First home buyer considering options - open to advice

Hi all, hopefully this is an appropriate thread. I'm brand new to the property game and having been learning all that I can, but am still looking for a little more direction. This is my situation:

Employment/income: Doctor, currently doing locum work making great money, $150k taxable income last financial year, currently earning more than that, max $200k. I'm about to embark on yet more training which will see my income drop to minimum $85k next year, $95k the year after (highly likely to be more, but not to my current levels.) After the 2 years my income should return to $150-200k+.

Debt: Around $32k in HECS, multiple additional qualifications have kept bumping this back up. 2 credit cards open with max limit 15k each, are always paid off straight away. Would be happy to close one.

Savings: This is where I'm expecting to cop it. I've been in the workforce 6 years, 4.5 of which I didn't save a cent. Yes I'm an idiot. Saving just didn't cross my mind, had a great time, travelled the world etc. I'm very happy in life and don't feel regret, what's done is done and I'm very fortunate to always have good earning capacity. I now have $35k in savings, will be $50k within 6 months. I know this could be more, I'm wouldn't call myself frugal but I am now diligent about putting away a fixed portion of every single pay. Main other asset is a car I paid $26k for 3 years ago.

House: Looking to settle and buy a PPOR in Ballarat, sick of renting and want to own my own place. Looking at houses around the $500k mark - more on this later.

Loan/finances: Will be eligible for FHB stamp duty concession. Being very fortunate to be in my profession, I know that banks will offer 90-95% LVR if needed without LMI. I think I will go down the route of a broker, as I have a number of recommendations for brokers who understand the deals available to medical professionals, how our income is structured (self employed) etc.

Partner: I have a partner who will live with me, they are currently undertaking more study for a change of career and so income will be minimal for a few years, though not financially dependent on me. They have had a career in the arts (i.e. sporadic, not regular income, no credit history) but good savings of ~75k. They are keen to hang onto this as emergency fund/living expenses given student status for the next few years. They also have documentation of ability to service $200/week (private rental.) Their feeling at this point is that I would be the sole name on the loan/house, and they would pay me some rent, I do realise this has implications for de facto status/claim to the house, and we are both happy to draw up whatever contracts as appropriate to protect ourselves. Once they have commenced full time work they would buy into the house with me.

Questions?
Is this is an appropriate price to be looking at? If I wait until I have 50k savings that will be a 10% deposit. Or just jump in now with 5%? I believe I could service this amount fairly easily. Should I go ahead and look at getting pre-approval now in case the perfect house comes along? I''ll be moving in January and so will be looking at renting then.

Or given that this is hopefully a long term property to live in, should I aim a tad higher to start out, rather than upgrading X years down the track? This may make it difficult while I'm on the reduced income for the next 2 years, could I go IO for this period to ease into it? Keeping in mind as well my partner's income will come into the mix in a couple of years as well and serviceability will increase again.

Or am I being totally unrealistic and should look closer to $400k?

Thoughts on timing of the Ballarat market? I think it's cooled very slightly right now after the recent surge but ultimately I imagine it will go up. Given this is PPOR not investment this is maybe irrelevant?

Hypothetically, if in a few years my partner could only find work in the city and we had to move back.. is that a huge financial hassle to sell and move after such a short time? This is hypothetical only.

And a silly question.. I notice people use broker's in their desired location but I could easily see someone in Melbourne while looking to buy in Ballarat right? Is this a done thing?



Thanks for anyone who got through the wall of text, I wanted to give all the detail to give a full picture of the situation - I know there's some great advice given out on this forum. I also know that much of this is personal decisions and preferences and people can't just give me answers! Just wanting to know I'm at least half way on the right track!

 

Buying just because your sick of renting is a newbie mindset. So is finding the perfect house (you just dont see the problems). Any long term investing plans?

Your still only saving 30k a year on your current income. The drop will be more than that. So you probably cant afford the same level of lifestyle if you buy a house.

 

Is wanting to own instead of rent not a valid reason for buying a house? Having a place to live? But yep that's a good question, I do not have a long term investment plan. Maybe this house will become an investment, maybe we will buy another once settled? Or perhaps shares? So yep, the answer is I don't know. I did say I'm a newbie.

I absolutely know and accept my lifestyle will not be the same as it is now, I see that as the sacrifice of owning a house.

 

You probably cant afford the mortgage on your current lifestyle when your income goes down.

Just wanting to own is a valid reason for most, but you have the potential to do a lot better than that.

 

Welcome to the Forum, hope you find the answers you're looking for here, there are lots of knowledgeable members

Hmm not exactly, eg. broker can be local to you or not, eg. broker in QLD when you're buying in WA, they don't need to be where you're trying to buy.
Suggest you speak to one asap though because once you know what you can afford to buy, that will determine where you can buy, how your cash flow/lifestyle will be affected etc. etc.

This could be an issue, IMO you should try to get some clarity on what you want, long term, then making decisions becomes easier because you know what you're ultimately trying to achieve.

 

Hi and welcome to the forums!

