Ready to take that first step...well almost!

Good evening folks and so another journey / part of our life begins - home ownership - gulp! Totally bamboozled by the amount of information in here and have been taking my time to try and get up to speed as much as one can.

My wife and I have managed to save a deposit of about $100k and I wanted to sound out some of the experts in here on potential next steps. I suppose at the end of the day it will be up to use to make the call but I wanted to get the collective opinion before we do.

A bit of background about both of us:

- I am a citizen / my wife soon will be
- My income is about $200k per year
- My wifes is about $120k
- We have a two year old child and the second has just started cooking
- We currently rent in Neutral Bay, Sydney at $900 p/w for a 2-bed unit
- Wife will be going on maternity leave in about 6 months (yes very early days)

We are in that position where we like where we live and it is also close to family but to buy a 2 bed unit here you would be looking in the $1.1m-$1.3m region I believe. Also is it sensible to buy a 2 bedroom unit for such a large amount with the 2nd child on the way...

Wondering should we be perhaps looking regional in about the $350-$400k mark and get two properties which are cashflow positive. Forgoe the likely greater capital growth of the metros for an asset that would be paid off in 25 years and be providing income.

Obviously time may be against us as my wife could potentially qualify for the HomeBuilder scheme once she becomes a citizen. I am keen to try and take advantage of the raft of current offers available. I am not so concerned about the various tax strategies at this stage but more what to do, continue renting where we want to live or take the plunge and buy a metro unit and stop paying rent...

There is also the chance we may of course move back to the UK in the next 3-5 years but I will do my best to avoid that. I did think about maybe looking at the Central Coast and commuting but again the family connections and the help that brings with a young family perhaps rule that out.

My thanks to anyone who can give any thoughts in advance and happy to provide any more information where needed.

 

Hi Donmoster,

Some initial thoughts. You both have good incomes. If you haven't done so already, perhaps work out what your family income will be allowing for children (with a second on the way) and perhaps some time off work.

If you are planning to move back to the UK, perhaps it would make more sense to build a share portfolio (ETFs, LIC's etc) rather than commit to repaying a loan for your PPOR? (Just a thought).

If you are going to move to the UK and are uncomfortable establishing a share portfolio, I'd be inclined to buy a PPOR as you will be more comfortable in your own home, and then either sell it or rent it out if you go overseas. I think there are capital gains implications for expats though which you would need to consider.

Kind regards

Jason.

 

Jason

Thanks for the response. Ideally not planning to move back but I will do what I am told ;-). I think that was why I was wanting to do something before my wife goes on maternity leave as she is the one who qualifies for the HomeBuilder, but again that only matters if it is a new build of course.

With regards the Share Portfolio yeah we didn't want to go down that route at this time but I get where you are coming from. I am not sure how the capital gains would work for ex-pats if a Citizen but I will look into it.

So that is a +1 for a PPOR rather than some investment properties. Appreciate you taking the time to respond. Thanks

 

Have a really good think about a 2 bed for a family of four. Especially factoring in working from home.

 

Yes to be honest I had not really thought about that from the buying side - that would be a nightmare. Funny I had been looking at perhaps moving to a 3-bed rental given rates are quite low at present but seemed to forget that thought pattern when thinking of buying.

 

I would probably just upgrade to a bigger place and just rentvest - especially if there is uncertainty if you'll be here for the long run.

Property is not as liquid as shares, so I would concur probably putting any extra money into ETFs (if the debate was between whether to rent or to invest in regional) what would be the net yield you'll get for regional properties?

Now getting over the barrier thinking rent is dead money, that is a hard one to get over especially with such low interest rates in this environment. Calculate the cost of renting vs cost of owning a PPOR including opportunity cost to invest that money, what would be better numbers wise. And take into account SANF (sleep at night factor... A term I recently learnt)