What to do? Pull out? Not?

Hi All,

As a FHB I signed a contract on a new 2 bedroom apartment in Westmead for 375k with a 10 day cooling off period in time for the 24k grant. Initially I was okay with the place until I found out the strata was around $745 pq. Although I was reluctant to get into it however the agent suggested that it is a blue chip property and will grow fast as well as rent out quick to the Westmead hospital staff due to the proximity.

The Bank I am going with has valued the property at 365k. The vendor is unwilling to negotiate. This means either I put in an extra 10k which I prefer not to and can't OR that I get a 92% of 365k loan from the Bank (potentially if they agree) and put in 15.2k from the pocket besides the 24k for the deposit. That blows out the LMI to 8k from 5k.

I live at home. I did my numbers and I figured that even if I rented out the property for the first 9 of the 12 month period (and then occupied it for 6 months) I would need to approximately put in $600 per month besides rent to cover off the strata, council rates, water rates and land lord's insurance.

Now my concern is that would that instead hinder my willingness to get more investment properties? If I pull out I feel sorry for the sales agent who has been more than helpful to us (believe me!) :confused: However on another hand I feel is it wiser to get say a 310k-330k old property in Giraween or Pendle Hill, have a smaller loan which when rented out is easier to pay off (though the prices may not rise as quickly as Westmead(?)) and hence be able to afford more IPs quicker than I would be able to with the current option with which I will have a 343k loan (after deposit) plus the 3k strata per annum plus other costs?

I know it may seem silly and that I was stupid, but I am new to all this. I am willing to lose a $1k deposit on a property than be stuck and hating it and wanting to get rid of it. I haven't had the right gut feeling but my mum feels that the Westmead location is just perfect. And I guess when you tell people they look favourably upon a IP/first home in Westmead as opposed to Pendle Hill or Girraween.

Will appreciate your thoughts!
 
from the sounds of it you already know what you need to do. I don't know the area's you are talking about - But I do think that if you aren't convinced what you are buying is good enough, then a) you probably haven't done enough research first and b) should listen to your instincts. Don't worry about hurting the sales persons feeling, they may have bent over backwards, forwards and inside-out, that is their job. Yes they may be disappointed, but tough. This is a HUGE purchase, do what is right for yourself. If the property is as good as they are saying, then they won't have a problem reselling it, will they? ;)
 
Thank you rugrat! :) I agree. I felt so much more relieved tonight when I figured I really don't want to do this! I'd lose 1k but oh well, better than being stuck with 3k strata per year. Poor agent was getting two sales for us (my sis and I) from the same builder. Pity the other ones valuations have come back considerably low and I don't see a chance of that getting across the line either. Cheers!
 
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As a FHB I signed a contract on a new 2 bedroom apartment in Westmead for 375k
The median price for units in Girraween is $325K. So if you proceed you are paying $50K over median which is generally not what you'd do with an IP.

Initially I was okay with the place until I found out the strata was around $745 pq.
$500pq would be better but newer places generally around the $700 pq mark without lifts and pools.

The Bank I am going with has valued the property at 365k.
Not uncommon in the present environment. That does not mean it is not worth $375K though.

The vendor is unwilling to negotiate.
I'm not surprised. There are other purchasers paying full asking price that do not need 95% LVR loans and valuers.

This means either I put in an extra 10k which I prefer not to and can't OR that I get a 92% of 365k loan from the Bank (potentially if they agree) and put in 15.2k from the pocket besides the 24k for the deposit. That blows out the LMI to 8k from 5k.
It is getting expensive to fund this unit now - sounds like you cannot really afford it.

I live at home. I did my numbers and I figured that even if I rented out the property for the first 9 of the 12 month period (and then occupied it for 6 months) I would need to approximately put in $600 per month besides rent to cover off the strata, council rates, water rates and land lord's insurance.
Really sounds like you cannot afford it.

Now my concern is that would that instead hinder my willingness to get more investment properties?
Tipping that amount of cash into it on a monthly basis will affect your future ability to service more debt on more IPs - yes.

If I pull out I feel sorry for the sales agent who has been more than helpful to us (believe me!)
Forget him. He'll get over it. He will spend his commission cheque and it will be gone. This unit will be a payment for you to make for a very long time.

However on another hand I feel is it wiser to get say a 310k-330k old property in Giraween or Pendle Hill, have a smaller loan which when rented out is easier to pay off (though the prices may not rise as quickly as Westmead(?)) and hence be able to afford more IPs quicker than I would be able to with the current option
Now you're thinking smarter. These will be more affordable although older.

I know it may seem silly and that I was stupid, but I am new to all this.
OK - so don't beat yourself up over it. Take your learnings and move forward having more experience and wisdom now.

I am willing to lose a $1k deposit on a property than be stuck and hating it and wanting to get rid of it.
Yep - agree

I haven't had the right gut feeling
You need to distinguish between buyers remorse and truly doing something that is wrong for you. In your case it is probably the latter.

but my mum feels that the Westmead location is just perfect. And I guess when you tell people they look favourably upon a IP/first home in Westmead
Every Indian Mother wants their child to be a success and buy in what they consider to be the 'best' suburb. You are going to have to learn to rise above the expectations of parents and the desire to please others because if you don't you'll be the bunny paying for these decisions financially. It sounds like you are at this point anyway - good for you :)

as opposed to Pendle Hill or Girraween.
Girraween actually has slightly better CG for units in the last 15 years if that is any consolation ;)
 
Hey Alan!

