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NSW PPoR Shoebox to be lived in, then rented in future

Discussion in 'Where to Buy' started by sydneysider_, 1st Oct, 2015.

  1. sydneysider_

    sydneysider_ New Member

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    Hi guys

    I intend to buy a really small apartment, inner west of Sydney.

    The loans are now approved and I am to pull the trigger soonish.

    What are everyone's opinion on this direction. I plan to live in it for half a decade, and then rent this out if I need to upsize.

    Can anyone point out the flaws in this plan?

    Thanks.
     
  2. monalisa

    monalisa Well-Known Member Premium Member

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    Is it a one bedder you are looking at?

    Sydney market is at its peak, so suggest holding out for a little longer.

    If you really wanted to buy now, I would get a 2 bedder - it would work out better, as these would be better in demand in comparison to a 1 bedder, and overall a better quality asset.

    Also be wary of oversupply :)
     
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  3. monalisa

    monalisa Well-Known Member Premium Member

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    Alternative is, if possible, continue current living arrangements, buy elsewhere in a rising market, then bring money back to Sydney in a couple of years and buy a better quality PPOR - rather than a shoebox.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Children coming along? A spouse coming along?
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Set the loan up as interest only with an offset.

    Park all spare cash in the offset rather than laying down the principal.

    Cheers

    Jamie
     
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  6. EN710

    EN710 Well-Known Member

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    A lot of things happen in half a decade. You might be surprised how your living requirements and wants can change in the next 2 years, let alone 5.

    Get something bigger I say, or like @monalisa said, buy in better market and buy something better later
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    How small is the apartment? Just be aware that if its too small your lender might have issues with it. Just how small "too small" is will vary between lenders.
     
  8. Greyghost

    Greyghost Well-Known Member

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    What about buying somewhere else slightly larger as per monalisa, better growth prospects and in a more favourable stage of the cycle and renting in Sydney? Plus applying what Jamie said above regarding offset funds.

    Be clear on both your investment and personal goals in isolation, one may be sacrificed over the other but at least you will not have a "muddied" situation as I believe you have at present.

    Define then act.

    Why buy a 1 br in Sydney
    Why upgrade in 5 years
    Have you considered where Sydney's cycles May be in 5 years
    What else can you buy elsewhere for same funds
    If you saved for an extra 6 months can you buy something substantially better
    What is the rent vs own opportunity cost
    What wil your earning capacity look like in 5 years
    Where do you want to live now, in 5 years
    Location of your work, family and friends
    Future kids?
    Lifestyle choices

    Etc etc

    Best of luck
    GG
     
    Last edited: 2nd Oct, 2015
  9. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Yeah, why now?
    How about just rent and buy in 2-3 years time after the Sydney market destruction?

    Your call, the market may not self destruct and could go on a little longer, nobody knows.
     
  10. sydneysider_

    sydneysider_ New Member

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    Thanks for all the good feedback everyone. This forum is very informative. A fresh change and air of community compared to most others I have frequented (especially the one named after a famous appliance brand).

    This is a one bedder, but very tiny. Banks have given their opinion and only a one has come back with an approval. Thanks for the heads up regarding oversupply. A quick look at re.com.au with 1 br filter and it really does show... I'm hoping the fact that it is close to the city with 2 mins walk to light rail and normal rail, the chances of it being an easy rent-able property.

    Thanks Jamie, I had never considered this to be an option. Will work out the math and repayments to see if this is at all feasible.

    I've been holding out since 2006.

    The two bedder option will come up once I get a, ahem, lifelong business partner :)
     
  11. sydneysider_

    sydneysider_ New Member

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    Why buy a 1 br in Sydney
    My salary and deposit can't afford any better, within reach of the CBD. I work in the CBD too.

    Why upgrade in 5 years
    I might possibly be coming into additional source of funds within the five years.

    Have you considered where Sydney's cycles May be in 5 years
    No. At this point, the graphs are all yoyo and there doesn't seem to be a cycle. I have not read much on it.

    What else can you buy elsewhere for same funds
    Melbourne CBD apartments, I have thought of moving there.

    If you saved for an extra 6 months can you buy something substantially better
    Possibly, but not a whole lot more can be saved. Salary is limiting

    What is the rent vs own opportunity cost
    I need to figure this one out

    What wil your earning capacity look like in 5 years
    3% pa +, and possibly a senior role which may bump it up higher, by 25%.

    Where do you want to live now, in 5 years
    Sydney.

    Location of your work, family and friends
    Work - Sydney. F&F - Perth primarily :(

    Future kids?
    Non foreseeable at this stage.

    Lifestyle choices
    This is a tough one.
     
  12. monalisa

    monalisa Well-Known Member Premium Member

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    Hi Syd - how much are you looking to spend in Sydney?

    What are your long term goals in terms of investing? Is this just a one off purchase, or are you looking to create wealth through property?

    If you are looking to create wealth through property, I wouldn't be buying a one bedder here or an apartment in Melbourne - as I understand, Melbourne has an over supply, which will impact capital growth, and could be a slower way to create wealth.
     
  13. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    I'd consider @monalisa's suggestion and perhaps look at investing elsewhere. Sydney's pretty much done and will remain flat for many years. Your capital could be put to better use elsewhere and used for a PPOR purchase in the future.
     
  14. EN710

    EN710 Well-Known Member

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    Does it need to be really close to the city? Can you get something quite decent within the that price range, with say, 30 mins travel with public transport?

    City to city wise, you can get much better property say, in Melbourne and Brisbane with the same budget.