First Time Buyer

[hyperterminal]

Hi All,

Firstly, I am new to property investment so I ask for forgiveness in advance if my overall post
sounds naive or stupid. I am currently looking to invest in property for the first time and my
budget for investment is approx $450k-500k. I am hoping I could get some advise from experience
investors around certain things but firstly Ill explain my situation and goals.

Where we live in Sydney is extremely expensive and the market is very hot. For our family to
find a liveable unit for the size of our family we would need to spend at least 800k and houses
are just out of the question as they will start at around 1.4-5m. Given we are currently on one
income it's not possible.

We could look elsewhere to live but we have family close by and its a personal choice to stay in
the area. My wife is probably 2-3 years off going back to work so we have two choices.

Continue to rent and not buy anything or whilst renting buy some investment property/s. With the
aim at the end of the 3 years have a payment history with the bank and also maybe some modest
equity.

My thought to date has to buy two properties one which I would be looking for focus to be yield
so that expenses are mainly covered and second property where yield is less of the focus and
looking for more of a gain on the property itself. My though for reason on two properties is
to not place all eggs in one basket.

Given my budget it is obvious that I would not be looking at the major capitals for my purchase.

Could I kindly ask for some feedback on two things.

FYI, in my situation I will be placing about $70-80k deposit on the property/s. Looking to borrow around
350-400k.


1. Is my approach sound and any advise on the approach Ive outlined to take to investing. or any other thoughts
on what I should do?

2. Suburbs, areas I should look at as options to invest in (I am not adverse to buying anywhere in Australia)
where you believe are good investments either from a rental return perspective or potential for growth.


Hope this all makes sense, apologise in advance if it doesn't.


Any feedback would be great appreciated.

 

[gcb160]

There are still many suburbs in Sydney which are affordable for houses. Look in Western Sydney and South Western Sydney. For your budget, you should be able to pick up a decent house to live in.

 

[Rolf Latham]

Many people in your circumstances are looking to purchase in the Brisbane metro area

Ta

Rolf

 

[hyperterminal]

There are still many suburbs in Sydney which are affordable for houses. Look in Western Sydney and South Western Sydney. For your budget, you should be able to pick up a decent house to live in.

Thanks for your feedback, we have already decided to stay
In the suburb we are in to be close to family for support
as one of my children has special needs and we wish to stay close
To our family. Otherwise we would be looking in outer suburbs..

To my original investment question does anyone have
Any feedback ?

 

[write2abdul]

Not sure you would get a decent house for 450-500k in Western Sydney in a good suburb especially if its for live in.

There are still many suburbs in Sydney which are affordable for houses. Look in Western Sydney and South Western Sydney. For your budget, you should be able to pick up a decent house to live in.

 

[DoAndroidsDream]

Hyperterminal, the great thing about buying an investment property or two is that you don't need to think about living in the property yourself. It takes the emotional focus away and you can just focus on the numbers. This is what I have done. Plus, it's actually cheaper to continue renting... it really is.

I live and rent in Sydney but I bought my first property in Melbourne a couple of months ago in a suburb with a bit of a reputation. However, rental repayments cover my mortgage (IO) and a bit more so far. You could do the same, continue to rent where you are if that suits but look at some cheaper areas of Sydney to purchase.

If you pick a handful of suburbs you might be interested in, why not type them into the Advanced Search function on this forum and soon, you'll have a lot of information at your finger tips. Then you need to start comparing with information from Your Property Investment Magazine (type it in Google) and then use Real Estate Dot Com to check rental values. From this forum, you can also download a whole range of spreadsheets if you do some searching.

Someone on this forum once wrote and it has stuck with me that, basically, if you purchase a place for 300k, you need to make sure the rent that it attracts is above 300pw. Ideally, you need it to be about 330+, as this will help you cover your costs. The bigger the difference the better, although the bigger differences are usually found in regional areas. I don't know enough about those to comment, however. But the point is... there is no point in purchasing a 360k property that only earns you 260 in rent a week. The figures will never stack up in your favour.

All the best.

 

[gcb160]

Not sure you would get a decent house for 450-500k in Western Sydney in a good suburb especially if its for live in.

I guess that depends on what you define as a good suburb. My view is people are better to be realistic about the suburbs they can afford to live in, research those suburbs and buy in the best suburb that they can afford rather than never owning their own home because they have unrealistic aspirations to live in a particular area that is beyond their affordability.