Thank you heaps for your reply! I really appreciate it :D! I'm glad I figured out now and not 4 days later when the cooling off is over.

How did you know my background :D ?? You were close! My grandparents were born in India :)!
 
Wow, Propertunity, you ARE good!!

I went back and re-read the posts to see where you figured out the ethnic background and could not pick it.
Marg
 
could it be that your nice and helpful REA ignored or conveniently forgot how much the strata fees are?

Hello Piston,

We were going to get two props via this REA - one for my sis and one for I. Both were developed by the same developer. The first one when we decided on he had said the strata will be $300 pq as there were no lifts. For this Westmead one he said the strata will be around $450 as there were lifts. However when I spoke to the strata manager I happened to bring up both properties and I quoted this amount. So the strata manager said - how would the REA know?! and that the property without lifts had an estimated ~$570 per quarter. Though the agent was adamant the strata will be low still =/ - even after I had spoken with the strata manager.

That aside, the vals for the first prop are coming to be 30k or so below the asking price and comparative sales in the area are much lower. So we are going to pull out of both contracts and keep looking; find a cheaper property; put in a smaller deposit and step into the market. That would give us a smaller mortgage and lower maintenance costs and I hope options to buy more IPs.

I feel that townhouses and villas seem to have lower strata than units.
 
Alan,

I was wondering if you'd be aware of the average price of 2 and 3 bedroom townhouses and villas in Toongabbie, Girraween and Pendle Hill?

I noticed on realestate.com.au that the ones available (very few!) are between 330k - 350k. The REAs say that these properties are going on the dot or for even more than as listed. That is worrying because it makes it challenging to negotiate.

Thanks!
 
Alan,
I was wondering if you'd be aware of the average price of 2 and 3 bedroom townhouses and villas in Toongabbie, Girraween and Pendle Hill?
Would you be surprised if I said I was :)?

I noticed on realestate.com.au that the ones available (very few!) are between 330k - 350k. The REAs say that these properties are going on the dot or for even more than as listed.
Yes, there are very few. Yes, they often get sold within hours of listing. Yes, they often go above listing price.

That is worrying because it makes it challenging to negotiate.
It is a sellers market out in those places at the moment sa_ali. And you will be seen by the REAs as a bit of a novice (although you are getting an education the hard way).

To negotiate on price in this market is difficult but not impossible.
 
Sounds like you've made the right choice. Getting $24k is a good thing for a new home, but not if you cant really afford it. The $24k will mean jack all when you have to sell it quickly so the bank doesnt repo it.

For the early $300k mark, there are other areas which you can look at. Parramatta is worth a look too.
 
Thanks Alan and Tez!

Would you be surprised if I said I was :)?

Yes, there are very few. Yes, they often get sold within hours of listing. Yes, they often go above listing price.

It is a sellers market out in those places at the moment sa_ali. And you will be seen by the REAs as a bit of a novice (although you are getting an education the hard way).

To negotiate on price in this market is difficult but not impossible.

No I won't be surprised :)!

My sister is adamant that we don't buy anywhere but Toongabbie, Girraween and Pendle Hill. On the other hand, I think we should consider further out west like Quakers Hill and Penrith because there won't be any issues renting a place out there (from what I hear), it will be much more affordable and it will allow us to pay it off quicker to make room for new IPs. If I am not wrong, the Bank would want the loan to be 80% or lower to get the next property - right?

The only issue is time and lack of knowledge about Penrith/Quakers Hill as opposed to Toongabbie, Girraween and Pendle Hill.

I'm so confused!...How are the areas further out west? I know they have a lot of crime however a lot of people here seems to be investing in those areas :confused:
 
If you are confused and being pulled in one direction by your sister and also want to look at areas you are unfamiliar with, then you will be in no position to make any kind of meaningful, considered decision and will therefore be at the mercy of any and all REAs who have their own agendas.
 
Browse the forums, get an insight from the wealth of knowledge here and do some of your own research. Spend the weekends exploring the suburbs, talking to people at work, uni etc who might live in these areas.

Or else you will find yourself making the wrong decisions.

You could always use the services of a buyers agent. While it may seem a bit of upfront $$ to spend, they may be well worth it in the long run as they will sit down to see what you want out of the property.

If your looking at Pendle Hill, Toongabbie etc look at Parramatta etc as well. My unit in Rosehill is getting good rents coming through.
 
Thanks Alan and Tez. I will make sure that I make an informed decision. I would consider areas further out west as well. We saw a villa for 315k in Girraween today. We were more inclined to get it for 305k - 310k. Thought the agent was quite cut throat about it. I guess we wanted in that price as it needed some renovations like a paint, new carpet and door nets required a change. There was a sewer going under it.

Tez, I don't think I can get a villa/townhouse in Parramatta for the price I am looking in. I'd prefer spending the least I have to in a location with high rental yields and capital growth so I am able to build a portfolio as opposed to spend what we were originally going to spend in Westmead and Pendle Hill.
 
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