House or apartment in Sydney?

[menty]

So with the government scrapping the free stamp duty for first homes I may need to push my plans to buy an ip sooner.

This is my current situation
70k salary, 180k savings, 20k in fhsa.

The original plan was to buy the property as a ppor and make use of the saved stamp duty, live in the place for 6 months, fix it up if need be, and then convert it into a ip.

The bank will loan me 300- 350k.

So I have the option of buying a 400k - 500k house in the lidcombe area or more west or I have the option of a 400k 2bedroom apartment in the inner west.

Are there other areas I should be investigating? I am not sure how feasible my plan is. I have heard some people comment that one should borrow as much from the bank as possible.

 

[Propertunity]

If you can afford it, I'd suggest buying the Lidcombe house on land as opposed to the Inner West unit. If you take a look at the attached graph, you'll see that Lidcome houses have out-performed Ashfield units. HOWEVER, the median house price in Lidcombe is $683K these days, so if you're budget only extends to $450K, the house is going to be less then ordinary.

OK, so you have 15 weeks before the SD concessions are removed for an extablished property. Whatever you decide to do, you and a whole bunch of others will be trying to do it too, so act quickly but not at the expense of doing all your DD.

 

[menty]

Thanks
That was a great help. Other areas may be okay too. What about areas close to parramatta, as that is quickly becoming a second CBD.

I could easily afford a unit in lidcombe that is close to the station also. I have seen a few and they really aren't too bad

 

[Propertunity]

Thanks
That was a great help. Other areas may be okay too. What about areas close to parramatta, as that is quickly becoming a second CBD.

I could easily afford a unit in lidcombe that is close to the station also. I have seen a few and they really aren't too bad

Parramatta's been Sydney's 2nd CBD for some time.

Personally, I'd choose an Ashfield (or Inner West) unit over a Lidcombe unit. Ashfield units have out-performed Lidcombe units over the last 15 years......but there is a lot of competition from other buyers.

 

[devank]

You can find a decent houses around Parra CDB for that price.
Eg: Berala, Merrylands, Pendle Hill, Toongabbie, Girraween, Seven Hills

 

[menty]

I have considered a house in berala as I live there also. However, I am unsure about rent and all given that berala train station does not get as many express trains as lidcombe. You do not get much house for 400-500k in berala

What do people think about townhouses?

This is most likely be a short term investment as I will be selling it within 6 years to avoid cgt

 

[devank]

This is most likely be a short term investment as I will be selling it within 6 years to avoid cgt

You will get another 6 years if you move back in just before 6th year.

 

[menty]

Thanks I didn't know that.
Back to the original question. Views on buying a house or an apartment then?

 

[cadence]

Would you consider house in Auburn or Granville. Saw some advertised for around $500k.

 

[virgo]

House or Apartment

Hiya

I would buy a house (or a townhouse) in suburbs around the Parramatta area....

I have a house in Greystanes; never vacant since the day i bought it! In fact, tenants were offering higher rent than advertised to secure it!

(i recently just found out it was opposite a primary school with a gifted program (OC) ; seems like a big thing to the tenants!)

 

[Aaron_C]

(i recently just found out it was opposite a primary school with a gifted program (OC) ; seems like a big thing to the tenants!)

I guess the parents weren't gifted then...

 

[Rloom]

You will get another 6 years if you move back in just before 6th year.

Can you use this strategy while you live in the same city? I thought you need to live interstate/oversea with genuine reason. Any advice will be appreciated. Thanks.

 

[Belbo]

Can you use this strategy while you live in the same city? I thought you need to live interstate/oversea with genuine reason. Any advice will be appreciated. Thanks.

Yes, you can. Buy a PPoR in Penrith and rent it, and slum it out in Point Piper for 6 yrs. Give or take $100K, you'd only be out of pocket by $2M or so at the end the day. Peanuts!

 

[BernieLarkham]

This is most likely be a short term investment as I will be selling it within 6 years to avoid cgt

Why, what is your strategy? Also if you buy as IP straight up your lending limit will increase...

 

[menty]

Main reason is Id like to start with something comfortable. If I can access the FHOG and stamp duty exemption then why not? I prefer to be neutrally to positively geared for this first place.

 

[jech]

I have heard some people comment that one should borrow as much from the bank as possible.

Can anyone comment on this?

Why do people not dump all the savings in the mortgage to minimise interest paid to bank and also to own more of the property quicker??

 

[Aaron_C]

Can anyone comment on this?

Why do people not dump all the savings in the mortgage to minimise interest paid to bank and also to own more of the property quicker??

That's a good strategy for your own home mortgage - but for investment properties it is better to pay interest only to conserve cashflow while maximising interest deductions to reduce tax payable.

 

[Garry Mac]

Have a look around Sydney's Western Growth Corridor menty. For an IP with good potential capital growth and strong cash flow, buy a house and add a garden cottage (granny flat). Rental demand is also high.

Cheers
Garry

 

[jech]

That's a good strategy for your own home mortgage - but for investment properties it is better to pay interest only to conserve cashflow while maximising interest deductions to reduce tax payable.

Can you please illustrate this with examples?
I have been feeling very stupid about this for a while

 

[Aaron_C]

Well if hypothetically you have a $100,000 PPOR mortgage and a $100,000 investment property mortgage @ 7% p.a.

Home mortgages are usually P&I so monthly repayments are higher. But they are not tax deductible so it drains your cashflow severely. You will be paying ~$8,000 p.a from after tax income

On the other hand, investment property interest is tax deductible so you are paying it from pre-tax income, which is a lot easier to handle ($7,000 pa). Once the PPOR mortgage is fully paid, then you can use your PPOR as security to invest in other properties/securities, and since it will be for pure investment purposes, it will become fully deductible. This gives you greater borrowing power and hopefully lead to better portfolio growth as you acquire more assets.