Join Australia's most dynamic and respected property investment community

To buy or not to buy

Discussion in 'General Property Chat' started by JDP1, 24th Jan, 2016.

Tags:
  1. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    A friend of mine is in an interesting position. He currently has a house in glen iris in melbourne. The property has a lot owing on it (mortgage). He wants to buy, buoyed by success of his glen iris ip which has done good growth with the Melbourne boom of recent.
    Should he buy (using glen iris equity) ? he is seeking something similar in melbourne.
    I am not sure if he should...he has a fair amount owing to the bank and i dont think any of his real estate ideas will be return more than just paying off the mortgage. I recommend pay off some bank debt (mortgage) on glen iris and relook after a few years in melbourne when the market is more favorable to buyers. He is not interested in investing interstate in more cg potential markets as he wants to be close and keep tabs on the RE.
    Thoughts?
     
  2. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    742
    Location:
    Homeless
    No one knows what a market will do for sure and when the peak will be. If he is comfortable with the debt required and believes Melbourne will do well within the timeframe they are looking at then why not buy?

    The idea to pay down debt only to borrow more in the future is flawed in my opinion to start with. You are either looking to grow or not. Might as well get at it as soon as possible if you are still growing. Assuming you have sufficient cash buffers etc
     
  3. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    @JDP1

    No idea until we know his serviceability, other assets etc.
    If the man is earning $500k per year vs $40k pa, big difference.

    The Y-man
     
  4. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    My understanding is that his serviceability is good. Not sure exactly buy id say he pulling in about 150k per year. Plus/minus...
    My concern with him pulling the trigger to buy is that he only wants to buy in iner southeast melbourne and that market is at peak abd nothing is cheap there. Plus he has im guessing 75-80 % owing already. The bank is going to nail him to the wall on that if that increases with equity and what he wants does not have the growth potential to warrant this imo. Ie what the bank is going to whack you is more than any cg you will get.
    At least for the next 3 years in that markwt.
     
  5. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    418
    Location:
    Darwin
    Does your friend have a team? Are they getting pro advice, or are they just winging it?
     
  6. JDP1

    JDP1 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    2,839
    Location:
    Brisbane
    Dont know but most likely not. He is street smart but not an experienced investor and i dont think he has any team in place to get any professional advice.
     
  7. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    Couple of things

    Are you sure? What if it is not?

    Compared to...?

    Not sure I understand this. Banks have never whacked me or nailed me for the growth potential or lack thereof of any of our IP's or PPOR.

    These days, as silly as it sounds I like the new APRA restrictions - because I feel (perhaps incorrectly) that the banks will stop lending to me long before I get anywhere close to a stupid LVR and borderline serviceability.

    The Y-man
     
  8. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    418
    Location:
    Darwin
    If he's not going to spend a few hundred on solid advice before spending hundres of thousands on property then he almost certainly won't listen to you. All you can do is point him to this forum and suggest some pro advice, but other than that, I reckon just leave him to it. You can't help someone who doesn't help themselves.

    I have no idea if Melbourne is still a goer or not but without a plan, structure and team your friend is more or less gambling.

    I reckon stay out of it. Just make sure you're there for support if it all turns to poo.