I am upgrading and buying a place to live in - Free standing townhouse or wait for a house?

Discussion in 'What to buy' started by Daniel999, 13th Oct, 2019.

Join Australia's most dynamic and respected property investment community
  1. Daniel999

    Daniel999 Member

    Joined:
    13th Oct, 2019
    Posts:
    5
    Location:
    Sydney
    Hello I am new to PropertyChat and I have looked at a few old threads on Townhouse vs house. However I am not investing, I am buying a place to live in. I have some questions and I would appreciate some advice.

    Background:

    Currently I own and live in a 2 bedroom unit in Sydney's upper North Shore, it is a 40+ year old block. The market has come down in the last 18 months and now it is going back up so I am using this opportunity to upgrade.

    Initially I wanted to buy a freestanding house but after 10 months search I haven't found a suitable home. Now the price is rebounding quickly and I am getting priced out again, because even though I am upgrading but the prices of houses are gaining more than my unit. This is why I began to consider townhouses, in the same suburb to where I am living.

    Where I am at:

    This week I put in an offer for a townhouse and it was accepted. I haven't signed the contract yet.

    The townhouse is freestanding, 3 bedrooms, full brick, 25 years old. It has 140sqm building area allocated with 320sqm land. 1.5k from the shopping centre and 2k from train station. It is not easy to find a freestanding townhouse on 300+sqm land. It is almost like a house anyway. The location is also good. There are about 30 townhouses in the complex. It is in the same suburb to where I am currently living and the price is about 80k lower than a 3 bedroom fibro/timber/500sqm house in the same area.

    However the strata for this townhouse is 1100pq (including water), and they are currently taking special levy so it is 1400pq because they are doing a project to paint the exteriors for every townhouse in the block, it is a very large block, the total land area is almost 20,000 sqm. They have a common playground and barbeque area (no swimming pool).

    I am not a property investor, my plan is buying a home to live in for long term, for decades to come.

    I understand that if I buy a house then while there is no strata but I will have to pay for building insurance and any maintenance/repair myself. I found the below web article, and I worked out even after I removed several repair items such as damp repair and gardening, to live in a house the maintenance/repair is still around 4000 per year (on 5 year total). From my research, building insurance for a 3 bed house is about 1000 per year. So the total upkeep will be approximately $5000, per year, for owning a house. Will you say this a good estimate?

    The web article is here (Retirement Community News — Melbourne Retirement Communities).

    So my questions are:

    1) Should I pull the trigger and buy this townhouse? Or should I wait for new listings of houses to come on the market? My concern is we are already mid October and this Spring hasn't seen many new listings and the prices in Sydney are rebounding very quickly, it went up 4.6% in 4 months. And in the area I am looking to buy the prices are reflecting the recovery trend. Right now I can spend an additional 80k to buy a house, but my concern is if I wait another 2 or 3 months the prices might go up further and move beyond my reach. So the alternative is buying this townhouse, but the strata is pretty expensive.

    2) The estimate for house maintenance/repair/insurance (yearly average based on 5 years total), is $5000 per year. Based on this estimate, then if my plan is to live in the property for 20 years then the upkeep cost for a house is almost the same as the strata fees! I never owned a house before and most of my friends who own houses don't keep records, but they did tell me once a few years they have to fork out tens and thousands of dollars for major repairs. Do you think an estimate of 5000 dollars yearly average for upkeep + insurance for a house is a good estimate?

    Thank you.
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    2,514
    Location:
    Australia
    Just because you plan on living there forever doesnt mean you will.

    There has to be some consideration for long term growth prospects here. For most people, the ppor is the retirement fund and the helping the kids buy a place.

    Did you consider that a downturn is when you should be upgrading, and not an upturn?

    Esp given that (small) price difference, objectively the fibro with land would rise more long term, just on the land content alone. But there are lots of possibilities. Eg moving to the next (cheaper) suburb. The problem with strata is that you cant control it.

    Townhouse without pool/lifts is ok, but you are more in control with a house. You can choose how and when to fix. Townhouse you have to pay to maintain the driveway even if you drive a vespa and your neighbour a hummer.

    Look most of your post is emotional and based on lack of experience. The upkeep on a house benefits you and you only. The use/damage and upkeep on strata is shared. Having owned both, experience says the house should be cheaper IF no structural issues.
     
    Last edited: 13th Oct, 2019
  3. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    6,913
    Location:
    Brisbane
    I would say that having once owned a unit in a block of five, bought brand new back in about 1978, it allowed me the pleasure of never having to deal with a body corporate ever again. It was a nightmare dealing with one of the owners and I've never touched body corporate again.

    My sister-in-law owns in a complex and everybody seems to hate her because she wants to improve things and makes suggestions and others (by now) will shut any idea down just because it comes from her. She is miserable, but loves her unit and doesn't want to leave due to its good position on the coast.

    I think $1100 per quarter is very high, but really don't know. Add in the special levy and you are paying a lot for something you don't even see.

    I also didn't read the linked article, but there's no way we would spend $5k a year maintenance on any of the houses we've ever owned.

    We do have to paint every ten years or so, but that is bringing the house back up to sparkling and gets us better rent, or at least better chance of getting a tenant than a badly maintained house.

