Financial Advice - Renting / Buying Apartment

Retailer123 on 10/12/2020 - 10:42

Hi All,

Needed some thoughts on what to do about purchasing a property. I have a unique situation where my partner is planning to move to Australia to eventually start a life and I'd like to move in to somewhere with her when she arrives.

Ideally, I would love to buy a house but currently don't have enough of a deposit saved (I'd like atleast 15 - 20% saved for a house) . I'd currently consider myself as a single earner for the time being as my partner wouldn't be able to contribute until they can settle. Currently am living with parents so I am able to save a substantial amount by not paying any rent. Reason I'd need to move is to support my partner and be with them.

My options as I see it are:

  1. Rent an apartment and save a deposit for a house
  2. Buy a apartment and commit to that before saving up for a house
  3. Attempt to apply for a house loan as a single earner and buy a house that's on the cheaper side. (Currently earning ~80k P/A if that helps)

If I go with option 2, would it be considered as an investment that can last me as I can potentially rent it out after I can afford a house? Or are all the expenses such as Strata simply not worth it?

Would love some insight, still young and trying to step out into the housing market while I can :)

Financial

Comments

  • bobbified on 10/12/2020 - 10:53
    +1

    …but currently don't have enough of a deposit saved (I'd like atleast 15 - 20% saved for a house)

    How much have you got now and how long do you think it'll take you to get to 15-20%?
    If you have nothing saved up right now, Option 1 is going to be your only option.
    But if you have enough for a deposit to buy an apartment, I'd take that as a baby-step and o that first. At least it means your goal of having somewhere you and your partner can live alone.You can always save up and move into a house later.

    • Retailer123 on 10/12/2020 - 11:06

      I've got about 20k saved up and I saved this within a year. Would maybe take me 3-5 years of saving to get that deposit.

      • bobbified on 10/12/2020 - 11:11
        +4

        It's not really enough to do anything with, so if you are going to move out now (assuming your partner is coming soon), I think renting is going to be your only option.

        Asking your partner to move in with your parents might be okay, but you've got to be careful if your partner doesn't get along or isn't entirely comfortable with your parents. He/she might not necessarily tell you that they're not comfortable and it could manifest in other ways. You might be able to save more money that way, but it could come at the cost of your relationship.

        • Retailer123 on 10/12/2020 - 12:34

          Great advice, thanks! Everything comes at a cost :)

  • hoey888 on 10/12/2020 - 11:01
    +1

    Why not have your partner move in with you at your parents place? Maybe suggest it as a temporary idea though

    Partner/spouse may not like Australia at all. Give them a taste of Australia and then maybe revisit the idea. Worse decision would be purchasing a apartment/home that partner/spouse doesn't like only to incur additional buy/change over costs.

    Personally, you may want to rent an apartment/house before buying. Think of it as a 'short term try before you buy.' 1 year lease commitment is easier to walk away from for a first time couple than committing to a 30 year mortgage.

    • Retailer123 on 10/12/2020 - 11:04

      Yeah that'd be ideal but not too sure how my parent's would feel about that, wouldn't really want to trouble them. I agree it's a risk that my partner may not like Australia but also she's taking a risk to even consider moving here so the least I can do is support her.

      I hate the idea of renting because I think it's a massive waste of money - but yeah might not have any other option. Thanks for your input! :)

      • SF3 on 10/12/2020 - 11:14

        not too sure how my parent's would feel about that

        You should ask, at least that may give you a new option.

  • Quantumcat on 10/12/2020 - 11:02
    +1

    The downside of option 1 is paying rent and the downside of option 2 is paying extra stamp duty. Option 2 also comes with slightly more risk (eg if there turns out to be a terrible expensive problem with the apartment building or you can't sell it at the right time later or it goes down in value). What you need to do is find out how much stamp duty you would be paying on an apartment, do your budget and work out how much you can be saving and how long it would take you to save up a deposit on a house, round up to the nearest six months and see how much rent that will cost you, and see which one costs more. Assuming that the apartment stamp duty is cheaper, then decide how much cheaper it needs to be to account for the slight extra risk. If stamp duty costs more than renting for the period of time needed to save up a deposit for a house then definitely just wait and get the house first.