 

[write2abdul]

Right but if the suburb is good(Minimal crime rate, good schools, access to trains) the prices are high.

Do you want to live and bring up your children in Merrylands as the price is affordable? I wouldn't

I guess that depends on what you define as a good suburb. My view is people are better to be realistic about the suburbs they can afford to live in, research those suburbs and buy in the best suburb that they can afford rather than never owning their own home because they have unrealistic aspirations to live in a particular area that is beyond their affordability.

 

[ZachAnSel]

Right but if the suburb is good(Minimal crime rate, good schools, access to trains) the prices are high.

Do you want to live and bring up your children in Merrylands as the price is affordable? I wouldn't

Dont worry, merrylands no longer affordable
http://www.propertyobserver.com.au/...ion-record-price-as-winter-auctions-soar.html

We actually one who purchase ip at Guildford, next to merrylands. Price increase 50% in 2.5 years.

 

[Mick C]

Where we live in Sydney is extremely expensive and the market is very hot. For our family to
find a liveable unit for the size of our family we would need to spend at least 800k and houses
are just out of the question as they will start at around 1.4-5m. Given we are currently on one
income it's not possible.

^ Do you know what your borrowing capacity is?...5/10 client's come to us with the SAME expectation .... i " dont think" the bank will lend me the amount im after so im gonna buy this instead etc - .... and more than half of them will get it wrong, most can get the loan they are after - it just depends on the lender they use and structure and of course income

Assumptions can be dangerous.

Having said that if your looking at a purchase price of 1.4M with a 20% deposit than yes your "solo" income with one kid your income most likely need to be over > $100,000 for sure unless you have another form of income etc...

But going down to $800- 900 purchase possible...just depends on your income and lender choice.

Continue to rent and not buy anything or whilst renting buy some investment property/s. With the
aim at the end of the 3 years have a payment history with the bank and also maybe some modest
equity.

^ Firstly your end goal is to eventually buy your PPOR- most likely around 1.6-1.7m by the time your ready so you need to make sure buying these IP first will not impact your borrowing capacity, the more property you hold "generally" it does reduce your borrowing capacity slightly and gets harder to lend. SO plan ahead. But of course you can sell - so make sure you buy the 1st for the right purpose - Capital growth rather than rental yield in your particular case.

Why?

- Option to sell and have a larger deposit from the increase CG
- Option to keep ( if you can service the loan) and draw on equity for 20% deposit on your PPOR..

I personally think buying a IP first in a decent area with good CG is a sound idea, if you can;t afford the house you want at this point in time ( i personally prefer Rental yield...but my goal are different to yours- so you really need to find the strategy that fits what your after in 3-5 years time)


Not doing anything and keeping it in cash, means that you need to grow your cash savings faster than the PPOR area's increase....BUT if you already have your foot in the market you can rely on the property market to save up the deposit on your behalf, until your ready.

Consider buying a Unit ( For IP) around or near the PPOR place you want to buy; why? for CG ( presuming it's an area with CG) + option to move in if you realllyy realllyy need too...renting can be a B***.

Some Decent CG areas in decent areas around Sydney under $600 for a 2bed unit.

- Hornsby
- Meadow bank ( Older style)
- Ryde ( Older style)
- Rydalmere
- Ashfield ( Will struggle a bit)
- Flemington
- Homebush West
etc....

 

[gcb160]

Right but if the suburb is good(Minimal crime rate, good schools, access to trains) the prices are high.

Do you want to live and bring up your children in Merrylands as the price is affordable? I wouldn't

I couldn't afford to bring up my family in Merrylands even if I wanted to. I know lovely people that come from Merrylands. There's nothing wrong with Merrylands unless your family is part of a gang. My husband and I will be bringing up our family near St Marys because that is where two young professionals can afford to buy a house. Luckily for us half our family lives in the Blacktown Council region. We aren't worried about the crime rate, we have access to trains and schools all study the same syllabus and the teachers have the same qualifications. How a child performs at school has more to do with the family they come from than the school they go to.

 

[gcb160]

Right but if the suburb is good(Minimal crime rate, good schools, access to trains) the prices are high.

Do you want to live and bring up your children in Merrylands as the price is affordable? I wouldn't

I just find it odd that people keep renting because they think they are too good for the area that they can afford to buy a house in but who is buying homes in that area? People similar to themselves. In some cases, families who buy homes in cheaper areas don't have less money, they are just wiser with it and have less debt.

