TO buy or not to buy in Brisbane?

[confused101]

I'm absolutely confused about whether to buy or not at the moment.

I've saved what I could to cover borowing costs and most probably will be looking to buy somewhere in the brisbane area - somewhere like sunnybank.

My problem is that everyone is talking about the "impending debt crisis", the future "rental crisis", a hike in interest rates, etc.

I just want to do the right thing with my hard-earned money - I don't want to speculate on quick gains, but I don't want to be paying more than 35% of my income on house repayments for years and just sitting at home doing nothing because I can't afford to do anything else.

On the other hand people are saying Brisbane has good "fundamentals" with the fastest growing inward migration in Australia, etc.

I'm single, earn $80,000 per year (but only have savings of $15,000 - to cover borrowing costs):

Can anyone advise me whether I should purchase a property now or wait a while and continue renting at $175 (and soon to increase) per week until perhaps I have a partner in a few years and we can do it together without too much financial strain? Or will housing in Brisbane be SO expensive that even two people can't afford a place?

Any help is appreciated, thanks!

 

[alexlee]

Buying in Sunnybank isn't exactly what I'd call roughing it.

If you don't want to spend too much on house payments, go buy somewhere further.
Alex

 

[wylie]

My first thought is to keep renting at $175 per week and buy something as an IP and rent it out. Put any extra money into an offset account so that if you never move into your IP you have a bigger debt on it and can use your funds elsewhere.

Curious to know what you are renting in Brisbane for $175 per week?

Also curious to know how you can earn $80K, be single, pay only $175 per week rent and only have $15K in savings? If I were you, while single, I would buy something, rent it out, stay where I was renting, and get a foot in the door, so to speak.

If your savings are not enough to avoid LMI, maybe borrow enough to avoid the LMI (parents?) and pay it back super quick.

Wylie

 

[steveadl]

I like Wylie's suggestion. Do you have to buy a PPOR first? If you're quite happy to keep renting at $175pw (or higher after increase), why not just buy an IP first. Then, when you do meet a girl and are ready to get a place together in a couple years, you can get the PPOR you want and as you said - have 2 people helping to pay the mortgage.

Getting the IP now will most likely help you out even more when you do get the PPOR in a few years.

 

[alexlee]

I'm assuming you're fairly young. A lot will change in the next couple of years. Buying a PPOR is a bit more restrictive when it comes to going to another city or going overseas, for example, while buying an IP (better tax treatment, too) might be easier.
Alex

 

[letiha]

I also agree with Wylie, you can buy investment properties in good areas that cost you hardly anything, 30-40 a week after tax.

 

[FHB]

Practice paying a mortgage on the house you want to buy for a few months, and include all costs, rates, insurance etc (minus rent). This will prove that you can do it, increase your deposit and give you a buffer. Even if you decide to buy an IP to start off, you will want a bigger buffer than $15k, and you will want to know you can cover holding costs when it is vacant, IMO.

I wouldn't worry about prices in Brisbane becoming higher than anyone can afford, prices will only go as high as the people competing to buy the property can pay. If you are in a competitive position you will beat them. Saving and investing now should give you the edge in the battle.

 

[confused101]

Hey thanks people useful suggestions.

My sister is in a similar boat to me (similar income, no savings but!) - we were thinking of buying something together, but from some of the cautionary tales people tell me (and that I've read here) about going in with siblings I'm guessing not recommended.

Just to let people know why i only have $15k saved - only been working back in oz for 8 months now - was doing the working holiday in the UK til then and came back basically with nothing.

Is there some kind of spreadsheet (link?) that allows you to calculate the income/cash-flow ramifications of buying a first investment property? I'd like to see how it may differ for me to buy an IP as opposed to a PPOR (seeing that I'd miss out on the first home buyers grant etc).

Thanks again for useful suggestions.

 

[wylie]

You don't miss out on the FHOG because apparently if you never live in the IP you buy now, you can use the grant when you do buy a PPOR down the track.

If you do a search you will find many threads on this.

Wylie

 

[wylie]

And if your sister has similar income, why not both get your first houses.

I have never regretted getting a property when I young, and you are on a good salary with the ability to do so now, before you settle down and maybe have children.

This way, depending on how your life pans out, your wife will probably have the option of working or not when you have children. Having that option is a HUGE thing.

It is an option I had, and I would have hated to have to work if I wanted to be at home.

Not something you are even thinking of now, but it will become very important down the track.

Wylie

 

[sue78]

Alex - you can still find properties under $350k in Sunnybank but probably not that nice.

This area I reckon is under valued still. The median price here should be $500k because it's such a brilliant location and close to the city.

 

[eggnog]

I'd also do what Wylie sugests. Also to add, with the location try looking at runcorn. Very undervalued in my opinion and cheaper than sunnybank. Directly on train line/station and with the new calamvale shopping center being built prices will only go higher.

but remember to DYOR

 

[sue78]

runcorn isn't that cheap either. I live here. It's very handy to the to Kuraby, Fruitgrove or Runcorn Station and close to the city express bus on Warrigal Rd. Within the past year, prices have gone up between $50 to $100k in our estate alone. It's still very cheap considering land is around $300k to $350k alone.

