Graduated and wanting to buy near the city

Disclaimer: I'm very much a newbie and even a few keywords or links to point me in the right direction to do my research would be appreciated.

Background: Just graduated and started looking at my graduate offers and realised I want to be close to work. I'll most likely be staying at work for more than 10 hours a day (workaholic) and prefer the convenience of being close to the city. My graduate position alongside some passive income and contract work, I'm expecting to make about $140k (maybe more depending on how hard i push myself) before taxes and super. I have enough saved for a deposit ($200k) in liquiditable equity/bonds which I plan on cashing out sometime next year depending on how equity markets rebound.

I have no debt, don't drive and don't have extravagant expenses (no gf).
My current travel time is roughly 30 minutes each way (at the minimum) living out west. I expect to shave that down to 10 minutes (66% decrease) each way after moving out. So in total 40 minutes per day.

Question: Should I purchase one of those new crown two bedroom apartments (roughly $800k to $900k) near green square?

My mentality: I'll live in the apartment for 5 or so (while working crazy hours as an analyst) years and rent out the other bedroom to a close friend who will be working at an investment bank (we're both workaholics). Hopefully after those 5 years I'll have settled down with a s/o and plan on cashing out and looking for a house somewhere a bit further out. I'll hopefully also be tuning back on the analyst level work and start managing analysts instead.

My concerns:
1. The property market will continue cooling for longer than the next 5 years and I'll make a significant loss on the apartment when I do finally sell it
2. Strata will be ridiculous (pool, gym, bar, etc). I don't even know where to begin calculating this. I've tried googling it but I get very vague or qualitative answers
3. I should keep my money in the equity market and rent instead of buying

 

You have a lot to work with. Buying a high strata unit in an oversupplied area in a city coming off the big boom? Probably not the best idea. Rent near the city and buy elsewhere.

 

Would you know a rough estimate on strata? e.g. 4k per quarter?

I originally wanted to rent but my parents come from an asian background where their friends bought early on and saw high returns and now expect me to do the same. I'm trying to look at this holistically with as much data as I can get.

One of the options I am considering is renting in the city and leaving my money in equity. I'm a lot more comfortable with stocks+bonds vs property.

Any suggestions on where to rent or buy? My green square decision was just based on browsing suburbs close to the city and looking at the nice photoshopped pictures.

 

If you can get the same leverage with equity without blowing up, go for it.

Cant help you develope independance, sorry.

 

Not in that location. I'd look around Potts Point and Elizabeth Bay personally, preferably in a cute art deco building. Give it a few months more though.

 

Which graduate analysts make $120k+??
How did you manage to have $200K of equity while studying?

30 min travel time is actually good. Even if you live closer, if you have to catch a public transport, then it would take about that much time anyway. Actual train (eg) travel doesn't really matter much. You can catch up with your social network or news in that time.
I would either stay walking distance to the city or close to a transport hub provided you don't need to change mode.

 

Firstly, well done. You are doing the right thing to try to park some of your wealth in a property, that you can use now, and draw an income from later in life.

I am not a fan of the Green Park area, and I try to avoid "new" builds. But if you have you heart set on it, there are worse places to invest than Green Park. It is attracting a lot of amenity, and with it will come people and vibrancy.

Regarding the market cooling for the next 5 years: this would be unprecedented and very unlikely. Many are now saying that the bottom will be in by June19. What tends to happen is that there is a significant down year, and it zig zags sideways for another year or two before resuming a bull market.

I wouldn't worry about picking the bottom of the market - in a sense that is not your job. Your job to buy the best quality enduring property that you can at or below prevailing market prices. Over thinking the timing of the property markets can be procrastination masquerading as analysis.

There are worse decisions than to buy one year into a very sharp fall in property prices.

It is hard to recommend suburbs without knowing your tastes, hobbies, and personal preferences. The North side offers Neutral Bay as a convenient suburb one bus stop from the CBD. Yes Potts Point may be desirable also. Lilyfield, Rozelle and Leichardt in the Inner West are well down from a year ago and represent value also.

There are people that can help you with this sort of decision making. Good luck.

 

"I wouldn't worry about picking the bottom of the market - in a sense that is not your job. Your job to buy the best quality enduring property that you can at or below prevailing market prices. Over thinking the timing of the property markets can be procrastination masquerading as analysis."
I'm sure people who make money out of property transactions would agree but I wouldn't.
You do need to do analysis & research. You do need to try to catch the cycles.

 

Thanks Devank,

I should clarify. You should be aware of what represents good value and what is expensive. Yes cycles can be instructive and I do understand many cycle theories.

