Should we really be selling stories like these to young investors?

There are no two bedroom apartments in Sydney in "blue chip areas" for less than 600k. Try 800k maybe. Once you've paid 800-900k, you might as well pay a million as far as I'm concerned.

 

Does LMI go up with purchase price? If you go over $1m purchase price it shoots up way past 2%?

 

I'm in two minds. Good on this girl for being savvy, especially regarding positive cash flow - she clearly did very well out of the boom, but I'm not sure the "buy an apartment" advice is terribly helpful in an oversupplied market. I'm also a bit uncomfortable with the idea the property market ought to be a ladder; does no one ever remember ladders also go down? People can be set back decades by poor investments, and the young and inexperienced are at risk of exactly this. When you see constant "young person gets rich investing" articles they can often make investment sound like a simple, foolproof, get-rich-quick scheme.

I think a better approach with these articles would be to advise young people on how investment is not easy and requires dedication, but is incredibly rewarding when done right. Too often these articles have a "look this young person bought property now they're rich buy and you'll be rich too" vibe, and it's a worrying oversimplification.

If someone inexperienced tries to repeat her success simply by buying an apartment, that misses the point of why she succeeded. The suburbs surrounding Pennant Hills (like much of Sydney) are in an emerging apartment glut right now, she bought at the start of the boom - which is now arguably winding down (Sydney price growth has gone from 19% to 2% in a year according to APM, and even if you look at CoreLogic's questionable results it has at least halved), rates are going to rise... areas that most young people (particularly giving this country's youth underemployment crisis) are not the same areas a young person could afford ten years ago, when wages were rising at 5% per year, when the country was booming and when property prices were much less inflated compared to median incomes.

Young people can absolutely succeed but this sort of article is not the place to go for advice. "This person did it" is not a realistic plan.

 

Well, that is how you can do things, instead of complaining and doing nothing, although I would have made some smaller step/s in between.

 

Read it again. I said a mortgage of $600k, meaning you buy an $800k property with $200k of existing savings / equity. I didn't say you could get a two bed apartment for $600k.

 

You also said house rather than apartment

 

Yep, and I never mentioned a purchase price.....

 

Agree except for this part.
One of the main points she's making is that you don't have to have a large capital outlay to start i.e. she was able to get excellent yield on a studio apartment as well as the extra 100K in capital growth - not bad for a studio, really.
The article is ambiguous saying that she was able to increase the rent from $290 a week to another $1000 on top of that - I read it as another $1000 over and above interest payments per month. Badly written.
Smaller residences give better yields and it was with the yields that she saved for the next purchase. Hopefully hubby put some savings in there too.
Alos, the less glam/ more functional parts of Sydney increased in value sooner and more rapidly than the blue chip areas (surprise, surprise).

 

Have I got it wrong? All properties purchased in Syd market some years ago and made gains from this and will use proceeds to buy primary residence in Manly ??

 

studio in pennant hills expecting to reach 290k !!!!!!!!!!!!!!!!!

Then i saw the picture and saw the waldorf signs

 

I thought my cousin and her husband were nuts to pay 1.3m for their home in Oatley 2-3 years ago. They weren't trading up from anything substantial imo so their debt would be quite large. They also have 2 very small boys, a child less than 1 and a 3 year old so she's been in and out of work recently.

I thought their mortgage would be huge. But in terms of gains, it turns out they did fine with this boom when you think about the Sydney market as a whole.
Now I can't say this boom will go on forever, but long term, I reckon Manly will always be in demand.

Stepping up from an elcheapo studio to committing to buy for 1.1m on the next one seems like too much for me.
But... since they have a huge noose around their neck I'm sure they'll find a way to make it work. Even if it means cutting everything frivolous out of their budget.

 

Nothing really wrong with what she has done. I don't think the people in the article are attempting to create wealth through property, but rather, simply buy a place they are happy to live in, happily paying it off through their jobs/business etc.

They have used the proceeds of an IP to buy a PPOR they are happy to live in.
The great Australian Dream!!!

 

Lifestyle has nothing whatsoever to do with investing.. totally different rules

 

They paid 70% more than the price the apartment sold for 3.5 years ago ($645,000 in May 2013).

They paid $1.1M. The apartment was advertised with a price guide of $920k.

Let's assume their 10% deposit covered LMI, even if she makes the $100k profit on the other unit, after tax and dumping the proceeds into the mortgage they are still likely to have a $900k+ PPOR loan to service and no investment property.

I'm not sure there is much to brag about here. Without knowing their particular circumstances it is difficult to judge, but they appear out of their depth. Good luck to them.

 

I can't comprehend paying over a million dollars for a 2 bedroom unit, but that's what you get for growing up in Brisbane!

 

Brisbane has no real beaches, if it did, over time, same would happen, well it will happen anyway, just a way off at this time.

I know someone who paid 700+ for a 1 bedder a longgggggg way from the city, about an hour out, but is close to nice beaches, not for me, but that is the going rate.

 

the idea of investing early is really good.. but yeah paying 1.1mil for a 2BR smacks of overpaying.

 

I can just about accept that, but really struggle with people paying $2M or $3M and even more for a home .... then having to find a spot and park in the street!!
Marg

 

$1.1m definitely sounds ridiculous given the general oversupply in apartments. As for $2 and $3m - honestly I think here it's a lot like what was seen in Vancouver (which is all coming apart at the seams now). Clueless foreign investors purchased an awful lot of off-the-plan apartments and newly developed housing (often completely unseen) with little idea of the local market. I've met Chinese colleagues who've bought and just don't seem to understand why Australian detached houses are doing better - but the thing is, no one wants to live in a one or even two bedder in the sticks, and even if they did local investors and buyers have called bull on the high prices. The apartment market is just so crowded.