Young doctor + engineer unsure of what/where to buy

Hi All,

I’ve recently discovered this forum and am really keen to hear what people recommend for my wife and myself, given our current situation - we would appreciate any advice. Apologies if this was posted under the wrong forum.

Location: North Wollongong (renting here since 2019); moving to Sydney Eastern suburbs in February 2021 (will rent a 2br apartment there for ~$650-700/week) - moving here is non-negotiable for us since we have both been travelling for 1.5 hours each way for study for the last 7 years. Both of us have grown up and lived in Western Sydney until 2018 (Penrith/Blacktown).

Me - 27yo, Engineer in Sydney, ~$190k/year.

Wife - 28yo, Doctor (1st year post graduate) at an Illawarra hospital but moving to a hospital in Sydney’s East in Jan 2021; ~$80k/year but rising $10k per year, culminating in $300-500k/year after 5 years of specialty training (plus another 2-3 years for time off due to having kids).

Finance - we have ~$55k savings, and could potentially access an additional 15k after 4 or so weeks. We save a minimum of $1400-1800 a week. We both have 60k+ worth of HECS. My wife, due to being a doctor, can borrow up to 100%, and with NO LMI. Obviously the standard secured 90% portion of the loan would have a market average interest rate, however the remaining 5% or 10% portion (depending if we borrow 95% or 100%), will be a separate unsecured loan at 7-9% over a much shorter period (5-8 years).

We are thinking to buy an investment property in Western Sydney whilst renting in the Eastern suburbs (‘rentvesting’ as they say?). As this would be our first property, we would obviously be forfeiting the FHB stamp duty waiver/concessions, as we would not be able to buy something as owner-occupier in the East for less than 800k I believe. And even then, the FHB stamp duty concession on something like 780k is not all that much (~$3k).

We are itching to get into the property market so that we can focus on either paying down the mortgage or saving up (however the proposed stamp duty changes may affect this) for another investment property.

For an IP, we are looking at suburbs like Penrith, St Mary’s and everything in between. Predominantly looking for a 3 br house, >500sqm, somewhere in the vicinity of 550-680k ideally. Looking for all the usual things... proximity to amenities, public transport, schools etc etc... I am happy to be corrected but I think our best bet could be to just get into the market and secure something given that the market has taken off again...? Penrith/St Mary’s as we would have family nearby and would be visiting there often. Happy to consider any other areas or any other ideas given our financial situation!

I am super keen to hear what people have to say. I am not interested in people’s opinions who say we are entitled - we’ve both worked hard to get where we are - both sets of our parents are almost 60, earn combined incomes of <$80k, have a single property, have ~$300k left in their mortgages and have given us ZERO financial support (apart from us both living at home until we were 25).

1. Should we rush into the market with our current financial position?
2. Are we better to just save for the next few year/s? Am mindful that we would want to have kids within 2-3 years (wife would not be working for periods of this time)
3. If we were to get into the market, anything else that we need to consider or should we just try and focus on securing a property in this ever-hot (and rising) market?
4. Should we aim for a 3 br house in the West or an apartment closer to the city? Rental yield?

Thanks for your time and would truly appreciate any advice.

Cheers

 

When do you want to buy ppor, and at what price point? Since you want kids soon, you probably want ppor soon too? You want to plan this, since you dont want to be caught at your borrowing limit while your wife is not working.

visiting an ip isnt necessary unless you do upkeep yourself.

 

Hey, thanks for the reply.

We’re not sure. We could easily rent a nicely-sized 3br apartment in the East once we start having kids I guess?? Although that would tip us into something like $900+ a week in rent I’d think which is a bit on the high side. The initial thinking was to purchase a PPOR in the East once my wife completes her specialty training.

I am super open to suggestions and advice

RE visiting an IP - noted & thanks

 

RE PPOR price point - maybe 1.8mil (in today’s prices) after my wife finishes her specialty training and has secured a high income (350k+)? Keen to hear opinions on what we could consider doing now and over the next 1-3 years as kids trickle in

 

IMHO, I think you should wait and save a bit more. I say this because of your wife’s circumstances. I often have dealings with Drs, and many of the junior drs (regs and ATs) tell me that it is super competitive these days to get a specialty position without additional training (i.e. PhD). With your plans on having children in the mix, getting to the $300-$500k salary might take longer than you think.

 

55k savings, a much higher income expected down the line, and kids in the plan..... rent and save more for a few years.

Your deposit is pretty small for your income. Regardless of whether you are able to borrow 100%, you do have to ask yourself if that's actually a good idea.

 

Appreciate and note the advice Shazz. She has already secured a specialty training position (Psychiatry) for next year, had graduated with honours and will be completing a Masters of Psych as part of the training program. I fully understand the concern, as she knows a fair few people who haven’t yet been able to get a consultant psych position after completing their training (90% are non-Aus citizens).

If we were to save for another 1-2 years, given our intent, what do you recommend?

 

Thank you. Agreed that our deposit is small - we have just out laid 60k on our wedding and my wife has only started full time work at the start of 2020.

 

Replied above sorry.

 

Replied above sorry.

 

This is not advice and please do your due diligence.

