removes any chance of the market kicking back into gear. Slowing jobs directly correlates to a slowdown in migration, which we are already starting to see. Basically these two cities are going to continue to get whacked with more properties, and less people to buy them. Given these cities make up the bulk of the property market, their performance is wrongly attributed as being the "Australian property market", when they really are a sub-set.

The story for Brisbane and Perth is very different. Both have already had a slowdown in building activity, so their industries are far less impacted in the wake of any national or global economic downturn. They also both have rising population growth rates. Brisbane population in particular soars during a downturn, directly correlating with people leaving NSW to head north. One metric i keep an eye on is new people to a state per new dwelling built. Once this number gets over 2 for a city (i.e. at least 2 new people for every one new house), it correlates with an increasing market. QLD will likely tick over this threshold this year (first time since 2012), and the outlook for next year is even better. Given the broader economy I don't think this will mean a full blown boom, but it does imply that the QLD market is in a strong position to weather any economic storms.

It may be a rough ride over the next year or so, but if you can make your payments and keep your cool in the wake of "recession" media hype, you'll come out the other end in a very strong position.

 

Hey MissMel - it's perfectly normal to worry if you've made the wrong decision, but I find rather than fretting about the what-if's, I play them out in a worst case scenario and see if it's really that bad. It usually isn't

At the same time, make a plan so that if 'x' does come to pass, you're well placed to cope with it.

For eg - do you have a cash buffer? Do you have income protection insurance? If things got tough, do you have family you can rely on?

As mentioned above, can you rent out the whole things and rent cheaply elsewhere?

If you have an arsenal of options up your sleeve to draw upon if things were to get uncomfortable, it makes it much easier to relax and let things pan out the way they will.

 

Fabulous advice above, MissMel. You'll be fine.
Depending on the location, have a think about Airbnb. It can give you some income, but you are not saddled with a flatmate. You'll also likely meet a stream of interesting people.

 

So many positive comments

 

Mel,the location is excellent ,and you don't have to worry about what expert's say about property prices in glossy real estate magazines newspapers ,""Because they need to keep their advertisers happy"" and most would not own property at all..
As you have said this is a 2 level property,can you live down in the bottom level and lease out the top section , either short term room by room or rent the whole section out..It will work itself out Mel ,just take one day at a time and stay happy..

 

Hi Leo. I definitely think we overpaid at the time. We’d been looking for about 12months and kept missing out to higher offers. The competition was strong. When we found the Chermside West place, we missed out again, and were called weeks later when the buyer’s contract crashed. My ex accepted an offer to buy him out at 330K. So, assuming agent’s fees will one day set me back 20K, I’d have to sell for over 680K to break even. Is that right? And if so, I know it’s unlikely

 

I’m genuinely overwhelmed by everyone’s kind responses. Thank you

 

If you can, I would suggest you put aside your emotions for a moment and crunch the numbers on all of your options including:

1. Keep the property and live alone.
2. Keep the property, live in it and rent out two rooms.
3. Keep the property, rent it out and you rent somewhere else.
4. Sell the property, buy somewhere cheaper.
5. Sell the property, rent somewhere else.
6. ...

Firstly, you would need to crunch the numbers from an income vs expenses perspective. As you had been in the property for the last 4-5 years, you should be able to come up with some accurate numbers here and do it for the next 3 years, preferably five years.

Secondly, you would need to crunch the numbers from a growth perspective. These numbers will be a lot more rubbery so you will need to run a few scenarios, once again over 3 years, preferably five. Simple scenarios such as 0% growth, 3% growth, 5% growth, ... and more complex scenarios such as specifying the growth (positive and/or negative) each year.

Thirdly, you will need to add the two sets of numbers together for each scenario. This will give you an estimate of your financial situation in 3 or 5 years time. Note:- for the Sell options above, you will miss out on any growth, so that needs to be a negative number for these Options; in the same way, any capital loss needs to be shown as a postitive number.

Finally, you need to overlay the financial outcome of each Option with non-financial considerations such as quality of life, happiness, flexibility, ... and then make your decision.

I know it probably looks like a lot of work but, in reality, it is not, especially if you have access to Excel.

Once you have done this, most/all of your anxiety will start to evaporate, you will sleep a lot better at night and you can get on with enjoying the rest of your life.

Final Note:- even if your preferred option is costing you more than you feel comfortable with, look at other options to increase your cashflow such as overtime, second job, selling your unwanted possessions, ...

 

For the last few years, I’ve always paid more than the minimum repayment. I vaguely remember someone writing ages ago here that you shouldn’t do that for your PPOR. Is that right? Or should I keep trying to put as much towards the mortgage to create a buffer?

 

I think @kierank post is exactly what you should do. I know i would be doing that. Properly assessing all your options then deciding what would be the best course of action which will most likely meet your needs, goals as well as SANF .

 

Thank you so much. Great advice.

 

The idea of going back to a share house situation isn’t ideal. But- I’m struggling in such a big house on my own. Both emotionally and financially. I just feel like I’m in a house suited to a family. Not a 33 year old. Domain tells me the place would rent for approx $425 per week, so I’m feeling I’d be better to rent the downstairs area for $200, and they’d have their own space.