Thoughts from experts - where to next

Hi all,

I’m a big fan of this forum and frequently find myself reading thread after thread. I recognise that there is a wealth of knowledge here and as such would love to lean on it.

I’ll provide greater context, but in short I’m seeking some commentary on what you would do if you were in my position…

As for the background -

I was fortunate enough to enter the market in April of 2021, purchasing a property for $725K + stamp + LMI etc in Brisbane which has since appreciated to $980K - $1.02M.

Whilst this is fantastic and I’m grateful to have been able to enter the market, circumstances meant that I would not be moving in and instead my first purchase became an Investment Property.

I’ve since worked the total owing on the property down to about $640K.

Now, I did make this purchase with much caution and perhaps didn’t capitalise on the low interest rates as much as I should have. Whilst I’m happy with the home, it is on about 405sqm, with a home behind (battle axe) and a property to the left and right. Courtesy of the battle axe I actually find that I have quite generous spacing between neighbours (all the driveways provide this).

This takes me to the now..

I’ve been fortunate over the last 12mnths to shift in salary substantially to c. $200K a year. I’m currently in Sydney renting and find myself pondering many things… I would welcome commentary on any of the below pathways I’m considering -

1. use the equity from the home and buy an apartment in sydney to live in rather than renting. From my understanding I should be able to buy another property at about $850K based on equity + a $50K deposit I have

2. Move back to Brisbane. Sell the current home and buy something bigger, living into it and making it the PPOR. What makes me hesitate here is the inevitable tax bill that I’m going to have on the property sale. I feel a little trapped at the thought of a $50-60K tax event here.

3. Keeping renting in Sydney and rent the property in Brisbane. Move into the Brisbane property in about 6mnths, invest about $120K from equity to lift the home and make it worth 1.3-1.4M. Use the other equity to buy a land rover Defender - currently driving a Honda Jazz and have never owned a “nice” car.

4. Any other thoughts?


Appreciate this is a lot. I welcome any feedback and appreciate the commentary of this community.

Thanks for letting me share.

 

Forget option 3. If your income has increased, save for the 'nice' car instead of borrowing for it.

The rest of your post appears to boil down to buying an apartment in Sydney to live in or moving to Brisbane and buying a larger home. Where do you prefer to live?

 

How much cash and other assets do you have?

An offset would have been better than paying off the loan.

 

Hi all,

I love how quickly everyone has jumped to help, thank you.

The 12mnth plan is certainly to be back in Brisbane or up in the Northern Rivers area in NSW.

I do have an offset account as well - taking into account what is in there and the loan sits at $563K.

 

No specific advice.... but if I were in your position...

I love my cars so can appreciate the thinking... but that'll work against you from a wealth creation perspective so I'd only do this if you're comfortable enough with where you've got to...

Depending on what and where you're looking for a Sydney apartment that may work well as a long term hold... many pockets are still struggling (since COVID) but seeing rental yields finally starting to increase now. I'd only do this as a long term hold as the transactional costs (as per option 2) likely wouldn't make it material to do for 12 months, and needs to be the right product.

 

Relative to your age, income and goals, are you where you want to be and are you going to get to where you want to go?

 

If your 12 month plan is to move back to Brisbane, or Northern Rivers, would it not make sense to pump as much as you can into your offset right now, and purchase a new PPOR when you get to where you want to live?

 

agreed... I owned only basic 2nd hand cars until my mid 40's... I didnt buy a nice car until AFTER I had retired all my O/Occ debt and until AFTER I had accumulated a sizeable portfolio of properties in my personal name and via SMSF and until AFTER I had migrated all debts to P&I

Delayed gratification is difficult, but worthwhile

 

100%!

I've owned a total of 3 new cars in my life. Two were bought pre-investing, the last one was last year. I'm now 60. All others have been bought second hand and driven until they started to cost more to upkeep than I was willing to spend.

 

Follow the job/income for now.
Keep stacking $ flat
In 12 months time move back into the original property short term (read Terry's tax tips)
Start looking for where you want to live longer term, then look for a home.
Use equity to purchase PPOR keeping IP
Save and buy 2nd IP
Buy a nice car a little later

 

I own a Mitsubishi Mirage at 41. Cars are a depreciating asset, and usually a heap of rust in 15-20 years. I would value owning the roof over my own head, or another IP, 1000x more than having a luxury car. But if it makes you happy, sure. I would find a large SUV stressful to drive in Sydney traffic. Land Rover also routinely sit near the bottom of Consumer Reports reliability survey.

