I am really in love with the SS forums and lurk around as much as possible. I was hoping I could get some feedback regarding a situation which may be generalised to be relevant to others. Please let me know if this doesn?t belong here.
I bought a PPOR unit for $390k in Westmead in September 2011. The capital price growth has been good, an identical unit sold for $520k in March this year and comparables are selling for c.$550k (so let's say 8-10% p.a. capital growth over the last 4 years)
I already have a lot of equity in this apartment. I started with $160k from my parents and so began with a smallish loan of $230k that is down to $217k, with c.$120k savings in my offset.
I realise NOW that putting $160k into equity in this apartment was a too conservative move and meant that I did not benefit as much as I could have in the last wave of Sydney price increases had I put less equity in and bought, for example, additional IPs. Lesson learnt.
The downside to the PPOR unit in Westmead is the exorbitant strata fees eating into my real returns (c.$1400 per quarter ? lift, massive car park and split commercial / residential). I know now that this is ridiculous and it was silly for me to overlook this in the original purchase decision. Another lesson learnt.
The PPOR unit is in my name alone. My partner / longtime GF has c.$100k in savings. Whether out of fearing of missing out or just the desire to have a house for when we start a family, we would like to buy something detached in Sydney (flexibile on areas). We both earn about $110-120k p.a. and have no dependents, so borrowing capacity is there. We are both 27, so time is there too.
We realise that the market for Sydney is hot and maybe topping out in the next 1-2 years.
I was mostly happy to absorb the extravagant strata in the last few years, perhaps out of naivety, inertia and also out of the knowledge that the market was hot. However, I wouldn?t mind getting it off my hands to be honest and particularly before a correction. I have a suspicion that some buyers overlook strata fees in a boom market but it could be a determining factor in a downturn.
The tricky thing is, and this is where I think this situation could be instructive to others, finding a replacement PPOR, especially in 1.5-2 years at a hypothetical top of the market would be ?buying behind?, if you believe that the market is headed for a correction
1) Firstly, am I being irrational / holding a grudge against myself about the high strata fees and wanting to exit if we move into a market correction period with low capital growth?
2) What are people?s general thoughts about selling PPOR at / near the top (assuming you know when that is) and concurrently buying an upgrade PPOR? Do you just suck it up and be thankful for the convenience of a PPOR? Or does it make more sense to rent a PPOR and ?withdraw? from the market until it ?bottoms out??
3) If you do withdraw from the market, would alternative investments forms not be similarly depressed? And so, although it may be the economically rational thing to reduce exposure at the top, with switching costs it?s worth sticking it out.
I realise these questions lend themselves to both ?depends on your risk appetite / strategy? and ?see a financial planner?, but just wondering if anyone had insight on these types of quandaries.
Also appreciate that these are incredibly na?ve / newbie questions, so thankful for any contribution.
I am also prepared for the response ?you demonstrably don?t have a strategy, maybe you should figure out one?. That is mostly true. Is a financial planner the best way to go about it?
I bought a PPOR unit for $390k in Westmead in September 2011. The capital price growth has been good, an identical unit sold for $520k in March this year and comparables are selling for c.$550k (so let's say 8-10% p.a. capital growth over the last 4 years)
I already have a lot of equity in this apartment. I started with $160k from my parents and so began with a smallish loan of $230k that is down to $217k, with c.$120k savings in my offset.
I realise NOW that putting $160k into equity in this apartment was a too conservative move and meant that I did not benefit as much as I could have in the last wave of Sydney price increases had I put less equity in and bought, for example, additional IPs. Lesson learnt.
The downside to the PPOR unit in Westmead is the exorbitant strata fees eating into my real returns (c.$1400 per quarter ? lift, massive car park and split commercial / residential). I know now that this is ridiculous and it was silly for me to overlook this in the original purchase decision. Another lesson learnt.
The PPOR unit is in my name alone. My partner / longtime GF has c.$100k in savings. Whether out of fearing of missing out or just the desire to have a house for when we start a family, we would like to buy something detached in Sydney (flexibile on areas). We both earn about $110-120k p.a. and have no dependents, so borrowing capacity is there. We are both 27, so time is there too.
We realise that the market for Sydney is hot and maybe topping out in the next 1-2 years.
I was mostly happy to absorb the extravagant strata in the last few years, perhaps out of naivety, inertia and also out of the knowledge that the market was hot. However, I wouldn?t mind getting it off my hands to be honest and particularly before a correction. I have a suspicion that some buyers overlook strata fees in a boom market but it could be a determining factor in a downturn.
The tricky thing is, and this is where I think this situation could be instructive to others, finding a replacement PPOR, especially in 1.5-2 years at a hypothetical top of the market would be ?buying behind?, if you believe that the market is headed for a correction
1) Firstly, am I being irrational / holding a grudge against myself about the high strata fees and wanting to exit if we move into a market correction period with low capital growth?
2) What are people?s general thoughts about selling PPOR at / near the top (assuming you know when that is) and concurrently buying an upgrade PPOR? Do you just suck it up and be thankful for the convenience of a PPOR? Or does it make more sense to rent a PPOR and ?withdraw? from the market until it ?bottoms out??
3) If you do withdraw from the market, would alternative investments forms not be similarly depressed? And so, although it may be the economically rational thing to reduce exposure at the top, with switching costs it?s worth sticking it out.
I realise these questions lend themselves to both ?depends on your risk appetite / strategy? and ?see a financial planner?, but just wondering if anyone had insight on these types of quandaries.
Also appreciate that these are incredibly na?ve / newbie questions, so thankful for any contribution.
I am also prepared for the response ?you demonstrably don?t have a strategy, maybe you should figure out one?. That is mostly true. Is a financial planner the best way to go about it?