I guess you could still pick up houses under $350k 3br, singl grg or highset houses.

Sunnybank Hills have highsets for under $350k.

 

[confused101]

Thanks again everyone!
I've decided I will probably look into a PPR initially to take advantage of the FHOG before inflation and appreciation eat away any further potential usefulness it holds!
But yes I will do a bit more research while going further.
I spoke to a mortgage broker who told me I can live in the house for 6 mths to qualify for the FHOG in the first year, then can move out if I want to use it as an IP - is this correct and will it affect my FHOG status/stamp duty concessions etc later (i.e. will i have to repay some of it if I move out after, say 12 mths, and use it as an IP?).

 

[rastus2]

I'm absolutely confused about whether to buy or not at the moment.

I've saved what I could to cover borowing costs and most probably will be looking to buy somewhere in the brisbane area - somewhere like sunnybank.

My problem is that everyone is talking about the "impending debt crisis", the future "rental crisis", a hike in interest rates, etc.

I just want to do the right thing with my hard-earned money - I don't want to speculate on quick gains, but I don't want to be paying more than 35% of my income on house repayments for years and just sitting at home doing nothing because I can't afford to do anything else.

On the other hand people are saying Brisbane has good "fundamentals" with the fastest growing inward migration in Australia, etc.

I'm single, earn $80,000 per year (but only have savings of $15,000 - to cover borrowing costs):

Can anyone advise me whether I should purchase a property now or wait a while and continue renting at $175 (and soon to increase) per week until perhaps I have a partner in a few years and we can do it together without too much financial strain? Or will housing in Brisbane be SO expensive that even two people can't afford a place?

Any help is appreciated, thanks!

Firstly you need to decide if you want to buy at all right now.... prices are high, although there seems to be some steam left in the market to keep rising..

Secondly you need to do some budgeting and basic maths... where is you 80K going ? How much in repayments can you afford ?

Thirdly .. if you are going to buy you need to decide if it's going to be an IP, PPor, or a hybrid (which many people don't talk about).

If you can afford it, I'd go the hybrid...

Buy as a PPoR.... perhaps rent a room out while you live in it for the first 6-12 months... then, if you want to ... move out, and use it as an IP.

The -ve Gearing of the IP make it attractive... but... and this is a BIG but... unless you've lived in the house from day 1 of settlement, you can not claim the Zero Capital Gains Tax if/when you sell this house.

You have 6 years timeframe between leaving the PPoR, and using it as an IP before your ability to keep it as a PPoR disapears... (you might need to move back into it for 12 months before selling it though)...

Think about it... talk to an accountant etc... and do not rush in...

Cheers,

 

[Rolf Latham]

Hiya Confused

Impending credit crunch ..................I think u can fix most of this by fixing much of your rate.

Impending rental crisis,.....................if this argument holds, rental yields may once again become 10 or 12 %..........would you rather be paying 8.5 % on your mortgage, or 10 % to someone elses mortgage.

Much of this equation is really an emotional one. I dont think its possible to cross off all of those risks........sometimes u need to trust ur gut feel.

ta
rolf

 

[Property Mogul]

Here's an idea I heard about once. If you and your sister both have the income then both buy seperate investment properties (perhaps an identical pair of duplexes). You live in hers and she in yours. This way you get the tax benefits of investment properties and it's like living in your own home.

Have I explained that right? Clear as mud?

 

[yieldmatters]

Can anyone advise me whether I should purchase a property now or wait a while and continue renting at $175 (and soon to increase) per week until perhaps I have a partner in a few years and we can do it together without too much financial strain? Or will housing in Brisbane be SO expensive that even two people can't afford a place?

It's really up to you as so much of it is for non-financial reasons when it is your own place.

But if you are asking on a pure financial basis then I would say waiting to see what will happen will not hurt you. Rent is much cheaper than interest and rent is no more dead money than interest is - so you are ahead on a week to week cashflow basis by waiting and renting. So your only consideration really is the direction of prices. There are 2 scenarios:

1) If prices jump up higher then you end up having to pay even more in the future for your place.

2) If you buy now and prices soften in the future then you will regret it and think that you should have waited for a better deal.

I would assign your own probabilities to those 2 scenarios and then I think you have a decision. If the probabilities are 50/50 then logically you would wait because it saves you money to wait (cheap rent) and these scenarios are on balance neutral. If you think they are 70/30 then you would of course you would buy now.

I am pretty certain on scenario 2 but I could be wrong - many on this forum disagree iwth me. You have to do your own research and make a call and then be comfortable with it.

 

[wylie]

Rent is much cheaper than interest and rent is no more dead money than interest is - so you are ahead on a week to week cashflow basis by waiting and renting.

I don't agree with this. Interest is only dead money if your asset does not grow. So if you buy a house for $300K and in ten years its value is $600K then the interest has been more than covered by capital gains.

Everything we have bought has grown by more than the interest we have paid.

And don't forget, you can have the best of both worlds. Keep paying your cheap rent and have someone else pay you rent for your own IP.

Wlie