My conundrum (when to buy)

Discussion in 'Investment Strategy' started by Alfiesausagedog, 24th Nov, 2016.

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

    Alfiesausagedog Well-Known Member

    Joined:
    16th Sep, 2016
    Posts:
    59
    Location:
    Brisbane
    Howdy guys,

    I thought I'd share my current dilemma to find out what everyones thoughts were on the matter.

    My wife and I are in our mid-20's and keen to achieve financial freedom (income replacement) through property investing. Currently, we do not own any property.

    Although we have little savings currently (paying off a wedding) we are now in a position to start saving quickly over the following 12 months. We expect to be able to save approximately $35k by the end of next year (2017).

    The issue is, in 2018 my wife will be leaving work to study full-time for 2 years, during which time our ability to save will be minimal. The course is interstate which will require us to relocate once I find suitable work. I do not expect to be able to increase my salary when we move.

    Once my wife graduates, nature dictates we will be looking to start a family, which we plan will be roughly 2-3 years after she's finished college. Once a mother, the plan is for her to work part-time (the course she's studying will allow her to earn better money part-time).

    This means that in terms of maximum saving ability, we have approximately 1 year before she studies and 2-3 years after she graduates.

    The conundrum:

    Considering we will require funds to move interstate, set up costs for her course, as well as backup savings in case of a disaster, I expect the figure we will be able to allocate to acquiring our first property will be $30k (this figure includes stamp duty and BA fees).

    Being such a small amount, I'm undecided whether to purchase something in 12 months and hopefully gain equity, or wait 3+ years until we're in a position to acquire a better property.

    I hate the idea of treading water for 3 years, however I don't to rush into a property which may not perform well enough to justify not waiting 3 more years.

    Thanks guys in advance.

    A
     
  2. Flipper

    Flipper Member

    Joined:
    21st Jul, 2016
    Posts:
    18
    Location:
    Perth
    Fairly similar situation here; we made the decision to wait.

    I know it goes against the "time in the market" approach, however we weren't ready to accept the additional risk without contingency.

    YMMV
     
    Mitchell and WattleIdo like this.
  3. Alfiesausagedog

    Alfiesausagedog Well-Known Member

    Joined:
    16th Sep, 2016
    Posts:
    59
    Location:
    Brisbane
    Interesting.

    Is this a decision you made recently? If you could go back, would you make the same choice again?

    A
     
    Mitchell likes this.
  4. BKRinvesting

    BKRinvesting Well-Known Member

    Joined:
    15th Oct, 2015
    Posts:
    686
    Location:
    Canberra, ACT
    Why not invest the money in other investment methods in the meantime - like a market ETF? It's liquid - so there when you need it (as long as the market isn't mid-crash) ;)
    Plus it'll pay you some dividends for your time.
     
    Mitchell likes this.
  5. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,635
    Location:
    Brisbane
    Search for a higher yielding property and buy it now, should almost pay for itself.
    3 years time look to extract equity or save in the interim.

    Last thing you want is to commit to a property you will be unable to hold long term. Defeats the entire purpose and most likely you will end up going backwards.
     
  6. Tony Fleming

    Tony Fleming Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    706
    Location:
    Sydney
    Couldn't agree more. Just make sure you pick the right property.
     
  7. Do Androids Dream

    Do Androids Dream Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
    102
    Location:
    Sydney
    Welcome to the forum!

    One year, let alone 3 years, is a long time away. A lot can happen.... a lot may not happen.

    Why not proceed with your plan to save your 35k deposit and reevaluate your decision to purchase by the end of next year? :)

    This will be the best possible time to make your decision given your circumstances (eg. Personal, financial, family) and the financial / lending environment.
     
    Last edited: 24th Nov, 2016
    Mitchell and WattleIdo like this.
  8. highlighter

    highlighter Well-Known Member

    Joined:
    2nd Jun, 2016
    Posts:
    930
    Location:
    Australia
    I'm just going to say, I lived in Ireland through the Celtic Tiger and crash. The biggest problem I noticed was oversupply. It seemed to come on like a freight train and it really stalled the market, but the first part of the market to stall (a good year or so before the others) was all those new developments. House and land packages, new suburbs out in the sticks, tiny one bed apartments in the city. No one wanted to live in these places and they were disproportionately bought by inexperienced investors (the bandwagon jumpers who had no idea what they were doing). If you're looking to buy, I'd avoid those like the plague. Quality detached houses in popular, established suburbs - even if the market does crash - will hold their value better and recover quicker in a downturn.
     
