Newbie-Start from Scratch or persevere?

Hi all,
I've spent many years occasionally diving deep into Somersoft and Propertychat threads as an interest in property has always led me back to it! I thought it was about time to sign in and post something.

I'm a 38 year old Brisvegan Male, I'm married, 2 children, live in an Ashgrovian Qlder in Ashgrove. My wife and I have jobs that pay around 120,000 each before tax a year and I am mortgaged up to the high heaven!

I've dreamed for a long time of building my own property portfolio, but I don't mind admitting that a lust for the material home (Ashgrovian Qlder) along with a decent income and hungry lenders has led me, in my view, away from that possibility.

Please tell me I'm wrong -- Our home (purchased in 2014) is probably valued around 890,000, my repayment remaining is 730,000 (including a 50,000 LOC which is already funding a UK investment that won't pay off for another 5-10 years). As I said, my wife and I are on 120,000 a year before tax and I have no other debts. For the LOC and our Home loan we pay around 3700 a month (we've partly fixed and partly standard variable on the loan). We have only about 20,000 in savings currently, which I've lumped into the loan as an offset also.

My conundrum involves many factors, including disrupting my childrens lives etc. but do I

1. Continue to knuckle down for a while, save as much money as I can, and rely on a property price rise (Capital Gain) on my Ashgrove home and look to build more attractive equity to play with later?
2. Get out while I can, look to rent in a less affluent suburb, build way more savings, coupled with the equity and look to build a property portfolio from scratch?

Apologies if the questions seem silly, but I thought that'd be a good one to drop from the start!
Thanks for having me!

 

You should sell up, move to Woodridge and go hard investing.

 

I'd love to do that Biz, unfortunately my kids schooling is a sticking point in more ways than one. I thought more the possibility of selling or turning the PPOR into a rental and then renting a property to live in, in Stafford, Everton Park or the like (closer to kids school). My extended family insist that I sit on the Ashgrove home and pay down the mortgage and rely on CG (the traditional way).

 

There is only 2 questions to ask yourself,?.
What will the "Wife"-Kids think?.
And what happens as Brisbane is a strange market in real estate,you could well sell now and never be able to buy back in when as it always does the price just keep going up..imho..

 

If you can scratch together a deposit you should be able to keep your house and buy one or two properties that are close to neutrally geared. You're on 240k so you should be able to swing it.

 

At 38 and on a combined income of $240K, you should be making substantial payments into your mortgage offset account.

Comfortable mortgage payments are usually reckoned to be a third of take home pay. Put at least that amount into the payments/offset every month, and the mortgage should reduce rapidly.

And don't blame "hungry lenders", interest rates are still close to a record low level.
Marg

 

I probably should have though about that statement "hungry lenders" , but in my case I meant it at the individual level, our current lender has been fantastic. The lenders we initially spoke to were happy to lend us the world (much, much more than we realised we could afford), but luckily common sense prevailed, at least a little bit.

 

Yes, it really is the responsibility of the borrower to decide how much they can comfortably repay.

I remember my daughter (an accountant!) was horrified when told how much they could borrow based on their income, they finished up borrowing about half of the offered maximum as that was what she felt they were comfortable with repaying.
Marg

 

It's none of the extended family's business!! Tell them to mind their own!!!

What's most important is what do you and your wife think? If you are both comfortable with renting somewhere in the same school area that is considerably cheaper, and then convert your house to an IP, then why not do it?

 

Don't know if we have the full story - but based on what has been provided, you need to get in to a serious saving routine. This is assuming there is not a pile of assets elsewhere.

You have to live off one salary and pump the other directly in to the mortgage or offset. Get that down to a manageable figure over 3 years and then look at investing.

Normal way is to save hard, invest well and then buy a nice PPOR. You've done it in reverse it seems.

 

240K after tax is approx 175K
your ppor payment 45K
leaves 130k for whatever expenses..

have you not been honest with us...maybe secretly feeding another wife perhaps?

 

Agreed, we're on just over half that and our monthly payments for our PPOR are around the same, but we're managing to slowly save and pay down two other IP loans as well.

You could live on $30k/year and save a deposit for $400k worth of property. Wouldn't be luxurious by any means, but still very doable.

 

If your expenses are out of control then it won't matter what you invest in.....the problem lies in behavior.