You'd do well to find a broker you can form a good ongoing relationship with - location is not an issue for this, they can be anywhere. As you've said, you're fortunate with your job and income, but planning around your imminent drop in income is going to be important, as is creating the financial habits that will allow you to make the most of your opportunities.

I'd look at this house as a stepping stone - giving your future plans, my thought would be to buy cheaper with the view to turning it into an investment later, and trading up when you have the income to support it. Going all in now will mean a potential boring and stressful few years eating beans on toast in your lovely house, compared to being able to save/increase cash buffers/invest in shares/still have a life.

Personally, I think not wanting to rent is an extremely valid reason to buy a house - nothing worse than a 19 yo property manager judging how clean your window tracks are!

 

~$500 weekly repayments, with partner paying say $150/week? Seems doable to me, but I understand that I'm seeing what I want to see. I'll probably be on 100k? Would going IO for a period of 2 years be feasible while my income is down, as a means to get into the market?

And yes point taken, I've wasted potential thus far. Would you suggest something like starting off with a smaller investment property, while continuing to rent for a few years? I'm 29 years old now, and keen to get into my own home at least in the next few years.

 

More reasons to get clarity on what it is you want to achieve, long term, it's hard to know what you should/shouldn't be doing today if you don't know what you want to achieve.

 

Thanks for the reply Jess! This does sound like sensible advice. Do you have any opinion on living in the property for the 2 year period vs rentvesting?

 

At your income, you seem to be saving 30k, renting 25k and spending the rest. When your income drops 50k or so, what happens? Its doable but will be harder than you think with no savings.

Cant even try to suggest anything since you dont even have a goal. Getting rich isnt specific enough, if your interested at all. Your income affords you a lot of mistakes though.

 

Thanks Lindsay, I completely see what you're saying. I suppose I want what a lot of people want - to be a home owner and also create financial security and ideally some wealth. For someone as relatively clueless as me in this field, the idea of a financial advisor or similar sounds tempting (but also slightly scary as I'm sure there's a lot of dodginess out there too.)

 

You need to know enough to recognise the dodgy. If you are interested, go read a few books first.

 

Thanks.. I can see the clear message I'm getting is to work out a real plan and goal. I've read the barefoot investor like the rest of the nation has.. any other pointers here?

 

Nothing that can be summed up in a few words. Might be worth spending a few months reading, not 5 minutes. Theres a book list somewhere.

Can you tell me how to be a doctor in a few words?

 

As with any industry there will be good and bad (plenty of good ones on Property Chat by the way) BUT ultimately setting your goals and speaking to some one about ways to achieve them will open you up to options you might not have considered. Maybe property is what you need, maybe shares or other investments OR a mix of property and other investments. At least they will show you the path(s) you can take to reach your ultimate destination. Just my 2 cents

 

It depends on the property - given your desire to not rent, rent-vesting may not be in line with your goals, plans and personality. But if you buy something you'd never be able to live in, then renting where you enjoy can work well, especially if rent is cheaper than owning in the same area. These sorts of things are usually clarified pretty quickly through a good conversation.

 

Hello - great situation to be in. My best mate tells me at every opportunity he can that his hands will be worth $2mill a year (just before he books business class tickets on his CC!!). Personally I think it's the right attitude, experienced doctors (particularly surgeons) get paid a lot of money and there's plenty of time to save down the track. Essentially they can play to a different rulebook to others trying to play the property game given their proposed income levels. If your on a program there's a pretty good degree of certainty its coming too...and the (long) hours often justify the higher expense living (convenience).

Relating to your specific situation, MEDICO's often have access to direct to bank products that brokers may not be able to underwrite. I.e. if you go through the right channel your lending options open up. This may be particularly suitable to you. There's a few lenders that do 95% no LMI (ANZ) with conditions via the broker channel. I'd suggest you:

- Call BoQ specialist and see what they can offer you (possibly 0% deposit options). Not sure if brokers can access their 100% no LMI product/whether its still on the table. Worth checking.

- Speak to a broker that you like to deal with and see what they can offer you (likely 10% deposit options)

 

Welcome to the forum! You have made the first and greatest step and that is being interested! Everyone starts somewhere, and everyone knew nothing before they knew something. Understand it can be a bit daunting starting out, especially not knowing where to look. Some beginner resources i'd recommend would be; Podcasts (Property Couch first 20 eps specifically, Michael Yardney podcast, Momentum Wealth Podcast, Books; Margaret Lomas, Steve McKnight, Rich dad Poor dad or anything Robert Kiyosaki, and of course; This website!

 

Thanks for the reply!

 

@paradiso35, it is a sad fact of life that most people put more effort in planning their Xmas holidays than they do planning their financial future.

That is why they have great time at Christmas BUT a crappy time in retirement.

I love the old quote from “Alice in Wonderland”, namely:

“If you don’t know where you are going, any road will get you there.”​

As others have said, I would strongly recommend that the first thing you should do is develop a Financial Independence Plan.

Then, as you embark on your wealth accumulation journey, you can monitor your progress against this Plan and, where necessary, take corrective action to ensure you reach your “financial independence destination”. You will be amazed how “magical” this is.

Easy to understand BUT hard to do.