Looking for some advice from the experts!

Hi Guys,

I am a first home buyer who has been reading these forums for a long time (about 2 years), taking in every ones advice/opinions trying to figure out when to dive into the market. I have missed many boats and opportunities and should, coulda, woulda when i had the chance 2 years ago. I just kept thinking things would come down.

Now my predicament has come to a head. I am getting married in 2 months and am going to require somewhere to live. I have a few options and i thought it was time i posted my situation up here just to see what everyone has to say.

Please keep in mind that i am very interested in investing my hard saved ($250,000) deposit in property for wealth creation, but have the view that i would like a house of my own first.

Here are my options!

- My parents have an investment property that they are willing to kick out the tenants of and let me and my future wife live in rent free for as long as it takes us to find our own place. This is great, but the obvious risk is that i still wont have a foot in the market and prices continue to rise. Leaving me behind the 8 ball again.

- I buy a property now before things get way out of hand! At the risk that they don't get out of hand and all the doom and gloom comes to fruition. Leaving me having paid way more than i should have.

Any advice/opinions are much appreciated.

Hard to say what's the right answer for your personal situation, but you are in a strong deposit position.

Something to consider if you do want to purchase your own home:

* You've got a large deposit, often the best place for money saved is to pay down non deductable debt.
* Buy a house and use a significant portion of your deposit.
* Post settlement, assess some of the equity in the property to draw an investment loan, use this to purchase an IP or another investment if appropriate.

This way you miniminise your non-deductable debt and still get to have access to money to invest in a tax effective manner.

This may not necessarily be ideal for you, but it's worth considering. I'd also suggest your partners feelings about investment and home ownership are taken into account in your decisions.
You seem to have your head screwed on right at least with the fact you consider prices dropping a possibility...I would say rent the house from the parents (do the right thing and pay them rent) and give it another 3-6 months before making a decision to buy (price direction will hopefully be more obvious by that time). IMHO last years frenzy has pushed prices way above sustainable levels via low interest rates and larger FHB deposits (via the FHB Boost). We have already seen a 2% drop in the Melbourne median according to the REIV, wouldn't hurt to wait another 3 months to see what prices are doing. Even if prices don't go down further from here I don't like the chances of them inrceasing much either with rising interest rates, fuel prices, etc.

I am getting married in October this year also, but will be resigning my lease for another 12 months from June (after selling our PPOR in January this year) as it's hundreds of dollars cheaper per week for us to rent rather than to buy and I don't see much room for short term growth (and am actually expecting further price drops).
Hi velocitygt,

'Wow' to your deposit - that's amazing!

Also 'wow' to your folks' generous offer! They rock! Agree with Y-Man...pay them some rent though, it's the decent thing to do. However, if they are happy to give you a leg-up, maybe just pay nominal rent so they can cover their expenses. (Depends on their financial situation).

How would they feel if you lived there while accumulating a couple of IP's over the next few years? How would you feel about it?

There are pros & cons to owning your PPOR. Obviously, it's the great Aussie dream, but there are a lot of non-deductable costs involved too.

I say: Buy an IP!!!

Prices may come down somewhat over the next few months, but interest rates will most likely go up. There will always be an excuse you can provide yourself as to why not to buy & you will be paralysed by inertia (hence the 2 years of missed boats). Even if you pay a bit more for a property now, as long as it's well-placed, serviced by good amenities etc etc, it will appreciate over the long term and you will make your money back.

You mention 'wealth creation'...have you thought about how buying a PPOR now may slow that down a bit? Perhaps buying IP's, you are in a position to create wealth faster?

With such a great deposit, can you buy 2 IP's immediately & rent at your folks?

I know it would be lovely to own your PPOR getting married & all, but I feel you could really capitalise more on your current situation buying IP's. Then in a few years time, you'll be in a much better position to buy the PPOR you really want & you'll have a string of IP's behind you.

Back yourself & get into the market! There are no guarantees in life nor property acquisition. The only sure bet is that if you sit on the sidelines for another 2 years your welath creation plans are going nowhere.

What's the worst that can happen, you go bankrupt & have to sell? You're not going to jail, you haven't stuffed up your life, no-one's going to hate you. It's just investing.

Good luck, for what it's worth, I believe you can do it & I dare say your fiance has faith in you too :)
take up parents offer but pay them something, buy at least 2 i/p with strong returns wait for them to rise in value, get a line of credit and purchase your ppor.
Here's some advice from a real expert ;)


If you can't be bothered reading the article in full:

Flowing from all of the above I believe our investment strategy should be:

1. Hold back from buying house and land assets for the present as there is going to be opportunity to buy well in the lower quartiles later this year;
2. If you haven't already invested in Melbourne than the opportunity has largely passed and hence I would suggest that unless you are a very experienced investor you should stay away from that market now as the risks are getting a little high;
3. Darwin has become expensive so be very selective if you want to invest in that market;
4. It may be getting close to being time to go “bargain hunting” in Brisbane but would probably wait a little longer as this market presents as having further falls particularly if interest rates continue to rise;
5. Moderate the leverage on each asset and try to achieve a positive or near to positive gearing situation;
6. Sydney units which are well-positioned (close to transport hubs) and more than a decade old look to me as if they are going to see the best growth. Having said this, avoid suburbs where there are significant volumes of new development taking place.
I always tend to like reading the articles that tell me to stay away from the market as things will be cooling off. But the little man on my shoulder keeps saying the same thing is going to happen, i will have missed yet another boat! Thank you so much for all the advice guys!
Buy a house; hold it for 20 years; make money.

Make sure you can afford the holding costs (whether it's PPOR or IP) and I think the rest is irrelevant if you hold it long term.

Do you think those that bought (and could afford to hold) property before or during the stock market crash in '87, and the ensuing property decline through to 1991+ would be caring now that they bought at the "top"?

If you buy now for $500K, find out in 3 years you could have bought for $400K, do you think you'll care in 20 years when it is worth $800k-$1.2M?

Of course if you don't buy, and it goes to $600K, then you can't afford it, you have to live in a crappier part of town etc etc...

How much did your parents pay for their property? Do you think they'd care if you told them they could have held out and paid $10K or $100K less? I think not...
I am not an expert, but I'll add a couple of thoughts.

If you take a very bearish scenario (a Steve Keen style 40% collapse in prices, and then a slow rise at around the rate of inflation) then you will be better off buying than renting after about fifteen to twenty years. Which is pretty much what Perth Investor said above.

So the question is can you afford somewhere that will meet your needs over this sort of time frame?

The other is how do you expect prices to move over the next few years?

The standard opinion on Somersoft is that they'll continue to rise at an above inflation rate for the long term. Then there is the bear case that they're massively overvalued. (See this video from the FT.)

If you believe the former, then buy soon. If the latter then wait.
I guess this all just comes down to either having a Bearish or a Bullish view on the property market. I have had a bearish view for a long time and now, just as the market looks to have run out of steam, and there are alot more people with a bearish view, im going to dive in because i need a house! Maybe i should just rent a place of my own for 6 months and see how things play out. Atleast i wont be cutting my parents rental income and things may be a little clearer in terms of where the market is going. So confused!