  9. Alfiesausagedog

    Alfiesausagedog Well-Known Member

    Joined:
    16th Sep, 2016
    Posts:
    59
    Location:
    Brisbane
    You speak a lot of sense. I'm the type of person who likes to plan things as far ahead as possible, I guess my best option will be to reassess my situation once I have the deposit ready.

    You make a good point. One thing I'd hate to do is rush in to a decision and end up worse off after 2-3 years.
     
  10. kitdoctor

    kitdoctor Well-Known Member

    Joined:
    31st Jul, 2015
    Posts:
    494
    Location:
    Darwin
    You might also want to do some reading of Phillip Anderson's work who believes real estate follows an 18 year cycle at a macro scale. He predicts a major crash in 2025/2026 and warns about buying property too close the peak.
     
  11. Angel

    Angel Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    5,322
    Location:
    Paradise, Brisbane
    Where do you want to live and what style of property? If you can bare to live in a high rise apartment near the CBD, then hang back for a few years until the developers are literally giving them away to whoever wants to take them. You will get a smorgasbord of places to choose from.

    A young lady at my husband's work bought a low-rise apartment in Fortitude Valley a few years ago and it suits them perfectly. Even with a young child. She works in the Valley and her hubby cycles to Newstead.
     
  12. Do Androids Dream

    Do Androids Dream Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
    102
    Location:
    Sydney
    I understand where you're coming from and by all means, continue to plan for your future. It's great to do so and I do too. However, some flexibility with your planning is very helpful too so you can seize opportunities as they come up. This is especially important for buying investments, as you'll discover along the way when you take into account yield, growth, location, interest rates, etc., in a year's time. :)
     
  13. Jessica732

    Jessica732 Member

    Joined:
    22nd Nov, 2016
    Posts:
    9
    Location:
    Strathpine
    We were like you and decided to try and save as much as possible in a short amount of time - we still kept an eye on the market, had a strict budget and ended up buying a 3 bedroom house in Strathpine, Brisbane for $280K. We only had a 15K deposit. It needed some work but my partner has a lot of tradie friends - most buyers were turned off the property because the seller had gotten a B&P done and it indicated termite damage, and the shower was leaking through to the other side of the linen closet, house had been uninhabited for about 2 years and it was super mouldy. We got them to agree to an invasive termite inspection which found the damage was minimal but still managed to knock 10K off the price. Property has increased $25K in a year and that doesn't take into consideration the renovations we've done. We're now looking at buying another property to live in, and will be renting our current house out for $360/week (which is more than our P&I repayments!). By all means save as much as you can but also keep an eye out for a bargain property that could be a good investment. Also if you rent while you're interstate, there are all sorts of tax deductions you can make on an investment property.
     
    Shankiedoodle likes this.
  14. Alfiesausagedog

    Alfiesausagedog Well-Known Member

    Joined:
    16th Sep, 2016
    Posts:
    59
    Location:
    Brisbane
    I remember listening to a recent inverview with him (about 6 months ago) and he was predicting a signifigant crash to occur within the following 12-18 months.
     
  15. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    3,472
    Location:
    NSW
    A little wisdom from Solomon: Prepare your work outside, and make it fit for yourself in the field; and afterwards build your house. Proverbs 24:27

    So if it were me I'd get the careers sorted first. That way you'll get a better property with better prospects. But don't forget to revisit the investing goal once that's sorted.
     
    Patamea, Sackie, Perthguy and 3 others like this.
  16. Flipper

    Flipper Member

    Joined:
    21st Jul, 2016
    Posts:
    18
    Location:
    Perth
    Late reply, sorry.

    Yes fairly recent; we made the decision approx. May 2016. Would do it again. Much better position to pull the trigger already; getting better with every month. We are fortunate with the timing in that the Perth market is cooling/cold.
     
    Shankiedoodle and Perthguy like this.
  17. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    11,760
    Location:
    Perth
    Cooling/cold? It's practically dead! :p

    That's not true although it seems like it. Lot's of places I am following are going under offer. It's just that prices are way down on 2 years ago.
     
    Flipper likes this.
  18. Flipper

    Flipper Member

    Joined:
    21st Jul, 2016
    Posts:
    18
    Location:
    Perth
    Yes you're right - I was speaking in terms of affordability. Plenty on my watchlist under offer also!
     
    Perthguy likes this.
  19. aussieB

    aussieB Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    364
    Location:
    Darwin
    If you don't mind me asking, what course is your wife going to study ?