VIC Strategic Buying in Melbourne Northern Suburbs $650k - $850k

Hello Property Chat Members,

I’m hoping some of the more experience and more investment savvy members can give some advice on this.

My details below:
- Combined income $150k/year
- Annual net surplus $50k/year
- Today's savings $60k
- 1 dependent 7yo going to Public School in Pascoe Vale.

Our initial plan was to: Buy a property around the $600k-$650k mark around the N, NE, NW middle ring suburbs of Melbourne as a stepping stone home where we could live for some time and convert into an IP in the next 2-4 years. This way we could take advantage of the stamp duty concessions and first home owner super saver scheme and buy the place with a 5% deposit; all this would benefit us when converting the property into an IP as LMI would be deductible, and interest on 95% loan too. Happy days until here!!!

Issue that I am confronting right now is: We are at that point where WE have enough money to do it; But, I am now not sure if this is the right decision because what $650k would buy us in the middle ring is maybe a property that would not be investment grade or in an area that is not investment grade (That is my unexperienced with lack of location/dwelling grade knowledge internal self talking.....).

Other option that we have and that has been recommended by a qualified paid for services advisor is: Saving another $60k and reach $120k and get into the market with a 5% deposit for $850k property (we can reach this point in 10 months, by June 2022). Only reason what I am having 2nd thoughts and asking you all is because the advice was given under the terms: "this is just a recommendation but do whatever you feel is best".

This advisor claims that $850k could get me a property that is closer to the median price of property in Melbourne and therefore It could get me a better quality property that is more "investment grade" in better area.

My big dilemma is: Whether waiting 10-12 months to get into the market is a smart move or not? considering where the market cycle is atm. Would I be paying $850k in 1 year for what costs today $650k? If that happens I would feel like the most stupid person in the world!!!
Apart from that, getting into the market at $850k would completely wipe out any possibility of stamp duty exemptions (I know this is not the main reason to buy a IP, but again....., it means paying $40k in SD compared to $17K for a $650k property)

Considering we would like to get this first property converted into an IP after a little while and that what we want to achieve is to buy the best possible investment grade property in the best possible investment grade location within our budget and possibilities...........

What are your thoughts?????

HEEELPP!!!!!

Sorry about the long post but wanted to give as much information related to my case as possible that way could get the best advice.

Thanks a lot in advance

 

Just my thoughts, buy what you can afford when you are ready to buy. Don’t over analyse. (Doesn’t mean to buy anything-research carefully and buy the best quality property you can afford).

If you are aiming to build a property portfolio it’s the total mass of the portfolio that will count in the end. In coming years you won’t be thinking about ‘investment grade properties’, but rather the total sum of your portfolio, lvr, rental income and outgoings.

In other words think about accumulating multiple properties rather than one or two ‘investment grade’ properties.

‘A rising market lifts all boats’ - was one of the best things I read on the somersoft forum.

Sorting out a sustainable borrowing plan with a reputable broker experienced in portfolio construction would be a good first step.

 

Thanks for your recommendation Jingo! Appreciate it!

What are your thoughts on my situation @The Y-man @Terry_w?

Would like your help to tag some of the other experienced members in the forum to see if they receive a notification and can help me with their thoughts too.

Would really love to read all your thoughts!!

 

I'm hearing a lot of Fear of Missing Out (FOMO) in your above post and it's probably not helped by the current media/news climate. Which is no doubt feeding this fear among many.

A lot can change in 2-4 years. You may make this purchase an IP eventually or you may not, or you may decide that you wish to stay on in the property you purchase as your PPOR and then buy other IPs.

Regardless, I'd encourage you to take a few deep breaths and ask yourself if you'd be happy to live for 2-4 years in a property you aren't entirely satisfied with?

Instead, I would strongly encourage you to continue saving to build a greater deposit. With a combined income of 150k, you will easily be able to save a much bigger deposit. This will give you more options to buy in the area/s you'd prefer and also less financial stress (trust me, it's worth it). I'm not entirely sure that the 60k will necessarily cover all of your expenses (legal costs, etc.) either, so do think about having a little buffer in place for any unexpected expenses.

Personally, I'm a big fan of the North East (Montmorency, Viewbank, Watsonia, etc.) as these areas have excellent Owner-Occupier appeal. If I had my time all over again, I would probably have saved a little more money to buy into these areas as my first step.

Spend a little more time on the education side of property investment too... this forum is a great start but check out books, podcasts and the latest research. This is invaluable.

 

Not sure what you are asking but you seem to be spending a lot of money if you are on $150k and only saving $50k per year. That means you are spending $100k, including tax.
I would start by increasing your savings.

Sometimes starting off with a cheaper property is the way to go - if you think property values will keep increasing.

 

I was in a similar boat to you in 2017. I realised that the boom couldn't be sustained, so ended up waiting and increasing my borrowing capacity in the meantime. Ended up buying in a desirable suburb in Q1 2019 at the bottom of the market.
I suggest you continue to monitor the suburbs you are keen on and increase your savings and borrowing capacity. There will always be a buyer's market after a bull run.
The desirable suburbs with good schools, low crime rate etc will do very well in the long term.
Agree with above poster, middle NE has some good suburbs

 

Hi @Jingo, so you are of the view that less is better? That having 3-5 ‘investment grade’ properties that can produce you enough income to support your personal needs in 20 years time is better than amassing a big portfolio of 10-15 properties?

Not trying to be smart, just asking to get your views on this and learn from them.

Thanks.

 

There is a lot of this at the moment for sure, not going to deny it!! The double digit growth recorded over the last 12 months doesn’t help with the feeling either.

Thanks for the advice @Do Androids Dream really appreciate it!!!

 

OMG this one was a surprise!!! And I thought we were doing great by saving 45% of our after tax money!! We make 117k after tax

however, I might have underestimated it a little and savings could be potentially closer to $60k instead of 50.

We are literally only spending money at the moment on
Rent 18k,
groceries 11k,
utilities internet and cellphones 5k
Petrol and Parking 3k
Rego and car maintenance 2k
Clothing 2k
Birthdays and presents 2k
Insurances 3k
Home miscellaneous 2k
Subscriptions 1k
Weekends, takeaways, getaways, pocket money 6k

But again, there is no holiday and not extravagant on this.

 

My question is if we would be better off buying now at around $650k or buying in 10 months at around $850k if I want to buy a place with owner occupier appeal in the middle ring N, NE or NW suburbs of Melbourne? @Terry_w

 

What do yo thinks about this boom @Triton ??

it is maybe a bit different no? Owner occupiers driven, closed borders and a lot of migrants to come after all this craziness settles is what I can see (far from being an expert on global economy or anything like it, just my view). What are your thoughts?

 

I'm in a similar situation and thought if I buy at $600k-$650k the cost to enter the market is fairly low given the stamp duty concessions, and interest vs renting will be similar. And so I thought I may as well buy. I'd get some capital gains until I'm ready to decide on longer term home.

But then when I started looking I thought I'll probably have to go up to $700k. And even at that price I'm wondering whether to compromise in location or dwelling type. I'm interested in what people think about your question . Would it be better to save more and stretch to a bigger loan for a more desirable property?

 

It depends on how you think values will go. If rising rapidly getting in quick might be best

 

Yes those seem pretty reasonable

 

Fawkner - walk to station.

 

@scientist do you reckon you can still find a detached house in a lock for $650k in Fawkner walking distance to the station?

 

Maybe 800k I reckon

 

Thanks for the advice @The Y-man!!!

what are your thoughts ok the surrounding suburbs lalor and mill park for something similar to that house you sent?

demographics in those 2 suburbs and in Epping and price points wise?