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Home in Sydney, IP elsewhere?

Discussion in 'Where to Buy' started by Gee, 16th Sep, 2015.

  1. Gee

    Gee New Member

    Joined:
    16th Sep, 2015
    Posts:
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    Location:
    Sydney
    Good morning all,

    First post on the forum, hello to all of you.

    I'm very excited to be buying my first property and I was hoping for some guidance, input and/or advice.

    First, some facts. I have a deposit of $105k. I'm currently discussing my mortgage options with a broker. I would like to buy before the end of 2015. I'm single and I currently rent in inner city Sydney - share house, very affordable for the area ($260 p/w). I currently earn $130-150k.

    My goal is to start building a property portfolio. In my mind, buying my first home in Sydney is the wrong move. I grew up on the Northside and would like my first place to be close to family and friends. I would end up with a huge mortgage buying somewhere I want to live. I could most likely service a mortgage on a 2-bedder, with renting the second room out, but it would make a large dent in my monthly paycheck.

    The alternative is to buy an IP with an interest only loan, maybe slightly negatively geared for now, and pour my monthly savings ($3k+) into an offset account/redraw facility. Once i've saved enough and the equity from the first IP can be realized, I'd buy another property. Another option is to split the deposit and buy two properties at the same time. If only buying one, I'd like to limit the capital investment to keep the cash liquid.

    The second option is probably the riskier, but offers more flexibility. I'm happy renting in Sydney for now if my money is going to work harder for me in an IP (or two).

    Keen to hear your thoughts. Also, advice on areas I should be looking is welcome.

    Thanks.
     
  2. Hodor

    Hodor Well-Known Member

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    Homeless
    Sounds like a good plan. Buying ip is a more efficient way to go tax wise and offers flexibility. We just bought our ppor with equity gained through an ip so maybe I'm bias.

    Be careful with your savings as redraw and offset are actually two very different products - you want offset.
     
  3. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
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    2,458
    Location:
    Sydney & Gold Coast
    Welcome @Gee.

    You are right–your money will go much further if directed into investment properties rather than an owner-occupied home in Sydney.

    Not to mention the fact that the Sydney market is at its peak and you can be pretty confident that once things ease up, we'll see a pretty flat period for many, many years.

    Brisbane is looking good.
     
  4. ej89

    ej89 Well-Known Member

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    Location:
    Sydney.
    Should come to the meet up in Western Sydney tonight. Could get good advice there.
     
  5. HUGH72

    HUGH72 Well-Known Member

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    Looks like you have a decent income with very low living expenses and a high disposable income. Why not buy 2 places possibly in Brisbane for up to $350k each, A 10% deposit will leave some cash left over for stamps+costs+Lmi. I would see what your broker suggests is possible and to determine your risk tolerance etc.
    Continuing to rent very cheaply and buying 2 slightly negative to neutral cashflow lower cost places is probably the least risky option. Paying down a huge PPOR loan is harder.
     
    bob shovel likes this.
  6. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    ej89 likes this.