My point is more that you can't pick tops and bottoms and trying to do so will just prevent you from doing anything. Markets can always surprise you.

 

I wouldn't be buying an apartment, prices seem to be more likely to fall than rise - why not rent one and wait

 

Definitely will look into these areas. Thanks for the suggestion.

I have 3 offers right now that I’m contemplating as I think I want to work in a technical role with a mix of business (with smaller offers e.g. financial advisory at an IB)
- Strat & Ops for a FAANG (close to 100k)
- Solutions Architect for a FAANG (110k base 60k variable comp with essentially non stop travel)
- internal Infrastructure engineer for a FAANG (80k with choice of travel)

This plus contract work I do on the weekend/after work (roughly 30-40k a year depending on my regular job workload)

And passive income (5-10k a year)

I had my first job as soon as it was legal (KFC at 15 iirc) and I’ve been working in corporate since first year university (4 year double degree) and spent my final year doing full time study + 70 (average) hours of work per week at 3 places.

I think 30 is good as well but having 40 mins total shaved off every day is quite a large amount. Assuming 200 working days a year, that’s 133 hours saved in a year on work travel alone. If I bill on average 100 an hour that’s $13.3k per year. This doesn't include any travel for leisure to the city either.

This is only one of the reasons why I want to move closer to the city. Continue reading for the rest.

This is my thoughts exactly which is why I’ve constrained my decision to be within the next FY. Hoping to make the decision to buy or rent in Feb/March (start dates for my grad jobs) but can wait out a rough equity market or property bear market.

1. Gym: Having one in the building where I live would be perfect. I'm currently signed up to a local gym which is closed by 8pm (i.e. I can only gym on the weekends)
2. Independence: I took a trip to Europe for two weeks and enjoyed learning basic stuff like making scrambled eggs and washing clothes (which my parents have been doing ever since I was young). I default to working if I have spare time and I feel like I'm lacking in general lifestyle skills e.g. cooking meals
3. Pet friendly: Love seeing dogs and other animals around the neighbourhood
4. Views: A nice view of the city for when I need to work on the weekends if I ever need to catch up on work or work on a creative hobby.

Probably looking at this option. Rent near city and purchase land somewhere outside the city (like liverpool? There seem to be a few corporate buildings e.g. pwc. Sellers seem to be advertising it as a second CBD.

Sorry for any typos/grammar issues as i'm typing this out on the phone

 

How much did you say they offered you?

Dude, rent and buy elsewhere. Why restrict the pool of possible investments to where you'd like to live?

 

Have you done a bit of analysis on what renting in the city and buying investment vs buying the new apartment looks like? Could be worthwhile. If it was me and the options were a new apartment or rentvesting i would go rentvesting every time. Your shiny new apartment is going to depreciate for the first few years, which will be amplified if their is an oversupply in the apartment market around you in the future.

Also who knows where you'll be working or what type of dwelling you'd like to live in in a couple of years time, tastes, needs and preferences (and relationship statuses..) change often when you're in your 20's im finding personally.

If you did go for buying elsewhere and renting close to work then I think it is wise to ensure that it is somewhere you would be willing to live in the future. As I have seen @John_BridgeToBricks mention elsewhere, people often get stuck when they have maxed out on investment properties and can't buy something where they want to live, and everything they currently have is not acceptable for living in to them. But then it is your first and still young and single and looks like your earning potential is high so perhaps not as big a issue right now for this one, but things change so need to be able to adapt

 

Like a few people have already said, rent close to/in the CBD, buy elsewhere.

Dude, I've been in IT 15 years, with the past 6 in Arch and Strategy, I had to use my Google-fu to find out what in the heck FAANG meant and I work with two of those vendors' technologies on a near-daily basis. Learned another acronym today.

 

I don't understand this question. How much did I say who offered me?

Just from the responses in this thread alone, I'm definitely going to look into renting instead of buying the apartment as I do value long term > short term (patience is a virtue).

Not yet. I may draft up a model to do a sensitivity analysis on both options. This will be after I fly back from a work conference (US) and a wedding (China) (so Jan).

Is there somewhere on these forums (or another resource) with discussions on the major drivers of apartment and investment property prices? I only know a few basics from reading the AFR.

Yep this is definitely an issue in the back of my mind that I know I can't answer right now.

That's a good idea however it may limit my options as i'd ideally want to buy a property close to the city (albeit not as close as one stop away). I may end up working overseas as well (one of my jobs requires a bit of travelling right now - around 10%).

It's a finance term (all over the AFR). I was tossing up between working in business or tech and I think I like the mix of both.

 

Sarcasm.

 

Don't have to worry about picking the bottom but ignoring a falling trend is not a wise move even for a non-investor.