Advice for a FHB in Perth

Hi Guys,

I have been reading these forums for awhile now. Really useful information but I am getting to the end of my tether now and need some more personal advice.

I am a FHB, we have been looking for units / townhouses from Scarborough up through to Padbury.

I will try to be short and sweet here because I know I could go on for ages. We are looking for a property that has

1) Minimum 2 bedrooms
2) Outside courtyard (we have LOTS of surfing/camping gear)
3) is within 1km of the beach

Those are really the main things we are looking for, our budget is 380k. We have a 50k deposit and are borrowing around 330k.

The problem is...there is just NOTHING available near the beach that meets our needs (the main ones being space and close to beach).

Whats making life stressful is that I really want to get into the property market and it feels like prices are increasing and I am missing opportunities. 12 months ago our budget was 350k, those same units we looked at in Scarborough are now 380k+. Sure we may have saved 20k more in that year but we are still falling behind.

We have a combined income of around 6k per month, we can easily service a larger loan to get us into the 400-450k price range however I am very reluctant to do that as it will erode my ability to invest in other property and shares which I am very keen to do.

E.G borrowing 330k now, would still leave us with around $1500 a month extra cash after all expenses. I would love for some of that to go towards a deposit for an IP in 12 months time.

If we borrow 400k, the buffer is much smaller and I would not feel comfortable borrowing more money for an IP in this situation.

Most of my other friends are happily getting 400k+ mortgages...maybe I am to conservative? I like to plan for worst case scenario (i.e no bonus, no raise etc)

Any advice would be greatly appreciated.

Thanks.
 
I see both sides of the coin

On the one hand when we bought our property in Perth it seemed like the hugest mortgage ever... $450K. Within a year we were kicking ourselves that we hadnt gone up to $600K....$700K. It quickly becomes quite manageable.

On the other hand there is something to be said for being comfortable with your mortgage. We almost convinced ourselves to trade-up to a $1m place at the peak of the boom in 08. We stayed put, and 6 months later the GFC came, I lost my job, as did my wife. If i'd bought the property it would have financially destroyed us... prices dropped by 25-30% and we would have had to sell, losing everything we had. As it happened we had plenty of cash savings to pay our manageable mortgage and i spent 6-8 months of unmployment rennovating the place :)

The other thing to consider i think is the high cost of moving house in australia due to fees and stamp duty. If you buy the wrong property (i.e. one that doesnt suit your lifestyle needs) then you'll be over it an a year and will want to move on, meaning wasted money.

On balance, in your situation, i think you dont need a lot more money to get what you want (liek 15% odd, not 100%)... so go for the place by the beach which you can use and enjoy for a good few years. I think scarborough is a good suburb to invest in and it may well be that your first PPoR could well become your first IP when you want to move on.

Good Luck!
 
Paying a bit more to get nearer the beach might pay off more than buying cheaper and trying to save any leftover income.

You might find that the equity in your beachside house increases faster than you are able to save.

There's also alot to be said for being happy where you live. No point buying somewhere where you will be miserable... life's too short.
 
Hi Prep,
Have you explored the idea of buying something a little more pricey, and then renting it out after you have "done your time" in regards to the FHBG?

This way you can eventually move in when it becomes more financially viable to do so.

What are your living arrangements now? Are you able to go back to them after 6 months?

Boods
 
Hi Welcome to SS :) Great to see another Perthite!

1 option - Renting Yourself & buying IPs

Have you thought about renting a place for yourself to live in - 1 km from the beach and buying IP's?

Perhaps what you could do is first off buy the IP which is a bit further away from scarborough beach live in it to satisfy the free stamp duty benefit and $7 k grant. Then after a year turn it into a rental.

If you do this make sure you make the loan Interest Only - IO. Keep some money in the offset account. You dont want to pay off any principle if your turning it into an IP soon. Then after a year turn it into rental and move out and rent close to the beach yourself. You should have the cashflow to rent near the beach and invest in other properties/shares. Do some calculations!

If you do want to buy the type of ppor (with enough space) 1 k to the beach that you desire you might just have to wait a few years till you can afford to! Maybe in a few years down the track you could purchase an IP close the beach rent it out for a few years then when the loan is more managable and the property has increased in value you could move into it yourself.

Or, you could buy your IP 1 km to the beach now for $400 K move in for just the 1 year and then turn it into a rental property and rent something else nearby. If for example you decide after 7 years to move into your first ip next to the beach your loan would be $350 K and the value could be double eg around $800 K. It would be easier to pay off your ppor now! See what im getting at.

There's heaps of topics here on renting yourself and buying IPs. There are pros and cons to it. One of the pros being all your loans are tax deductable.

Anyway thats another option you can think about. Before you do anything though have a good read here for a few months learn a lot, figure out a strategy before rushing out to do anything.


Option 2

Buy the $400 K ppor next to the beach. Just pay IO. Put money in your offset account and the extra cashflow that you now have because you are not paying any of your principle off your loan can be used to fund deposits for IPs. This is what I have done. My PPOR is IO with offset attached. I'm not paying any principle and have used my offset money as a deposit for my 1st ip. My ppor will one day in the future become an ip so i wont ever pay the principle off, not for 20 or 30 years or something or if i decide to when i retire.

Type into the search box Interest Only.

Perth is starting to rise now. Good time to get in!


Good luck :)


I am a FHB, we have been looking for units / townhouses from Scarborough

1) Minimum 2 bedrooms
2) Outside courtyard (we have LOTS of surfing/camping gear)
3) is within 1km of the beach

Our budget is 380k. We have a 50k deposit and are borrowing around 330k.

The problem is...there is just NOTHING available near the beach that meets our needs (the main ones being space and close to beach).

Whats making life stressful is that I really want to get into the property market and it feels like prices are increasing and I am missing opportunities. 12 months ago our budget was 350k, those same units we looked at in Scarborough are now 380k+. Sure we may have saved 20k more in that year but we are still falling behind.

We have a combined income of around 6k per month, we can easily service a larger loan to get us into the 400-450k price range however I am very reluctant to do that as it will erode my ability to invest in other property and shares which I am very keen to do.

E.G borrowing 330k now, would still leave us with around $1500 a month extra cash after all expenses. I would love for some of that to go towards a deposit for an IP in 12 months time.

If we borrow 400k, the buffer is much smaller and I would not feel comfortable borrowing more money for an IP in this situation.

Thanks.
 
Hi Everyone

I appreciate all the advice. We are currently renting south of the river. Nice place and pretty cheap at $1050 for 3br. However its not where we want to live so staying here and buying an IP is not an option lifestyle wise.

My main concern was that if I borrowed to much for my PPoR, it could add many more months onto the time needed to save for a deposit for an IP.

We have already found that prices have risen more than we have saved (between mar 09 and now) so I think I will just bit the bullet and borrow 20-30k more so we can get into the market.

Currently we have pre approval for a P+I loan....I had not thought about an IO loan as I thought the idea was to pay off your PPoR...although thinking about it when we move whatever property we move from will most likely become an IP so maybe it makes sense.

Thanks.
 
My main concern was that if I borrowed to much for my PPoR, it could add many more months onto the time needed to save for a deposit for an IP.

Well first of all you could have say 200k IP + 200k PPOR; or 400k PPOR. During a growth phase you'll get roughly the same increase in value.

Secondly if you buy the PPOR you may not necessarily need saved cash for the IP.

Eg. Buy your PPOR needing some love for 400k. Give it some love (ie. renovate, landscaping, etc) for 15k. Revalue the place 6-12mths later for 460k. Plus you've paid off 5k from the loan. So you have available equity of 460-400-15+5=50k and at 90% lend that is 45k. There's your 10% deposit plus costs for your next 350k IP.

Have you read any prop investing books?
 
jargon!

$380k isn't going to buy you a 2 bedder near the beach - period.

$420k will get you an 80s 2 bedder in Scarborough.

buy what you can afford - or afford more.
 
A 2 bed townhouse in my complex in Mosman Park went under offer for $429k recently but the buyers finance fell through. The townhouse is now off the market, well I can't see it advertised anywhere, but if you were interested in buying in Mosman Park, maybe you put a letter in there letter box asking if they were interested in selling.

The townhouse with a small makeover rents for $400 a week

It's about a 4 min walk to the beach, 2 min walk to the train. Let me know if you want some more info!
 
A 2 bed townhouse in my complex in Mosman Park went under offer for $429k
----
It's about a 4 min walk to the beach, 2 min walk to the train. Let me know if you want some more info!

4 min to beach? Hmmm couldn't be west of the train line for that price... Must be on/near Stirling Hwy near Vic St train station?
 
see i've got no idea about that - my ears perked up as well, but it's not as close to the traino as you'd think - it's actually just south of Moore Dr near Marmion Ave.

interesting though.
 
Hi Guys.

Well we brought something..only a verbal acceptance so far but all looks good. A fair bit higher than our budget but we are happy.

Was on the market for 400-425, we got it for 410k. In a small complex, has nice sized rooms and plenty of potential in the kitchen and bathroom. Another unit in the block sold for 419k last October.

Only about 800m from the beach so pretty happy.

Only issue is now, we are thinking about renting it out to the current tenants for
6 months as this would suit us work wise. I am not sure how this is going to affect us with the FHOG. We would move in after 6 months for 3-5 years before renting it out again and hopefully upgrading to a nicer PPoR.

I have asked the question on the Finance and Tax forum so i dont want to repeat myself here.

I work in the city, however my partner works south of the river and is on a 6 month contract hence why we would prefer to rent out the property initially then move in after 6 months.

I appreciate all the help guys. Thanks a lot
Andrew
 
Well guys..my plan has just gone down the drain I think. The current tenant has been on a periodic lease since mid January and I just found out today they are not wanting to stay.

The FHOG rule of having to live in the property for 6 months within the first 12 months…how strict are those time frames? I am assuming the 12 months start from when we actually get the keys to the house?

Problem is going to be timing…what if it takes a month to find a new tenant, then they sign a 6 month lease which would mean when we moved in we would only have 5 months out of 12 months in the property. The current property manager says that a 6 month lease may be difficult to get as well.

Maybe its all to difficult and we should just move in straight away..
 
it's never too difficult if you put your mind to it.

advertise now and ask the tenant if they will allow a new one through. if not, just take photos of the property, bung it on RE.com and advertise it for $15 a week more than the current tenants are paying.
 
yes your right..nothings to difficult :)

Just worried about the timing in regards to the FHOG. Is it

A) You have to occupy the property for 6 months WITHIN the first 12 months

OR

B) You have to occupy the property for 6 months however you just have to move in WITHIN 12 months

I am hoping its option B.

Are 6 monthly leases not common place?
 
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