Consumer Reports Didn't Recommend Any of the 7 Land Rover Suvs They Tested

Regarding investment, my feeling is selling properties is even worse than just paying tax. Imo, you also basically lose the sunk cost of the stamp duty you pay again for the replacement house, buyers fees, sellers commission, and another loan application process. If you will just sell one to buy another property, why sell in the first place if you can just tap equity to buy a third Ppor in either Northern Rivers or Brisbane.

Waiting until the lease ends on your Brisbane property and living there for a year or two is an option if you choose Brisbane, even if you don't want to stay there long term.

I'd echo previous mentioned sentiments the only logic for buying is Sydney given a 12 month planned stay is if you feel certain an apartment in Sydney would be your top investment choice regardless.

Also, not an expert.

 

Number 3!!!!

you will make more cash from improving the property relative to the time taken than any other option!!

the car would be a good reward for yourself, and encourage you to repeat the process all over again on the next deal !

lolling at the hate on the car, different people appreciate different things. A lot of you would find it strange that I have no issues spending over $100 on a hat… or $400 on a night out at a club. people value things differently. There is a time and a place to hold back on things that give you pleasure. You’re in a situation where you’re sitting on hundreds of K you can invest for more $$$, it’s the skill of doing that regularly that’s more important than a ****** $150k spent on a car.

FYI tho, I don’t value cars either, would much rather use big sums of cash on holidays than cars. Nothing beats a good holiday. Meanwhile the more “fun” cars can easily have “real” ownership running costs of $2k or more per month.. do a quick google to run the numbers on the real running costs of a car that’s the same or similar to what you’re into.. and determine if that $$$ per month is worth the happiness it brings. I’ll be buying a luxury only when I can stomach the $$$$ costs

Apparently the average ownership cost of a car is more than $1500 per month for people in metro areas. So luxury or otherwise expensive vehicles are sure to be noticeably higher, considering many of them depreciate faster than that. A friend of mine pays a little over $300 per month in comprehensive on his AMG C63

Here’s an article on car ownership costs, mostly discussing averages

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Regards to point 4.

it’s mostly about what you find you’re good at.. if property isn’t something you wanna develop skills in, just keep buying stuff that will appreciate long term. Don’t think too hard about it, and then focus your energies on work and other aspects of life.

Maybe put aside a pile for something else..

 

Ugh. Reading comprehension fail for me. Agree with Chabs. This one by a mile.

We bought a junk fixer upper in Toowoomba for $370k. Nothing wrong with the house, save 30 year old carpet, every room different colours, 30 year old parquetry floors lifting up, lights falling out of the ceiling.

Replaced all the lighting with LED's (I was an electrical apprentice) and new ceiling fans $3k, picked up 90sqm of surplus hardwood flooring $5k, got hardwood installed, and existing parquetry floors refinished $17k, painted for a month until I couldn't stand it (well mostly avoided painting for a month... before caving and hiring someone) $5k, spray killed the yard which was only weeds, mixed in 3 cubic meters of organics with a tiller, reseed $1k, split system air conditioning installed $3k (had no AC at all), Tiles + Tiler $3k, 12 kw solar $7k, new closet sliding doors $2k, etc.

Anyway, whatever. Spent $55k. House value went from $370k to $475k. So made $50k in equity for very minor works as far as renovations go. Two years later, formally appraised at $525k.

Yes, if you got a good price on a fixer upper, improving it should make you a fortune. And I found figuring out how to do this whole process, while trying not to break the bank, really fun.

Option 3 by a mile imo, if the house is in fact pretty shabby like ours was. And I suspect the improvement will appraise as such, plus some added equity, potentially allowing you to pull out the equity to buy yet another IP, or a better PPOR. If you have finance to do another IP, you could maybe the IP now, and the renovations later. Just depends how much you want/can stretch yourself. Don't know if the $200k salary will follow you to Brisbane, but if it doesn't, you may as well use it to obtain all the debt you can now, before your borrowing power drops.