I messed up, what is my best option?

Discussion in 'Investment Strategy' started by C4tg1rl, 1st Aug, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
  1. C4tg1rl

    C4tg1rl Member

    Joined:
    28th Mar, 2019
    Posts:
    16
    Location:
    Melbourne
    Sorry this is long but I feel like I need to make
    my situation clear.

    I’m 25 and got sucked in to the H&L thing, purchased 400sqm land for 310k in nov 17. No partner just me. Due to title in feb. I got a rebate from the developer of 35k - which is good.. but I doubt I could sell the block as there’s identical blocks available and the buyer could get a rebate. My rebate doesn’t apply if I nominate the land. I’m pretty certain I won’t have any luck selling the land, so if I don’t settle I’d lose my deposit (20k) whatever, but the scary thing is the developers can then sue me?

    Originally I wanted to build a nice 4br 2bth 2 car double storey 2 living areas and a decent yard sized house and live in it. It’s 30k north from the city (mickleham) and yes I know, endless land.

    I got a good block in the best area of the estate, walking distance to schools, parks and shops, which is what I wanted.

    I earn a lot and have a big deposit (200-250k deposit) So my mortgage repayments are close to what I pay in rent now.. didn’t seem like a bad idea at the time.

    Since the settlement is ages away and I’ve had plenty of time to research, now I realise it’s probably an awful investment decision.

    House I want with all the upgrades is around 400k. I know I’m over capitalising but if it’s what I want to live in, I like nice things.

    I also know as a first home buyer, a budget of 750k is probably a bit abnormal, but as I said, I earn a lot.

    I know as a PPOR it’s a purchase made with my heart, not my head, but if I want to set myself up for retirement then it’s probably a bad idea.

    I’m not sure if I should go ahead with it and get the upgraded house and be happy living 30k from the city which is quite far.. or lose the land lose my deposit and face being sued.

    Maybe I will hate living out there and I’ll regret it. I can’t predict the future. I work from home
    So for me, being close to the city isn’t a worry. I’m thinking for myself obviously.. But of course my partner may work in the city and travel time will be stressful..

    I’m an all or nothing kind of person, I don’t want to meet halfway (which would be to build a smaller cheaper house and not overcapitalise) however my theory is, if I build a cheap house, it’s no better than the townhouse i currently live in (preston) which defeats the purpose of living out there, if I live that far, I want the nice house, otherwise I’d rather stay where I am and continue to rent.

    I could build the smaller house (still 4br 2br but one storey and small and narrow and not good) and rent it out to tenants, but if I rent it out i feel like I’d be better off getting the better house option because, If I get a **** house, I’m sure there’s plenty of other **** houses nearby and the rent competition won’t be ideal. The better house would do better for getting tenants and rental income. But then I’d rather live in it and not rent it out.

    All up with land and the nice house it will probably cost me 750k. Could be slightly less without the stone bench or porcelain tiles etc.. I don’t see houses in mickleham going above that price anytime soon, why would they? So I’m kind of lost. I don’t know what to do. I am young and if I plan carefully I can be set up for life but i don’t want to make a huge mistake and ruin any chance of financial freedom by buying this H&L.. and getting sued scares me. I can take a 20k loss of deposit but more than that seems like a bad idea. How likely are developers to sue? How much would it be? Can I get out with only losing my deposit? Ideally I’d like to hold the land long term and just have the peace of mind that I will always own a family home, I’ve got it out of the way. Everything else I buy will probably be townhouses or small 2br houses closer to the city for investing.

    I’ve just been scared into believing h&L is a horrible idea but maybe it’s not that bad?

    I think I’m the type of investor who would long term, buy, hold, rent, accumulate rental income, maybe sell when I’m older or need to. I don’t think I have the mindset to constantly buy and flip properties, but I’m young and inexperienced so who knows.

    I’m wondering if there’s a way around this, where I can get the big nice house, live in it, but also be able to invest somewhere else and make a good property portfolio. I’m earning about 300-350k + a year before tax and that number is only increasing however as I’m self employed there’s no certainty I can maintain this income forever. But that’s the risk you take being self employed!

    To me it seems like if i can find a way to manage this potential “mistake” by holding 10+ years and also build wealth by investing in better properties, I can still come out on top?

    Opinions? Thoughts? Ideas?
     
  2. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,436
    Location:
    Melbourne
    I don't think it's a major problem TBH.

    I read the title and thought you bough an apartment in the Opal tower or something.

    1. PPOR is a lifestyle choice first, investment second. If you're going to love it, why not?
    2. There's some fans of mickleham here i think ....
    3. You could've done a lot, lot worse.

    I think you should build it and enjoy. Figure things out after that.