Just for interests sake...could you shove one wage onto the mortgage and live on the other? If you can't then you might well have a spending problem...

 

Absolutely, life is way too short to worry about what other people think

 

No dishonesty here.....I've tried to give you as much honest detail as I can, but starting to regret that as I'm getting a bit of heat. I work in IT, my wife is a Senior in a Health field, I have two kids in a catholic school who do some extra curricular stuff, other incidentals, and would freely admit we probably spend too much on a monthly basis currently mainly in groceries and healthcare. Car is fully paid off, have a credit card debt owing about 100 dollars. Bought this house in 2014 for around 800,000, but mortgage is still around 730,000. I do have other assets tied up in a business in the UK, but that is money I have invested (from my Line of Credit above) directly into that business, and have as yet seen no return from that.

 

Thanks Rolf. Their contribution is Love and Advice. I also ended up using the lender my family use who managed to structure the loan so I could avoid Mortgage Insurance and have a Line of Credit for a UK investment, but it was only the relationship I used to my advantage.

 

Thanks @hammer, I agree our spending behaviour is an issue. That's probably the way we need to go. We would spend the majority of our money on Healthcare (unavoidable) and groceries (fixable). My wife and I are going to look to shop mostly at the cheaper supermarkets now as opposed to the big 2. Another great idea a friend had is to have a two week hiatus from grocery shopping and try and survive on what we have (a little hard with children, but we'll give it a shot).

 

No regrets mate. People are just confused about how you're struggling with $175k net income and "only" $45k in mortgage repayments. I'd be digging a little deeper into your spending habits, as I doubt that health care and groceries are what's holding you back.

As a high-level,very conservative guess for annual expenses:
$_45k - Mortgage Repayments
$_20k - School Fees for 2 kids (and levies and extras)
$_15k - Out of School Hours Care for 2 kids
$__6k - Health Insurance (top cover + extras)
$_31k - Groceries @ $600/wk (does anyone really spend this much??)
$__5k - Car running expenses
$__5k - Utility/home insurance/internet/Foxtel bills
$__5k - Rates / Water
$__3k - Clothing
$__1k - House Maintenance
$__9k - Doctor/Dentist/Pharma
$__5k - Other
$150k - TOTAL

That leaves you with ~$25k/yr, and there's plenty of scope to tighten the 'budget' I've scratched together up there. Obviously I don't presume to know your personal situation, but you can see why we might be confused about your post.

What exactly is the problem? Are you stressing about having no cash left to invest? or the size of the mortgage?

 

@Phase2, Thanks for the breakdown. I am not struggling financially at all in my present situation so a little confused as to that question. My post is more about the fact I don't think I can build a property portfolio now with the debt I have (high LVR, low savings at the present moment), and mainly to ask experts, who know more than me (as a newbie), whether I continue to pay down a mortgage or sell and rent to get a better chance at that sooner? Maybe I'm just being impatient.

Maybe my first post isn't worded well also, and I think in retrospect I should've left out all of the money detail, it seems to have inflamed people, but your almost close to the mark with that breakdown.

Groceries are lower, but I would include dinners out, work lunches, weddings, travel etc. (and as I mentioned we need to curb that spending, I am aware of that). There have been several out of pocket expenses with major surgery in the last couple of years. The 20,000 we managed to save last year went onto our home loan as mentioned in my original post. We also paid down our 5 grand credit card and only owe 100 or so dollars (as mentioned earlier). We have also fully paid for a car with cash around 30,000 after trade in (sorry I should've put that in, but just occurred to me it might be what people are searching for), in the last financial year. The previous year my wife's mother fell very ill in a 3rd world country and I won't even go into the issues we had there to get her alive to an Australian hospital (assisted flight and legal fight with Insurer), but it sucked up a similar amount of money.

Not so much stressing\struggling, just keen to get into property and wondering the best strategy to suit. So didn't really want to give full details on our spending, but now I've done that I hope it's enough for people to trust me on that front, I've got nothing I am willingly hiding, just a question about Renting or Owning property and how it could help me get a leg into Property Investing. I expect this year we can save much more given we don't have any more unknown expenses.
I'm also a little scared of posting anything else now...so please go easy on me! It's my first ever forum also, let alone property forum!