My first buy: ppor for now, IP later

Hey there - I’m a pre-approved first home buyer based in Canberra and am looking to buy in the next three months.

Big picture, I’ll be moving to Sydney in the next 1-2 years (ie enough time to wait out the fhb live-in requirements (being 12 months) and make any tweaks that need doing while I pay down the debt). I have $60k ready to go and have a place on the FHLDS so no LMI on a deposit of >20%. Net income is $5k/month.

I’m in a classic situation which is looking to buy either an inner-city apartment or a townhouse a little further out. Priced $485k and $465k respectively, both 2 bed/2 bath. The apartment is a well respected 2002 build in the CBD and boasts rental of $550-$650 week; OC fees of ~9k pa. The townhouse is almost new, and is literally on the edge of Canberra with new suburbs, schools and shops going up by the month - still a 25 min commute to the CBD (true to Canberra form). Would likely be pulling $360-$450 in rent; ~3.5k OC fees pa.

I would love to hear what your instincts tell you about this choice and which option you think I should go for. My risk appetite is pretty moderate, willing to negatively gear for CG but really want it to be tenanted once I move interstate (initial leaning was towards apartment due to desirable location).

any and all thoughts welcome, would love to hear what you think of this and answer any questions!

 

Hello! I'd say no to the 9k pa Owners Corp fees!

 

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Even $3.5k for a townhouse is high!

 

Thanks guys. What do you consider to be reasonable fees for a complex of townhouses (no pool/lifts)?

 

$2k-$2.5k for apartments would be reasonable. I haven’t looked into townhouses but it would be very dependent on what the OC manages, if the OC only manages the drive way as is the case with some OCs then minimal but if the OC owns the external building then a touch lower than the apartment OC annual fees ?

 

Good Day Upandcomer

Firstly, as general rule of thumb capital growth is usually greater for houses than units/townhouses & I wonder if this is something you have thought on as you can add more value & get greater growth.

have you considered a house? what areas in Canberra are you looking?

your focused moreso on new builds? what about existing? yes, you don't get the same government incentives.

you are aware (over a 30 year loan term)
that is $270,000 in BC/OC fees, that's literally a house in Tasmania or SA or WA, etc etc.
and as a rule of thumb each 100k of debt cost roughly another $100 PW

If this is more of an investment (as will only be your PPOR for a year or two)
then have you looked at the associated costs of all options?

I say this as although your ticking a couple boxes the difference of how this could impact your future is as follows.

1-Purchase that looses 5k PA and yeilds little to no growth for 5 years
2-Purchase that breaks even and has good growth
3-Purchase that makes 2-5k PA & you add value and yeilds good growth.

I really think every asset should be part of the stepping stone to set you up long term and reach your desired retirement income.

Wish you all the best!

 

3.5k pa is fairly normal by Canberra standards for apartments close to the city, even if they dont have lifts.

But 9K pa, run run far away from that place! If its the apartment complex on edge of Braddon next to Dickson, message me. I have friends that own in that complex and can detail some of the issues.