    We've just updated two houses, put in new kitchens and bathrooms. One bathroom we installed 15 years ago and it was pretty ordinary back then, but we had no spare cash so did it on the cheap. The kitchen in that house was from the 1930s but freshly painted and new bench tops. Tenant loved it and didn't want us to install a new kitchen for an extra $20 per week. It suited the house, functioned well, was clean and worked well, but wouldn't pass the "can I live with this kitchen" test many tenants would pose.

    The other house we'd put in a kitchen on purchase, 20 years ago and the bathroom was also pretty ordinary, but we'd not updated it in 20 years and both needed updating.

    So, long story short, unless you are updating old kitchens and bathrooms, painting inside or out, the maintenance on a house is minimal in my long experience of owning just houses.

    For me, I'd stretch for the house and land and possible opportunities that could bring in the future.
     
    Archaon and Daniel999 like this.
  4. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,164
    Location:
    Qld
    We must have been lucky - we owned units in two complexes with no issues with BC, on the contrary, both were keen to maintain the properties well, as well as instigate improvements. One was in a block of 8, one in a complex of 80!

    I would guess your townhouse complex has an on-site manager. With only 30 in the complex, the manager’s salary will account for the major expense.

    You may find better value in a smaller complex with no on-site manager, or a larger complex where the cost is spread over more owners.
     
  5. Daniel999

    Daniel999 Member

    Joined:
    13th Oct, 2019
    Posts:
    5
    Location:
    Sydney
    "Did you consider that a downturn is when you should be upgrading, and not an upturn?"

    Yep, that's is why I started looking back at the beginning of the year, when it was approaching the bottom. However at the time not many people were selling, so most houses were either in bad locations or terrible conditions. Then starting from June they started cutting the interest rates and also APRA released the lending standard, then the market suddenly went from downturn to boom in a period of 2-3 months!

    And now the house prices are going up 1.9% per month I am concerned the prices will move beyond my ability soon.

    Furthermore the listings are so low, so I haven't seen houses within my budget. I know there are 3 bedroom houses I can afford, but the owners are not selling them because it looks like people are waiting for the prices to go back to 2017 level.

    Another possibility is staying where I am and wait for the next downturn, but from what we've seen this government will do everything in their power to jack up the property price in the foreseeable future, because they are using housing price as a leverage to make up for the slowing economy. Admittedly what I am saying here is FOMO, I used to think those people who bought in upturn market were stupid but now I am in the similar predicament I can understand the pains of first home buyers :(
     
  6. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    2,514
    Location:
    Australia
    Are you looking for analysis, or sympathy?

    No one knows what will happen. Your existing place would also have gone up, yes? Feel for those who dont own.
     
    Last edited: 13th Oct, 2019
  7. Daniel999

    Daniel999 Member

    Joined:
    13th Oct, 2019
    Posts:
    5
    Location:
    Sydney
    Looking for analysis by providing a background to the situation.

    If you are not interested then I am totally fine. But please don't be condescending.
     
  8. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    2,514
    Location:
    Australia
    If prices fell again, will you act quickly and upgrade, or just think wait a little longer so i can afford a better place?

    Remember you would just have seen a downturn with low stock, then an upturn, then a downturn again.
     
  9. Stoffo

    Stoffo Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    1,347
    Location:
    Sydney
    What do you intend to do with the current ppor ?

    Buy a house, get a long settlement.

    Figures for maintenance are based on Joe average who paints every 8 years and has a nice garden (you don't have to spend that, and plenty don't )

    Buy the right house and your maintenance cost will be way less than strata (brick with aluminum windows)
     
  10. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    4,656
    Location:
    Melbourne

    I read @Daniel999 post as saying $5kpa including all outgoings - i.e. rates, insurance, etc.


    The Y-man
     
  11. Daniel999

    Daniel999 Member

    Joined:
    13th Oct, 2019
    Posts:
    5
    Location:
    Sydney
    The estimate of 5k per year include repair/maintenance + home building insurance. (i.e. a total of $20k for maintenance/repair in 5 years, so $4k per year. But the home building insurance is roughly $1k per year, adding up to a total is $5k per year). Does this sound right to you?
     
  12. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    4,656
    Location:
    Melbourne
    What about rates? It's a big chunk of my bills. $5k a year would be pretty safe I say - I use that figure for my IPs but that includes land tax.

    The Y-man
     
  13. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    4,656
    Location:
    Melbourne
    @Daniel999

    Hint on timing - I prefer to buy at Christmas ~ especially those passed in just before Christmas.

    The Y-man
     
    Daniel999 and Archaon like this.
  14. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    2,514
    Location:
    Australia
    Rates are payable whether house or townhouse, and probably not much different.
     
    Angel likes this.
  15. Angel

    Angel Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    4,154
    Location:
    Paradise, Brisbane
    Trust this helps.....
    Where we own in Moreton Bay, QLD, the rates, insurance and water comes to somewhere between $4k and $5 per annum per property. Any maintenance is on top of that. We own a townhouse right next to the beach and two family homes in middle class suburbs. Strata fees for the TH is $250 per quarter in a 30 year old complex of 5. Our BC is awesome, and these fees are much lower than typical fees. The BC fees approx = building insurance on a house and they get termite inspections and check the roof regularly too. Separate from the BC, some years we spend nothing on maintenance, other years it might be about $2k per property. Average $1k per annum per property. I have been slowly updating whenever "maintenance " is required , eg when the blinds on the balcony doorway fell apart, I updated all the blinds in the TH to ensure they all match.
     
    Last edited: 13th Oct, 2019
    Daniel999 likes this.