I would get in touch with a broker and run some simulations on borrowing capacity now VS what it could look like in a couple of years (with expenses and salary/savings increases). For me, a PPOR is important and should be prioritised, but there are lots of people here who don’t mind rentvesting. This is something you should keep in mind and decide for yourself.
Once you know your borrowing capacity, you can then work out what you could do (i.e. buy an IP or PPOR or both)
In terms of the location- Western Sydney. Nothing wrong with that. My first IP was in that area and it did quite well. Again, do your due diligence on rental return, whether you could add value etc.

 

With your prospects it would make sense to get in to the housing market sooner rather than later. Just buy yourself a house that you like and live in it!! As a minimum you are avoiding rent in a low interest environment. With your expected work commitments the location should suit your life / work rather than anything.

When you are settled you can look to gear up via investment property. How long you wait is really up to you, but i can't see the point in sitting on the sidelines too long before buying a residence to live in.

Good luck.

Kids staying at home til 25 is a great contribution ...... not quite the same as the 'bank of mum and dad' but a contribution non the less.

 

Hmmm.... I am from the last millennium but I could never afford this amount on my wedding. I got mine cheap, it still lasts though!

 

I concur with Shazz@.

Wife might be starting psychiatry training next year but is very unlikely to achieve $300k when she fellows in 5 years (or 7 years if she takes time off for kids). Public jobs are competitive with many job sharing these days. Private practice takes years to build up.

Exercise caution with how much you borrow. 100% is too risky IMO, you don't have reserves nor the bank of mum and dad to come to the rescue if things go pear shaped. You need liquid funds for emergencies: banks not willing to lend the required amount after contracts are exchanged, negative equity positions, job losses, injuries, relationship breakdowns, large unexpected bills on your IP could all run into tens of thousands.

At your savings rate, you would have say 140k in a year's time. Prices may have risen 10%, but your deposit would have increased many fold. At that point, you could decide on whether to rentvest or buy an inner city apartment to live in (it won't be flash but this is the option I'd personally lean towards, and upgrade every few years).

You might decide instead to keep renting your 2 BR place in the east and invest savings in index funds for 10 years, by which time you would have a huge deposit and a 500K+ income for the dream home. It can be hard to visualise and plan so far into the future though.

 

Totally agree with this. Specialty training is hard and most Colleges are limiting the number of attempts at the final Fellowship exam. I know of a couple of excellent doctors who have just missed out and are now having to either change specialty - which in itself is difficult given how limited training positions are - or find Career Medical Officer positions which are less well paid and not available in all hospitals.

 

I too think the >$300-500k a year earning in 5 years a bit optimistic. I would say this is definitely possible provided that she passes all the specialist exams and she is not taking time off for kids. And of course if she could secure a full time job at a hospital she likes (A full time consultant job in any major cities will be much harder to secure compared to regional). Also IF she is not going to change her mind about the speciality (given that this year is her intern year).

My husband and I were in the same position like you and your wife. Hubby graduated at 24yo and became a consultant at 33yo. Passed exams all the way and we could not afford to have kids due to his training/requirement to change hospitals/moving interstate etc. He got offered a full time public job at a tertiary hospital right after fellowship. Even then he is not earning the amount you quoted above. Probably close. FYI we are non-Aus citizens if that was what you were referring to in terms of earning potential/job security. Also hubby is not in psychiatry

we decided to buy a house that we could afford at that time (at the beginning of his training) and just saved up extras in an offset account. When we had to move for his training we leased the house out and continued to save. After these many years I must say we are in a much better position now and could finally afford to buy a house at $1.8m as what you stated above. And we could also live on his income only when our baby comes next year.

just my 2c

 

This isn't correct. It's a little known fact - including to many industry professionals - that if you buy an IP as your first property, you categorically do not forfeit your right to FHB concessions if/when you decide to buy your first home. It is a first home buyer grant, not a first property buyer grant. Plenty of mortgage brokers in particular don't know this and will often calculate a homer buyer's outlay based on zero concessions because they believe they aren't entitled to it after having already owned a property.

Provided it is pure investment and you never moved into it, you'll get whatever is available at the time of your first home purchase.

- Andrew

 

Structural engineer?

If I were you, I will get into the market ASAP. However, work out borrowing capacity first.

 

For me personally, I was hopeless at saving but I was great with getting into (too much probably) debt and paying that down. So property was an ideal investment for me

Yes all that PLUS get a property with enough space in the backyard for a future granny flat - either for yourself to build or for the buyer you sell to.

Yes, this is what I would do.

You'll be close to family and a well chosen IP will take advantage of the growth that follows the new Sydney West airport.

If it were me, and it isn't, it's you, I would enter the market sooner rather than later. I think the longer you wait, the more you will have to pay. I also think that you are better off investing now before the kids start coming along. Life has a habit of interrupting your investment plans. Plus it gives you options. You may sell some, develop some either by renovating, or building a granny flat or.....whatever

Investing and saving are not mutually exclusive. You can do both

Hummmm. Having kids and working are not mutually exclusive either. (don't tell your Mrs that I said that).

Yes, do all your DD. Don't entertain FOMO. If you need help, consider using the skills of a buyer's agent (OK I declare an interest when saying that)

House on land.

Oh, none of this can be considered advice.