Disclaimer; I know that this is very much a first world issue but it’s one that takes up too much of my headspace. Desclaimer 2#; Understand I may sound like a ****** but I want to provide as much context as possible I am not sure if I should buy a PPOR or not. I have no real issues pulling the trigger on investments but the PPOR is a difficult one for me. It genuinely causes me a lot of stress going back and forth on it. My situation; Age – 31 Children – No (not for at least three years) Investments – One investment property + circa 350k shares and super Savings – Will be between 800k-1.1M by year end (most of this getting paid to me end of the year) Target property – terrace worth 1.3-1.5M with an offset account Live alone and will for the next few years Lots of current career growth and income growth Case not to buy · PRIMARY – THE MARKET; my whole life, property has basically gone one way and it’s largely been due to interest rates. I feel like inflation could bring on a rate rise and I will have bought RIGHT at the top. FYI – planning to buy an inner-city terrace in Melbourne. My IP is in another state. What will push up this market in a higher interest rate environment? · Tie up too much cash and lose the power of leverage; my IP is leveraged 80/20 so my cash on cash returns are great. My share portfolio has done really well and I’m confident in my abilities here My case to buy · I have the money · I would like to move from my little apartment into something bigger but hate the idea of paying a lot of rent · Social norm – I feel like a weirdo for not conforming to this · FOMO · Don’t want to have ALL my money in passive investments in case things went bad I know that i'm really lucky to have the choice. I know that! I actually feel burdened by it and that makes me feel more guilty. Really hoping for some wisdom here…I’ve internalised this too much and it’s giving my anxiety
If you plan to live in there for the next 7+ years go for it. You're not going to time the market perfectly.
Can you reach your financial goals without buying a ppor? if you do need a ppor. If prices fall, at what point will you buy? If prices continue to rise, at what point do you buy? If you dont know you run the risk of needing a ppor, but never buying one. you ok with that?
I feel like my financial goals will be more easily met without it as I'll get leverage but I guess I do ultimately want to own a PPOR too. It's a good point to have me thinking. I'd much prefer to buy when it's less competitive but yeah, who knows when?
You feel, or youve actually done some spreadsheets showing you can generate enough investment income to rent forever? why cant you get leverage with a ppor? why didnt you buy in 2018, or 2020? How good are you at spotting buying opportunities and actually acting on them? How much have you missed out on over the last 6 months? How likely do you think prices will be significantly higher in 20 years compared to now?
You can get leverage with a PPOR but the interest and costs aren't tax deductible plus it's kind of the safe zone right so ultimately you want to pay it down. Secondly, high repayments (if you're maxing leverage) are a real downside to owning a PPOR that keeps you out of other investments. I didn't buy in 2018 because I didn't know where I wanted to live so I bought an IP. I don't typically have an issue pulling the trigger on pure investments. Didn't buy in 2020 because I couldn't quite get approval due to a lag in my income because of COVID. Missed out on 10-15% the last six months. I hope my views will change. Need some more certainty about what path to go down.
Certainly is! Particularly at my age...I feel so burdened by the housing market. My IP is in another state, another cycle, etc. I feel good about that but Melbourne and Sydney...I feel as if I'm buying in the late stages of a super cycle and there could be an Ireland style correction in the next 5-10 years. Could be wrong! Kensington, Flemington, etc.
same thing, no? If you were certain what property would do, the next step would be easy. Fine you dont believe property can keep going up. If you find other investments that perform better, with the same or more leverage, great. if you dont, you will end up living worse than you otherwise would. risk either way, pure and simple.
Yes agree, If I was certain - that would take the choice out of it. Of course. I'm never going to have that so it's not what I'm seeking. Wrong use of words by me. I'm looking for some wisdom to add some weighting. Some experiences or things I might not have thought of. I understand that may be hard to get for what I need.
If you believe the fundamentals, that the population of Melbourne will keep going up, and economic growth (nominal) continues.... Buy as much land as close to the cbd and amenities as you can. Buy when it falls. Buy when you can. Buy for the long term. Sounds stupid, but fortunes have been made on this. You want more certainty? There isn't unless you convince yourself with your own interpretation of the stats. Is it going to continue? Are we hitting the end of a supercycle? Will interest rates rise to kill property? No one knows. But can you afford to be wrong?
How do you mean 'afford to be wrong'? as in, if I wait it out and miss out? Not really but I equally don't want to buy when there's no value in the market...
Say you wait a year. It goes down 10%. Great. It goes up 10%. are you ok with that? If you don't buy and wait longer. Say in 10 years it's flat or goes down. Great. If it doubles, what is the impact on your lifestyle / retirement / goals? But say you don't buy, and instead put the money into the next amazon. No problems. But if the investment fails...... What will you do if property performs well, and you are not in it? Even if you KNEW the chance of it continuing to boom is only 20% (or whatever), can you afford to take that chance? What's the effect on you if you're wrong? It won't be just some bad feelings. You may not be able to live where you want.
RE is biggest investment in Oz, have a look at the graph below. if this asset class falls dramatically so would most wealth in Oz! No certainty in any class hence those that take calculated risk move. RE is considered low risk investment especially for long term. We always bought when we could afford, now you may consider us lucky as we own many, but it was the opportunity luck and it was the risk we took that made the difference. You seem to have analysis paralysis, if so analyze what's the worst case scenario and how you will feel and then act accordingly, but no one can make decisions for you, only you can make that step!
Hi Yman/Any others What would you consider the nice areas of Flemington, AV and Brunswick? Any particular streets or streets that indicate the general area? I presume staying away from commission housing adjacent Debney park is a start.
Talking to the people on the ground in AV, while the station(s) look great on paper, they are useless in the mornings because they are completely full by the time they get to AV. So easy access to the tram is important - esp Mt Alex rd if going into town. The Y-man
