first home buyer VIC - should I buy 1BR flat close to work or house much further out?

Warning: long post!
Hi folks, hoping to get some of your wisdom as friends and family don't exactly have much knowledge to share other than what NOT to do when it comes to money and property(all are a financial mess with large personal debts and no assets).

I'm in my thirties and it took me a long time to break away from the bad money habits I grew up with, and slogged through low-paying jobs during my twenties before making a bit more improvement income-wise, so this is sad, but this is where I am at right now:

• $51k in cash
• $33k in stocks(index funds)
• no debts (HECS also gone by now)
• no property
• single
• no kids, no pets (not a popular thing to admit but I just never could stand them just never had a desire to be a parent or pet owner ever - this will not change in future, and I will not date or marry anyone who does not feel the same)
• currently renting 1BR flat in Melbourne within walking distance to work in the CBD for $360 per week
• have been in the same flat for the last year - I like it and the building it's in quite a lot!
• I love Melbourne, have already experienced living in other states and overseas, but this has always been home for me - I don't want to be away from it anymore; the only way I would move again is if I got a job offer from the USA paying double what I earn now(unlikely!!)
• was extended in my current job contract for 12 months (unlikely to be made full-time at the end though)
• have a monthly take-home pay of $5.5k per month, of which I save between $2k to $2.5k every month
• likely to find another contract after current one ends paying similar amount(I actively seek out offers and network quite regularly even while still in a job to be doubly sure)

I know there is massive doom and gloom to come due to oversupply of units in Melbourne, however, the thought of buying a 1BR flat popped up when the building I currently rent in advertised one for sale at $310k. I attended the inspection and found out the owner was eager to just move on with their life overseas and would consider offers of $300k. This had me thinking that if I sold some stocks, I could meet the 20% deposit.

However, I'm apprehensive and got stuck in analysis paralysis for the following reasons:

• oversupply of units according to the daily news - I wonder if some older style 1BR flats within 10km of the Melbourne CBD will start dropping even lower to $250k to $270k over the next 2 years
• strata fees - don't want to be duped into buying a unit that seems cheap but then has skyrocketing strata fees every year or keep gouging for "special" levies for no good reason
• googling for more info lead me to various articles and forums saying I should buy house and land - I don't really want to live in a house though, it's just too much space for someone who is single and leans toward a minimalist style, I don't want the upkeep of a yard or a car
• the only houses I can afford are at least 40km away from work though, and I've rented before in places that required long commutes and a car and really hated it(am car-free now and loving it)
• I've heard it was a bad idea to sell index funds just to scrounge together the deposit as the index funds are growing and paying dividends
• got very conflicting advice from 2 acquaintances with links to mortgage brokers - one said I should dive onto the property ladder ASAP and get the 1BR flat but I may not get approved for a loan, and the other said I should aim for a bigger mortgage of $400k-$500k and buy a 2BR flat or 2BR townhouse around Reservoir or further up and just suck up the LMI!!
• I am considering saving up for a few more months to be able to afford a buyer's agent to help me out, but I don't know if there are any that would even fart in my general direction since my budget is so low($300k to $400k)

What would you do in my shoes?? Questions:

• Wait a while longer before buying to save more cash? Or dive in sooner rather than later??
• Avoid units altogether and buy a house & land package for around $350k around Mernda? Then suck it up living there for 6 months to get FHB concessions then rent it out afterwards while I go back to renting a flat near the city?
• Get a 2BR flat/townhouse and get a lodger for the 2nd room?
• Some other posts I stumbled upon made a point about how getting an offset mortgage and HELOC could help me leverage purchase of more index funds to help with my investment goals - has anyone done this?
• Do buyer's agents work with people with such low budgets like mine?

I'm keen to buy my first property and have the advantage of an offset account and a line of credit for investing in index funds, but don't want to mess this up as government FHB concessions and grants can only be given once in a lifetime.

Looking forward to your thoughts!

 

Primarily, do you want to buy somewhere to live or as a capital growth investment?

 

buy a house in suburbs and rent where you want to live. didn't read the whole post but that's the best option. Forget 1 bedders there's no growth in those.

 

I think deep down, I mostly just want to get on the property ladder in any way as everyone I know who is in their 50s/60s and never got on it are in a really dire state these days! All the responsible people at work who seem to have their finances in good order have at least 1 property, whether they're living in it or "rentvesting". My ideal PPOR is a 1BR inner-city flat but every article I've read has made it seem like it's the worst idea ever.

I'd be happy to be rentvesting, and I would like something that gets enough rent to pay its own mortgage off much quicker - some 1BRs I saw seemed like they would meet the cashflow positive criteria because of the drop in sale price and only a small drop in rental price(I'm not very experienced so I don't know if this is correct though!).

 

Thanks! Do you think I should jump in and pay LMI now for $400k in further out places like Mernda, Wyndham Vale and other places around 40km away from city? Or wait a bit longer and save more cash?

 

Congratulations on all you have achieved so far.

It sounds to me like the last thing you would be content with is a house out in the wilderness 40 klms away. Don't go there.

 

House for sure. Rentvesting will be the most beneficial for your future investment wise in my opinion. Gets you on the property ladder in a better position for growth. highly likely the 1br apt market will be stale for a while.

Do things right and you could have both the house and your ideal 1br apartment within 2-3 years.

 

I feel a 2 or 3br Townhouse near the city for you would work as a good compromise. Get both growth and location. Win win.

 

If he must buy a house somewhere else, would he buy one in Melbourne (where?) or in another location like Logan or Moreton Bay for $400K?

 

Hi OP
If you feel one bedders suit your lifestyle then Footscray and surroundings will suit your budget

I like Footscray because of the close proximity, plenty of food around. Not to mention the pubs...

 

You've stumbled into the oppourtunity of a lifetime...

Look at it this way, your treasure is everyone else's trash. I mean this in a good way.

The fertilizer is starting to hit the oscillator right now for inner city appartments. Prices are falling through the floor as investors bail.

But you are not an investor! You're part if the crew who will come and mop up after the carnage has been and gone.

You're in a beaut position..and have absolutely no need to rush, the market wont go up tomorrow...it'll more likely drop.

So grab a fancy Melbourne coffee and take your time. Do your research (just like you're doing right now) and make sure you're primed and ready to pounce once the oppourtunity presents itself.

Oh, and avoid high strata costs......it really adds up over time. Go for something older with 2 bedrooms and lower strata if you can. You won't be single forever. 2br gives you way more options and provided you're happy to get something older - shouldn't cost that much more than a shiny new 1br.

Good luck!

 

I think the answer to that question is yourself. How much is your salary, where you like to live and would you be willing to move 40km away of stay close to CBD is something you will have to decide. You could follow many of the PC posters here esp @sash would would be able to advice of his buyings. Why not H&L in officer? if I was in your situation with the level of funds - I would take that approach.

 

Don't buy a 1 bedroom apartment. Rent where you are and invest elsewhere. LMI is fine if you think the property will go up in value more than in the time it will take for you to save for the extra deposit. Assuming you buy well that should be the case.

 

Nah mate.....I know nuttin'

But if it is Melbourne....here is a clue.....

Go West 25-30 clicks...Northwest 30 clicks...North 27-35 click or Southeast 45-60 click young man...or an rusting city call Geelong...(go cats)...

 

I personally would get a 2BR Townhouse appropriate for your budget. As you said, you can find a lodger if you decide to live in it and help pay the mortgage. If you want to rent it out immediately, or at a later time there will be more demand than for a 1BR apartment. Also townhouse will likely give you more growth than an apartment. A free standing house 30km west isn't a bad option either.