Ready to go on property number 1

Hi all,

I'm a 30 year old female and finally have a 65K for a deposit on my first property (I have been renting from 18 years old and only been earning a decent salary for the past couple of years plus got the rough end of the stick in a divorce). But, moving on from that, I'm currently living in a share house in North Western Sydney paying $100 a week rent and am saving $3000 - $3500 per month. I have a pre approval for 650K.

Now.. I have no idea what I should do.

My short term goal is to have a house or duplex PPOR in Western Sydney (Blacktown vicinity) by 2020. I could buy something now although it would be a stretch, rent it out and continue in share accommodation. Or, move in as PPOR and rent out the rooms to help with the mortgage, but forego tax deductions.

Or, would I be better investing interstate in a growth area using the equity over the next few years to fund a deposit on the 2020 property?

I also know buying off the plan/new is frowned upon, especially in Sydney currently, however I really want to take advantage of no stamp duty and the 10K grant which is a total of 30K I wouldn't be paying on 550K purchase price. I was thinking of either a new townhouse in the Oxley Park area or a new unit in Blacktown with depreciation benefits. I am probably wrong but I thought these are reasonable value considering established townhouses and units are selling for 490K. But, what happens next year when they are all completed around the same time...

Forgot to add that $100 a week rent is what I'm paying for a 3 bedroom house with 3 other sharers, although the lease is in my name and there's always the risk of someone leaving and me having to cover the remaining shares (total rent is $580 per week). I'd like to add this risk into the mix.

Any suggestions will be greatly appreciated.

 

Seems that financially, you probably are better off buying an IP within your budget (interstate?) and remain share-housing, if you don't mind that sort of lifestyle.

Please don't buy off the plan.

 

Hi Ella,

Good work getting back on your feet - that must be a good feeling!

It's hard to say exactly what to do given we don't know much about your income or other expenses. Is it possible to buy something established and new, but not off the plan? Or are they all getting auctioned for $1.2M?

 

I earn 90K pa and have no debt. No credit card, no car loan etc.

The only house at 650K I could afford is a 50+ year old house in Lalor Park or Blacktown which I'm certainly ok with. I've seen a few in that price range in Glendenning and Plumpton also which are probably 25 years old with smaller land sizes.There are newish townhouses in my budget however as a long term investment I'd prefer that chunk of land.

Because my LVR is high, I'm trying to come up with a better strategy than just buying a 650K house in a market that is due for a correction. I want the PPOR within a few years because I want the security for future children.

 

I wouldn't buy a unit or apartment in blacktown. A heap of land has been rezoned R4 so there will be HEAPS going up in the near future. My neighbour has bought two off the plan in a skyrise planned above the station, and now regrets it.

 

That makes sense.

Probably buying something cheaper elsewhere will fit your goals better than maxing yourself out now, especially if the peaking market is a concern for you. ON the other hand - what if Sydney doesn't go down, and your investment doesn't perform? Can you save enough while holding the investment to still buy your PPOR in 3 years?

Just a few scenarios to consider when deciding.

 

Can't help with when/where/what to buy, but after you buy, continue renting in a share house for about 3-4 years after you buy your first IP.
You won't be willing to do this again in the future because as you get older, you just become less flexible and less able to tolerate it, plus every bit more you pour into your IP on top of the interest in the first few years makes an enormous difference. Take advantage of your great opportunity to do this.

 

While I wouldn't buy an apartment there either, its for other reasons. I can see yields being pretty strong long term, but capital gains might not be worth the investment. Good news for investors is that a lot of the approved towers are simply not getting built! Was talking to a town planner the other day who was explaining that there have been approvals for towers Blacktown just north of the station since 2003!

I honestly think with Council's aggressive strategy combining with design excellence requirements, slow gentrification and MASSIVE investment in the CBD from all the huge rates revenue (which is only increasing, as Sydney's most populated and fastest growing LGA), Blacktown will be just fine.

