Invest in RE or ETF? Please advise

Hi All. My first post here and looking for suggestions on investing to start my FI journey. I have been reading about FIRE lately and it's encouraging to see people from all around sharing their thoughts and experiences.

Long read..please be patient

I have 25K in savings and have been looking at below options -

Option 1 : Take 70-75K loan (10 yr term) through NAB Equity Builder and start building ETF portfolio. I can still manage to save 1k p.m besides my expenses and loan emi, and divert them to individual stocks (not sure yet, just a thought) or add to ETF portfolio.

Option 2 : I do not have any property yet and keen to buy one. Currently renting 2B+2B unit in Western Sydney (Toongabbie) @ 2k rent p.m. Although I started looking to buy something as a PPOR, I learnt that my budget of 500-550K won't fetch me beyond a 1 bedder or so in Hills. (Btw, was planning around Norwest/Bella vista/Baulko/Castle Hill area). Instead of taking a bigger debt (stretching to 700-750k) to buy in a suburb I like to live in , I am thinking to buy something in my budget (2 beds with rental return of ~450 p.w in my area) and stay there for 6 months for FHOG and convert into IP. With IP, I can take advantage of Depreciation schedule & Tax benefits as well every year.

(If I happen to go with option 2, I will need 25-35k extra for deposit+misc. costs which I will borrow from my parents)

Bit of background - 36 M, single income, married with 2 kids. Gross pay 110k + super.

My other investments - Raiz (7.5k) & Spaceship (3k) ; Super is 15k (started work in aus only about a yr and half ago)

Looking at the above options, can you guys please advise which path would be more profitable looking at long term horizon (20-30 yrs)? I understand it makes more sense to diversify portfolio (bit of RE + ETFs) but very much confused which one to start with given my current situation. So looking for suggestions from the achievers

 

Option :3: Rentvesting?

 

Id say your 25k won't get you into a house as yet, perhaps investing in ETF's to grow your deposit as savings accounts offer little to no interest.

Then buy a property as a FHB, live 6-12mths then move out to rent a place where you want to live.

 

If you place the $25k in ETF's will you be happy if it has dropped to $20k right when you need it?

I for one have never viewed the share market as a bank.

Your money, your call though.

 

Option 2 may be difficult given your current status so I would see a broker to establish if that is even viable.

I say this because:
1 - Servicing is going to be an issue
2 - Deposit is going to be an issue, even if family gifts a small amount you are still well in LMI territory so gen savings comes into play.
3 - Your profile may not be the strongest for someone in LMI territory

 

You can apply for the Nab equity product and can invest progressively no need to take all at once. Why 10 years? Go for 15 years.

 

Thanks kierank, but isn't #2 that I mentioned called rentvesting?

 

I read Option 2 as buying in Sydney.

I am proposing you buy say in Brisbane. One would get a nice rental house closer to the CBD for your budget than in Sydney

 

I see. haven't looked beyond Sydney. Will give it a thought.

 

Either ETFs or a high depreciation apartment interstate (e.g. bris)

 

Thanks Archaon. As I mentioned, I can get rest of money from my family as a gift for the initial deposit. The question is whats the better option given the current market scenario.

 

If I would invest in ETF it would be for a very long term so not using it for short term to get returns for bigger deposit.

 

It kind of is, however if you were to forego your FHB and look at buying an IP from the get go, your serviceability should be higher (rental income) therefore you should be able to afford a better IP and still rent where you want to live.