    I have been thinking about a similar situation for a family member who wants to move near his other family member, he is deciding whether he should sell his home now, buy something not that close but sell and buy again when something closer comes up, or, sell his home now and rent while waiting for something to come up, or just stay far away and sell later.

    If this doesn't make sense let me know and I'll do a sample calculation with made up numbers.

    • Retailer123 on 10/12/2020 - 11:11

      I'd love that sample calculation. But yes will start the first step by budgeting and seeing how much it would actually cost me in the long run. Thanks! Need to put a lot of thought into this.

    • bobbified on 10/12/2020 - 11:12
      +1

      downside of option 2 is paying extra stamp duty

      OP sounds like a first home buyer with a relatively low budget, so may not need to worry about stamp duty.

      • Quantumcat on 10/12/2020 - 13:30
        +1

        He will still pay extra stamp duty if he buys an apartment and then buys a house. He could get off stamp duty for the apartment but not the house as he wouldn't be first home buyer anymore. If he just buys the house he can get stamp duty waived for that.

        • bobbified on 10/12/2020 - 15:46
          +1

          Yeah, you're right if you look at it from a straight stamp duty point of view.

          But there's a good chance that a slight upwards move in property prices while owning an apartment can mean that it'll offset the stamp duty that's applicable when eventually switching to a house. Whereas if OP was renting, the price of rent is likely to just go up in the 3-5 years that he intends to rent. NSW is also putting in that motion in relation to the removal of stamp duty (but the addition of some other tax to replace it!).

          Guess there's a limit on how much general advice we can give. OP will need to look at everything on a case by case basis to work out what the eventual outcomes could be.

          • Quantumcat on 10/12/2020 - 15:48
            +2

            @bobbified: That's true - I thought apartments didn't appreciate that much. But I'm no property mogul and don't have that experience to know.

            Yeah OP has to crunch the sums for himself. Hopefully we have given him ideas of what costs he needs to consider.

            • bobbified on 10/12/2020 - 16:03
              +2

              @Quantumcat:

              I thought apartments didn't appreciate that much.

              No, you're definitely right. Investments-wise, there's hardly any capital growth on an apartment, but the rental return is generally much better than that of a house. The capital growth on a house is much better, but the rental return isn't as good. The perfect investment would be to get a combination of both good capital growth and a good rental return, but we know how hard that is to find.

              When choosing a home though (as opposed to an investment), the financial (returns) side of it isn't always the main consideration. I think one of your earlier questions was one that asked who would prefer to live in an apartment over a house and I was one of those. I've spent quite a lot on my apartment knowing that I won't be getting that money back when I eventually sell. It's all just for my immediate enjoyment and comfort. haha.

              Hopefully we have given him ideas of what costs he needs to consider.

              It's such a long and difficult road nowadays to own a property and many sacrifices have to be made. Good luck to OP.

              • Retailer123 on 11/12/2020 - 10:01

                @bobbified: @bobbified @Quantumcat
                Thank you both! Will put in some effort to crunch numbers and consider the advice you have given.

  • [Deactivated] on 10/12/2020 - 11:04
    -5

    living with parents

    🙄

    • Retailer123 on 10/12/2020 - 11:05
      +1

      ?? What's the issue here chief?

      • SF3 on 10/12/2020 - 11:16
        +1

        Ignore, self explanatory here

        • bobbified on 10/12/2020 - 11:27
          +2

          Oooh.. it's that "low IQ guy that doesn't know how to deal with someone with a high IQ" guy again! LOL!

        • Zachary on 11/12/2020 - 16:56

          This guy is trying to act like the class clown I had in class…..sure funny at some times with his interjectures, but other times it's just cringy….and he should probably get a woman(not the same woman who dumped him…which might explain why he's here…), get married and have kids and live a happy life and away from ozbargain….

      • whooah1979 on 10/12/2020 - 12:23
        +3

        Women that are willing to leave their family and friends for their BF that has a steady income and lives with their parents in another country eat men for snacks.

        • MontyMacaw on 11/12/2020 - 08:54

          Especially if they have $20k saved

    • Fredfloresjr on 10/12/2020 - 11:27
      +1

      Again, your comment is not valid cos you like gold shoes.

  • netjock on 10/12/2020 - 11:05
    +1

    If I go with option 2, would it be considered as an investment that can last me as I can potentially rent it out after I can afford a house? Or are all the expenses such as Strata simply not worth it?