Seriously the precinct just north of the station will have a lot of new towers springing up, they should look good (there's about 9 in the pipeline as of today, I think 12 if you include those still under the DA process), what will follow is all the "lifestyle" stuff like nice cafe's, parks, etc. These will look good and add to the nice looking Blacktown Showground and other investments from council (such as the new park at Bungaribee).

Seriously a lot of the money being made from new places at Marsden Park, etc, is being invested into improving the city.

Disclaimer: I am both biased and very knowledgeable of the area! haha

 

Hi @Ella86

Great job on saving up your deposit !

I don't think your goal needs to be to buy a duplex in a particular location (or a duplex anywhere for that matter). Your goal overall is to acquire assets that will perform well for you. You also are not obliged to spend the full $650k. There are plenty of investors acquiring whole houses for $ amounts far below that. As others have mentioned, perhaps include interstate options in the mix.

The $100 per week in rent that you are paying is lovely and low. It'd be tempting to stay put in that gig for a while.

 

A question for the seasoned investors on here (of which I am NOT so don't take my word as decent advice, just an "idea").

Would 2 in the Logan area (300K - 350K each 3BR) be a decent option over 1 in an already boomed Sydney?

 

OP, I think it's a no brainer for you to buy an IP and keep renting. Reap the tax benefits of both having an IP and enjoy your $100 pw rent, as someone else mentioned, while you can still tolerate sharing a house. Once you live on your own, you'te unlikely to ever be willing to do it again.

As far as off-the-plan, if you go this route be very, very selective about the area, the developer, all the details. I think most off-the-plan stuff now is a bad idea, but there are some good opportunities there to be found. Don't dismiss it outright.

I bought off-the-plan in Sydney last year, and I do have some very good equity based on sales made after completion ($150 - 200K). I've also had a disaster (check my post history), but I have bought from a highly regarded developer, so I'm confident all will be resolved in the end. Be very selective with off-the-plan.

 

I was also weighing up the first home buyer grants. I am even entitled to another 17k (before tax) and mortgage repayment contributions being in defence. But buying an IP abit further out somewhere like Logan or Moreton bay is appearing to be the better option.

 

I'd say to keep renting the sharehouse and go invest some money in Brisbane which is safely within your loan limits. That way you have flexibility in the future for interest rate rises / sharehouse changes.

 

Hi @Ella86, really well done and with your ups and downs, you've done really well and you are still only 30!

I will say something different to everybody else. I would be happy to buy an older sound, habitable house on a good block of land in Blacktown or Lalor Park for 650k.

Blacktown is very well located transport-wise, just west of Parramatta and you have roads (M2/M4/M7) and you are near good rail and you aren't far north nor south.

Personally I wouldn't buy the OTP property, though I can understand how having no stamp duty might feel good, the component that will appreciate is the land. If the land is suitable, you could even have a granny flat in the yard, also giving a rental return.

You can also buy something interstate as an alternative, but if I was to buy anything in Sydney, a 650k house on land in Blacktown/Lalor Park would be it. Pretty much all the surrounds are at 1 mill or above so to pick it up at 650k seems like very good value. A colleague bought a townhouse in Doonside around 18 months ago for around $650k but it doesn't have the same potential price growth as a house on land.

Re: renting out vs. Moving in: your $100/week rent is great. I think if you buy in Blacktown at $650k, and if it goes up to say $800k in the next couple of years then you'd have to pay CGT.
I'd move into the place and get people to rent out the spare rooms (permanent housemates or airbnb guests).
Done legally, your home would be subject to CGT, but it wouldn't be the whole amount. But your $100/week rent is a great thing. So perhaps look at the numbers.

Btw, $90k salary is great. You need property price growth (and possibly through market increases and reno) then you can extract equity and buy an IP or two.

Note: not advice. But I still think homes in Blacktown and Lalor Park for 650k are undervalued!

 

Hey Ella it's a great position to be in!
I tend to agree with @Gockie

All I d add is if you live in it as ppor you can then move out after a 6 months to a year and claim the benefits of no cgt for 5-6 years this to be is a massive plus!

If you go down ip first patvv I d look brissy or Adelaide and don't use all your loan!! 300-400k