 

[write2abdul]

I believe that if I can't afford to buy in a good suburb, I would rather rent rather than buy a house in a suburb with known problems. Merrylands is good in day time, wonderful and a thieves den at night. I had few friends who rented there as it was cheap and had breakins 2 times in the span of 45 days.

Also, every suburb has some parts which are good and bad. Its about picking the right street and doing the research. I generally take a note about what others advise about the suburb and actually go there and explore the streets for few weeks. You are the one who would be living there so you should feel comfortable and safe

I just find it odd that people keep renting because they think they are too good for the area that they can afford to buy a house in but who is buying homes in that area? People similar to themselves. In some cases, families who buy homes in cheaper areas don't have less money, they are just wiser with it and have less debt.

 

[write2abdul]

Houses are cheap for a reason in this hot market, far from CBD, no good transport connectivity, crime rate/problems in the past and no infrastructure.

If you are fine with those than you would have a house/unit with less mortgage

I just find it odd that people keep renting because they think they are too good for the area that they can afford to buy a house in but who is buying homes in that area? People similar to themselves. In some cases, families who buy homes in cheaper areas don't have less money, they are just wiser with it and have less debt.

 

[gcb160]

Houses are cheap for a reason in this hot market, far from CBD, no good transport connectivity, crime rate/problems in the past and no infrastructure.

If you are fine with those than you would have a house/unit with less mortgage

The problem is these days properties in Sydney which are seen as 'cheap' aren't really. You still have to fork out a lot in mortgage repayments. I guess it is easier if you bought a property a long time ago because your property has gone up in value along with everything else but if you are a first home buyer even the cheapest properties still cost a fair bit of money.

 

[travelbug]

Personally I would wait a little while until Sydney comes off the boil. Then reassess your situation.

It is nice to have a PPOR, but if you want to live in a certain area then it may be better to rent there and buy IP's elsewhere.That way you are still IN the property game and won't miss out on CG.

I know people that rent in their chosen are because it's cheaper to do so (lower yields) and then buy IP's in other areas. Buying in cheaper areas (for an IP) usually means higher yields therefore you can hold more property.

 

[ndonnelly]

Right but if the suburb is good(Minimal crime rate, good schools, access to trains) the prices are high.

Do you want to live and bring up your children in Merrylands as the price is affordable? I wouldn't

Yeah I hear what you are saying but here is my $0.02 on that theory. At the end of the day you might be a person with x budget that means you might be only able to only buy into x suburb. There might not be the best schools or the best shops but if enough people move into that suburb with aspirations for good schools and good shops etc then such a demand will eventually mean these will materialise. People who do not care about good schools and good shops i.e. the people that can give suburbs a bad wrap will also move away to a suburb in which the price more accurately reflects these requirements.
This is the theory but it is also a risk but such decisions in life are a risk. I think listen to the info, digest the info (not just the info you want to hear but from an objective POV) and make the best decision possible.
In some ways the worst thing to do could be nothing

 

[ndonnelly]

Personally I would wait a little while until Sydney comes off the boil. Then reassess your situation.

It is nice to have a PPOR, but if you want to live in a certain area then it may be better to rent there and buy IP's elsewhere.That way you are still IN the property game and won't miss out on CG.

I know people that rent in their chosen are because it's cheaper to do so (lower yields) and then buy IP's in other areas. Buying in cheaper areas (for an IP) usually means higher yields therefore you can hold more property.

I just want to expand on your theory of waiting. If the market cools, great, but a property now compared to a property after 'cooling' is not going to be cheaper I would have thought.

 

[gcb160]

Yeah I hear what you are saying but here is my $0.02 on that theory. At the end of the day you might be a person with x budget that means you might be only able to only buy into x suburb. There might not be the best schools or the best shops but if enough people move into that suburb with aspirations for good schools and good shops etc then such a demand will eventually mean these will materialise. People who do not care about good schools and good shops i.e. the people that can give suburbs a bad wrap will also move away to a suburb in which the price more accurately reflects these requirements.
This is the theory but it is also a risk but such decisions in life are a risk. I think listen to the info, digest the info (not just the info you want to hear but from an objective POV) and make the best decision possible.
In some ways the worst thing to do could be nothing

Good theory. I totally agree with you.