How crazy am I for seriously considering an OTP for a PPOR in Sydney?

So essentially, I’m early 30s, I’m a first time home buyer and I’m wanting to get into the market for a PPOR.

I’m a person that has convenience as top of his list and is willing to give up a lot to get it, so all my searching thus far has been:

• Within 30 minutes from work (CBD)
• Within a budget of 640 or so k
• The above two points essentially rules out anything freestanding so from here on, assume I’m talking about apartments
• Close to public transport
• Garbage chute and/or elevator

The thing is, in my 2 months or so of research I’ve been exploring both Otp and existing apartments and just generally found that the existing ones are either missing a little something, or if they’re not missing anything, then they’re out of my price range.

Ok so this has devolved into rambling so here are my key questions:
1) if the price is significantly better for what you get in an otp place, should I still dismiss it by virtue of it being Otp? For example:
The siding in Petersham - 630k for a 1 bedder
The Siding - 287-309 Trafalgar Street, Petersham, NSW 2049 | Domain
Vs
Rosebery 665 - 685 - for a 1 bedder with car space. Very new and pretty but very out of the way and (IMO) a worse suburb than petersham
504/4 Galara Street, Rosebery NSW 2018 | Domain
Vs
Newtown 570k - for a 1 bedder and car spot. Price is right but it’s a real fixer upper that would need the kitchen ripped out before I’d consider living there
11/48-52 Darley Street, Newtown NSW 2042 | Domain

So those are just a few examples of many, I’ll stop here though, help me navigate this decision please?

 

Ppor is whatever you want, and clearly you want shiny, but....

do you understand why people would say you are crazy to consider otp? Are you satisfied that people are wrong about the risks, or you can handle the risks (like a low val or lower growth)?

also have you considered (and dismissed) alternatives, such as renting?

 

Don't do it.

You have a possibly short window to pick up an established apartment for a decent price - one that's fully renovated if that's what you prefer. The older the better.

 

thanks for the response! Ltv will roughly be 80% I’m refusing to pay lmi so will always try and keep it around there

 

what’s the thinking behind this?? Is it simply implied that if it’s stayed up for 10 years, the chances of it staying up for next 20 is good? Or is there something else about how things were built a long time ago??

 

"refuse" is a strong word - what's your issue with LMI?

 

I guess my issue is that I’d be renting for the rest of my life then, which is ok, but I have a deposit kind of ready to go, and sure I could shove it all in the stock market, but is that wise? Could housing ever get completely unaffordable for a guy like me who really values being close to the action?

I’m worried that one day, anything east of Auburn will just be crazy expensive one day and I’ll be stuck renting forever.

 

One option is renting and buying investment property elsewhere so you still have exposure to property.

what will happen if you have a partner, family etc?

 

ahhh I’ve just always been a bit price conscious, I don’t really believe in spending money on “nothing” so to speak and to me, that’s what LMI feels like, it’s a cost of not having money. So I’d rather just pick a cheaper option instead of pay that fee.

 

Interest is also the cost of not having money, which you're happy to pay?

 

Missing what exactly?

 

So if the valuation comes in 10% low you can come up with the cash?

You get higher leverage for lmi. People often pay lmi so that they can use the extra cash elsewhere pr as a buffer.

interesting that price conscious does not include opportunity cost.

 

If you can afford to avoid it then that's generally preferred, typically get a better rate when 80% LVR or less too. However some may prefer to keep cash buffer or invest the cash elsewhere, depends what's best for you/your situation.

 

The sheen.

 

Isn't OP's budget of sub 650k also eligible for first home buyer benefits (free stamp)? I imagine you'll pay more than LMI in inflated prices due to competing with other FHB.

 

I don't see it as "nothing", I see it in some ways as insurance. You're going to tell me LMI insures the banks and not you, but I would disagree - I'd personally feel pretty safe having an extra 65k in my account especially in these times.

 

Different Strokes for different folks - just because it's best for you doesn't mean it's best for everyone. In some cases being in LMI territory for an OTP apartment rules out a lot of lenders and in general applications with LMI are tougher to get approved so it really depends on the individual's circumstances.

OP may be eligible for the FHLDS if buying new, removing LMI when LVR >80% though.

*I'm not advocating OTP purchases*

 

No I get it, but the fact that he used the word "refuse" indicates to me that it's not even on his radar, even if it was one of the scenarios where it makes sense to use.

It's an extremely powerful tool to have in your toolbox, but it seems like OP has taken it out of the toolbox and tossed it over the fence.

 

Originally coming into this thread I was thinking, "well if its for a PPOR, then its all personal choice and whatever".

But if you're someone that is trying to be "price conscious" and weighing in a significant amount of financial considerations into the purchase - then I would say yes, you are crazy!