Where/when to buy?

J

Jamesdi

Hey Everyone,

I've been researching in purchasing my first IP for the past few months and have been reading up on a few things also - Including this forum.
There are several options that I'm currently considering but I have run into a bit of a problem in deciding on what exactly to do and as I've been reading this forum of late I thought I could get some advice :)...

Here's some background:
I'm 21 and have been working a combination of part and full time
Currently holding a part-time position whilst I am going through uni, with monthly income equalling approx $1,600
Upon completion of uni (June next year) I will continue at my current workplace in a full-time position, which would be in the range of 3,500-4k per month.
Have a max possible deposit of about $70k available at the moment but using less would be desirable - But obviously I don't want to be hit by LMI too badly.
The dilemma I have is that obviously with my current pay I don't have the borrowing power that I need to purchase something in the 300k+ range.

Now, for what I have in mind:
Option 1 - Wait until I complete uni and continue saving for the time being, then once on full-time work purchase an IP in the suburbs of Melbourne in the price range of 300-400k

Option 2 - Buy a studio apartment in or nearby Melbourne now, which because of the cheaper purchase price will allow me to still cover the repayments whilst still at uni

Option 3 - Buy something lower priced in Adelaide now, I've been told it's relatively cheaper with strong growth?

I am currently undecided as to which path to take but I am eager to get into the market asap, hence option 1 has its downsides in that I will have to wait until next year.

Any suggestions or tips would be greatly appreciated as I am just starting out,
Thanks in advance :)

-James
 
Hi James & welcome,

Firstly, good on you for wanting to start investing so young in life. you will go far! Secondly, have you thought about what your PI strategy will be? Most people agree that property is a reliable Get Rich Slow strategy. This doesn't sound sexy but it does work. With this in mind, if you are thinking of building a portfolio over the long term you need to take a long term view. I know at your age that next June seems eons to wait - but it really isn't, in the scheme of things. I reckon the best path is to continue saving, wait until you have a FT job, and then try & get the best asset that you can. It's hard when you are so keen to get started but it's worth being patient & getting the best start you can.
 
Thanks a lot for the tips :) Really appreciate it - I was thinking that would be the case, its just been on my mind and wanted to get things started.
And yes my strategy is that of a long term one, having a portfolio is what I'm aiming for but am aware that's going to take time.
But yeah that's true, I will take your advice and wait it out. I guess in the time I've got I will just continue my research which will probably result in a better first IP choice on my part :)
Thanks again :)
 
Congratulations on thinking this through and seeking advice. Once you're working full time make sure you get your finance pre approval in place.
I received some advice from a Greek property investor once that has stuck with me to this day. He said 'buy property when you can afford it, buy well, and don't sell unless you really need to'. The other piece of advice he gave was to 'never, ever pay retail.'
 
Thanks :) Yeah with the pre approval I've been told to get myself a small personal loan now - Not that I need it but so I can slowly pay that off and in turn get a good credit rating. As at the moment I don't have one due to never loaning, renting etc. So will probably do that.
And that sounds like good advice, I'll take it on board as well - Will just continue my research for now :)
 
Jamesdi said:
Thanks :) Yeah with the pre approval I've been told to get myself a small personal loan now - Not that I need it but so I can slowly pay that off and in turn get a good credit rating. As at the moment I don't have one due to never loaning, renting etc. So will probably do that.
And that sounds like good advice, I'll take it on board as well - Will just continue my research for now :)
Click to expand...

Don't get a personal loan. Just apply for a credit card instead.

Plus, pre-approval means nothing anyway so don't place too much emphasis on that. I can give you a pre-approval now in 1 minute but it won't mean you'll get a loan.
 
Wait for 12 months. You'll be glad you did. The way the prices are going you will have save ~10% by waiting.

This is definitely the wrong time to be rushing into property in Melbourne.
 
Thanks again for the help, really appreciate it :) Guess I'll just save up more of a deposit by then and get myself a credit card. Am just hoping I get in before the market recovers.
 
Just a suggestion, instead of getting yourself a credit card, consider getting a margin loan on shares instead.

Perhaps buy some BHP shares on a 50% LVR (max) margin loan (very little chance of them dropping from $40 to $20 a share). That way the interest on the margin loan is tax deductible, the shares may actually go up in value and you will receive dividend payments throughout the year.
 
Buy now

I am going to suggest otherwise. Everyone has been saying wait. I say buy now. Why??? Prices are cheap. Negotiate on a clean property around $150000and be very aggressive. Presently as you said Adelaide prices are low so don't be afraid if your offers are rejected. Just go to the next property. Make sure they're low maintenance. The market will eventually pick up and so will the property you buy now. A previous poster said buy when you can afford. Well you can afford to buy now so do it. Then when you do buy later on which is what everyone else is saying the property you own will add to your purchase of the $300,000. In not paying Mortgage Insurance saving you potentially thousands. Just my advice due research is needed. None of us knows your personally situation.
 
Hrmm, now I'm a bit confused - I don't know the Adelaide market well at all but I'm guessing I'd be hard pressed finding something for 150k? What would I be looking at for that price?
I'm also concerned that I will miss this down period in the market and end up paying substantially more in June next year :confused:
 
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