    The Y-man
     
    Shazi, Tom87, craigc and 3 others like this.
  3. wombat777

    wombat777 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,565
    Location:
    On a Capital and Income Growth Safari
    Shazi and Cmelderis like this.
  4. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,436
    Location:
    Melbourne
    ...and you'll be close to the airport if you are running late for a flight..... :D

    The Y-man
     
    Ringo1 and Codie like this.
  5. Lacrim

    Lacrim Well-Known Member

    Joined:
    25th Jul, 2015
    Posts:
    6,175
    Location:
    Australia
    Live where you KNOW you like to live (if you can afford it). I'd rather rent in the suburb I love than buy/own in one I don't.
     
    Shazi likes this.
  6. Joynz

    Joynz Well-Known Member

    Joined:
    5th Apr, 2016
    Posts:
    5,751
    Location:
    Melbourne
    I’m intrigued by what your occupation is? $350,000 for working from home at 25 seems unusually high.
     
    Curoch, Shazi, Hetty and 2 others like this.
  7. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,436
    Location:
    Melbourne
    I really like the awareness you have that "this isn't going to last forever" and that "750k is a lot" mentality.

    It actually speaks loads about you (in a good way).

    Looked at another way, your "disaster" is that you are in a deal where you end up with a house that it about 2.5 times your annual income.

    Two things;
    1. Many people buy houses that are over 5 times their income.
    2. IMHO 750k for a house *anywhere* (allegedly) in melbourne is not extravagant nor abnormal. We were absolute tightwads on a combined income not even close to yours, and we bought a $600k house as our first PPOR!

    The Y-man
     
  8. Codie

    Codie Well-Known Member

    Joined:
    6th Mar, 2018
    Posts:
    1,623
    Location:
    Brisbane
    Instagram influencer?
     
    MissMel, MRO and TMNT like this.
  9. Air_Bender

    Air_Bender Well-Known Member

    Joined:
    9th Jan, 2016
    Posts:
    691
    Location:
    Melbourne
    My money's on gaming. Online gaming to be more precise.

    Or a professional gambler.
     
  10. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    3rd Jun, 2015
    Posts:
    11,331
    Location:
    Perth
    I think at your age with that income it's not the end of the world - in fact it might not even be a mistake. Yes there is the chance you're over capitalising but 80% of people do that for their PPOR.
    H&L is not a terrible thing. Plenty of people choose to do it and make money out of it - yes some lose money - but eyes wide open and a long term strategy will iron out any kinks.
    I say build your dream home and make sure you have a good offset package or something similar to keep saving into so you can get your first IP then keep going forwards in the plan to generate a long term portfolio.
    By the way. Well done on considering all the aspects of this decision. Certainly you could sell the land at a loss now and quite quickly make up the lost money with your income but you will need to buy a PPOR eventually so it's really a decision of Mickleham or something else.
     
    Shazi likes this.
  11. EN710

    EN710 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,218
    Location:
    Melburn
    Doesn't sound like you are f up, more like some buyers remorse.

    It doesn't sound that bad. If you want what you want and can afford it, why not? I'd say just make the decision (whichever that is) and stick with it.
     
    Beano and fobo like this.
  12. Ketsle

    Ketsle Well-Known Member

    Joined:
    3rd Sep, 2018
    Posts:
    424
    Location:
    Perth
    Take a deep breath.
     
    Biggbird and Shazi like this.
  13. fobo

    fobo Well-Known Member

    Joined:
    17th Mar, 2017
    Posts:
    101
    Location:
    Sydney
    single on 350k a year its not a big deal at all? Just hold off building until you have a big chunk saved up

    Some kind of software developer Im guessing?
     
  14. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,192
    Location:
    Kimberley and NZ
    Just build what you would like to live in and enjoy it. The plot sounds well located. There's no big deal other than it sounds like you're getting mixed up between what you'd want as a ppor and what makes the most sense as an IP. You're young and on a very good wage so should be in a position to buy an IP before too long.
     
    Shazi likes this.
  15. TMNT

    TMNT Well-Known Member

    Joined:
    23rd Jul, 2015
    Posts:
    5,572
    Location:
    Melbourne
    I reckon we won't see op again.
    Verycommon amongst young people behaviour
     
    Danyool and Shazi like this.
  16. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
  17. Omnidragon

    Omnidragon Well-Known Member

    Joined:
    17th Oct, 2015
    Posts:
    1,693
    Location:
    Victoria
    Just settle it?
     
  18. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,345
    Location:
    Brisbane
    The way things are going there will be no planes flying :-(
     
  19. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,436
    Location:
    Melbourne
    Oh well, a nice skid pan and drag strip for the likes of @datto .....


    The Y-man
     
    datto likes this.
  20. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    Now ya talking!
     

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia