I desperately need your help. I am looking to purchase my first property but am unsure what exactly to do.
I currently have a sum of $250k cash to get into the property market. With the market cooling off recently, I am hoping to purchase a property by the end of the year.
At the moment, I am very confused as to exactly how to best invest this amount of money and would like to seek your advice. As a bit of a background, I am 24 years old and just this year started in my first full time position after uni. I am currently on 45k pa which is not a large amount by any means, but my salary gets reviewed per year and I am aiming to get it to 60k next year, with marginal increases after that. My job also gives out bonuses (10k+) per year based on profit. I live at home at the moment and don’t have high expenses. Since starting my job, I have managed to put aside $2000 per pay cycle and based on this, I think I can manage $500 per week in mortgage repayments.
My long term goal is to have one primary place of residence in inner Melbourne suburbs and then two smaller units/houses in either regional VIC or outer burbs which will be CF+ in say, 10 years and which I hope will eventually bring in rent as income when I am 40/50. In the long run, I will ideally like to have my PPOR in inner east Hawthorn/Camberwell/Mont Albert surroundings or inner CBD like Fitzroy/Richmond etc.
Option 1: Initially the plan was to put the entire $250k into a PPOR townhouse/uni/small house in either of the above locations of around $650-$750k, of either a 2 bedroom that can potentially be turned into a 3 bedder. That would mean my mortgage would be $450-$500k, however for the first three years I plan to continue to live at home, rent out the property entirely ($450 - $550) and pay the remainder, which would be $200ish a week. Based on this plan I can also afford an additional $300 per week repayment on top of the $200 I would have to pay, and whatever bonuses I get per year I will put as a lump sum amount into the loan. The idea is that by living at home for the next three years and paying additional, I will hopefully have reduced my loan term and repayments considerably. I also hope that my salary will have increased in three years time to afford the repayments. As the property is located inner city, in the event of difficulty I think it will be easy to rent out a bedroom to bring in some extra income. This scenario is based on the assumption that I will be purchasing my “lifetime” PPOR now, and most likely will not look to upgrade for a few decades. Hopefully during the next five years, I can save up another two deposits for smaller IPs. The issue with this is that the inner city properties generally all have rental yield of 3% and will not likely be CF+ for many, many years.
Option 2: My other thought was to split the money into two parts. $200k will go towards a slightly cheaper apartment $500 -550k max with mortgage repayment of $500 pw, and I can therefore move into it directly or alternatively rent it out and have it almost positive geared. In this scenario, I will eventually have to upgrade to a larger house within 5 or so years and I fear that as apartments have low capital gain so I may not be able to buy back into the above areas in the form of a townhouse or house. The other $50k will be put towards a regional house that will only ne neg geared $100 or so per week which I can afford to keep on the side. I’m not overly keen on this scenario as I don’t like apartments in general and the thought process is that for only 100k more, I can get something with land value (ie. Townhouse/unit).
Another option 3: Spit the $250k into two, and purchase two IPs in out burbs (Boronia/Ringwood) close to train lines worth around $400k each. As my deposit will be quite large, both properties will only result in an additional $200 pw combined out of pocket mortgage payment. I will then rent in my desired area, sharehouse with partner or friend at $200 per week. Hopefully I will save up another deposit and use equity to purchase my own PPOR in five years time. In this scenario, I am concerned that I will not have the same opportunity to buy back into inner city Melbourne and will have to settle for something more out or smaller.
Based on the above, what are your thoughts as how to invest most wisely with my money? I am not looking to have a huge portfolio – my main goal is to be able to get a PPOR in my desired suburb in the long run, with two smaller investments on the side as a bonus. In that regard, is it best to go with the first option, tough it out for the next 5 – 7 years and do it backwards from there?
Any advice will be much appreciated.
I currently have a sum of $250k cash to get into the property market. With the market cooling off recently, I am hoping to purchase a property by the end of the year.
At the moment, I am very confused as to exactly how to best invest this amount of money and would like to seek your advice. As a bit of a background, I am 24 years old and just this year started in my first full time position after uni. I am currently on 45k pa which is not a large amount by any means, but my salary gets reviewed per year and I am aiming to get it to 60k next year, with marginal increases after that. My job also gives out bonuses (10k+) per year based on profit. I live at home at the moment and don’t have high expenses. Since starting my job, I have managed to put aside $2000 per pay cycle and based on this, I think I can manage $500 per week in mortgage repayments.
My long term goal is to have one primary place of residence in inner Melbourne suburbs and then two smaller units/houses in either regional VIC or outer burbs which will be CF+ in say, 10 years and which I hope will eventually bring in rent as income when I am 40/50. In the long run, I will ideally like to have my PPOR in inner east Hawthorn/Camberwell/Mont Albert surroundings or inner CBD like Fitzroy/Richmond etc.
Option 1: Initially the plan was to put the entire $250k into a PPOR townhouse/uni/small house in either of the above locations of around $650-$750k, of either a 2 bedroom that can potentially be turned into a 3 bedder. That would mean my mortgage would be $450-$500k, however for the first three years I plan to continue to live at home, rent out the property entirely ($450 - $550) and pay the remainder, which would be $200ish a week. Based on this plan I can also afford an additional $300 per week repayment on top of the $200 I would have to pay, and whatever bonuses I get per year I will put as a lump sum amount into the loan. The idea is that by living at home for the next three years and paying additional, I will hopefully have reduced my loan term and repayments considerably. I also hope that my salary will have increased in three years time to afford the repayments. As the property is located inner city, in the event of difficulty I think it will be easy to rent out a bedroom to bring in some extra income. This scenario is based on the assumption that I will be purchasing my “lifetime” PPOR now, and most likely will not look to upgrade for a few decades. Hopefully during the next five years, I can save up another two deposits for smaller IPs. The issue with this is that the inner city properties generally all have rental yield of 3% and will not likely be CF+ for many, many years.
Option 2: My other thought was to split the money into two parts. $200k will go towards a slightly cheaper apartment $500 -550k max with mortgage repayment of $500 pw, and I can therefore move into it directly or alternatively rent it out and have it almost positive geared. In this scenario, I will eventually have to upgrade to a larger house within 5 or so years and I fear that as apartments have low capital gain so I may not be able to buy back into the above areas in the form of a townhouse or house. The other $50k will be put towards a regional house that will only ne neg geared $100 or so per week which I can afford to keep on the side. I’m not overly keen on this scenario as I don’t like apartments in general and the thought process is that for only 100k more, I can get something with land value (ie. Townhouse/unit).
Another option 3: Spit the $250k into two, and purchase two IPs in out burbs (Boronia/Ringwood) close to train lines worth around $400k each. As my deposit will be quite large, both properties will only result in an additional $200 pw combined out of pocket mortgage payment. I will then rent in my desired area, sharehouse with partner or friend at $200 per week. Hopefully I will save up another deposit and use equity to purchase my own PPOR in five years time. In this scenario, I am concerned that I will not have the same opportunity to buy back into inner city Melbourne and will have to settle for something more out or smaller.
Based on the above, what are your thoughts as how to invest most wisely with my money? I am not looking to have a huge portfolio – my main goal is to be able to get a PPOR in my desired suburb in the long run, with two smaller investments on the side as a bonus. In that regard, is it best to go with the first option, tough it out for the next 5 – 7 years and do it backwards from there?
Any advice will be much appreciated.
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