Invest in RE or ETF? Please advise

Discussion in 'Investment Strategy' started by DreamingFI, 16th Feb, 2020.

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

    DreamingFI Member

    Joined:
    16th Feb, 2020
    Posts:
    16
    Location:
    Sydney
    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 :)
     
  2. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,707
    Location:
    Gold Coast
    Option :3: Rentvesting?
     
  3. Archaon

    Archaon Well-Known Member

    Joined:
    20th Mar, 2017
    Posts:
    1,848
    Location:
    Newcastle
    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.
     
  4. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    6,308
    Location:
    It's All About Me.
    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.
     
    mikey7, Archaon and kierank like this.
  5. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,700
    Location:
    Melbourne
    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
     
  6. luckyP

    luckyP Well-Known Member

    Joined:
    5th Feb, 2020
    Posts:
    74
    Location:
    Sydney
    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.
     
  7. DreamingFI

    DreamingFI Member

    Joined:
    16th Feb, 2020
    Posts:
    16
    Location:
    Sydney
    Thanks kierank, but isn't #2 that I mentioned called rentvesting?
     
    kierank likes this.
  8. kierank

    kierank Well-Known Member

    Joined:
    10th Oct, 2005
    Posts:
    7,707
    Location:
    Gold Coast
    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
     
  9. DreamingFI

    DreamingFI Member

    Joined:
    16th Feb, 2020
    Posts:
    16
    Location:
    Sydney
    I see. haven't looked beyond Sydney. Will give it a thought.
     
    kierank likes this.
  10. KJA182

    KJA182 Well-Known Member

    Joined:
    5th Sep, 2018
    Posts:
    70
    Location:
    Sydney
    Either ETFs or a high depreciation apartment interstate (e.g. bris)
     
  11. DreamingFI

    DreamingFI Member

    Joined:
    16th Feb, 2020
    Posts:
    16
    Location:
    Sydney
    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.
     
  12. DreamingFI

    DreamingFI Member

    Joined:
    16th Feb, 2020
    Posts:
    16
    Location:
    Sydney
    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.
     
  13. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    8,920
    Location:
    Melbourne
    Limiting belief right there - don't take that spiel of "time in rather than timing" for granted. Timing is everything - be flexible, be adaptive, be patient, but take profits when you can.

    The Y-man
     
    Lauren350 likes this.
  14. croseks

    croseks Well-Known Member

    Joined:
    9th Oct, 2018
    Posts:
    184
    Location:
    Melbourne
    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.
     
    kierank likes this.