    I wouldn't go down this road. Happening to me right now this situation.

    Bank will loan you less money down the track if you want to hold onto the apartment because IF the apartment goes empty you will have to pay all the cost. Therefore it is a loan commitment. Apartments are good because the money you get will cover both the strata fees and interest minimum. Might pay most of your principle too. The only problem you end up having is having to pay tax.

    If you can afford it buy a unit or a flat (way cheaper body corporate) and appreciate better than an apartment in a building of 200 in a city of 60,000 built about the same.

    Obviously if you can afford a house you want to live in and with good forward potential do that.

  • whooah1979 on 10/12/2020 - 11:11
    +3

    I have a unique situation where my partner is planning to move to Australia to eventually start a life

    Make use you protect your assets just in case this doesn't work out.

    • brendanm on 10/12/2020 - 11:30

      As if this wouldn't work out, op has found the love of his life.

    • Fredfloresjr on 10/12/2020 - 11:43

      Gotta love all that flowery promises until they step their foot in here.

  • Archi on 10/12/2020 - 11:19
    +4

    80K Gross a year roughly translates to about 60k after tax in the hand about 5K a month

    a decent 2 bedroom apartment on the fringes of the CBD (15-20km) will probably set you back about 800K

    a deposit of 20% 160K leaving mortgage about 640K a monthly repayment for a 30 year P&I loan about $2500 per month.

    add in council rates, strata, electricity gas, water, mobile phone, internet, health insurance, car insurance and rego, there isn;t alot left for food, recreational.

    on 80K salary you would need to be super frugal to make ends meet

    • whooah1979 on 10/12/2020 - 12:26
      +3

      A one bedroom unit in the city is $749k.

      • onetwothreefour on 10/12/2020 - 15:48
        +3

        And you'll regret that purchase.

        • MontyMacaw on 11/12/2020 - 08:56
          +1

          I read about that somewhere…

  • screensaver on 10/12/2020 - 12:44
    +1

    My advice, leave your excess stuff at your parents house. Find a room (share house) for your partner or both at a great price and facilities and location. there are some unreal deals. Get the best pf both worlds, let someone else foot the bill for rates etc

  • Meho2026 on 10/12/2020 - 14:32
    +2

    We need more info.
    Whats the unique situation?
    It sounds like youre about to be taken for a ride.
    Have you ever met this person before?

    • Retailer123 on 10/12/2020 - 14:51

      Haha no issues here don't worry. Met several times. Just trying to plan out future together, was just considering to get my act together and purchase a property under my own name. I'm thinking best thing at this point is to rent and see how things go before committing to anything.

      • Hardlyworkin on 10/12/2020 - 16:15
        +1

        A new relationship plus house owning stress/ lack of money isn't ideal. If she likes you then whether you own your place or not won't matter.

        Just rent and get both your names on the lease.
        Will you be looking at a partner visa down the track or already onto that?

        • Retailer123 on 10/12/2020 - 16:24

          For now just later down the track. First need to see how she goes with Australia in general before we both make serious commitments.

  • TVC889 on 10/12/2020 - 19:54

    It is all about location. Buy a property which you can easily rent out in the future. Renting is not a good option if you can afford to buy.

  • A Vlad on 11/12/2020 - 08:12

    Renting is not dead money particularly in the current environment. This misconception was started during the baby boomer ere and passed down as a right of passage in Australia. It's simply not true that you need to rush to buy. If you can afford it comfortably and you really want to buy this house then go for it but it's not the only option and certainly not the best financially majority of time. Everyone believes their elders without actually doing any calculations and research themselves. People will sign their life away to slavery to pay for the dream (aka house) when they have little to no other assets. Is this really worth it? It may be to you, but as long as you are aware there are always other options then buying.

  • Masher84 on 11/12/2020 - 08:35
    +2

    Assuming your partner isn't very rich, you'd probably need to apply for a partner visa which at the current rates of processing will take years. There's a backlog of about 100,000 applications. https://www.abc.net.au/news/2020-08-14/partner-visa-process-…

    Application fee (from a friend who's been thru the process) is $7,500 plus whatever you have to pay the gov't of the other country.

    Would be worth having your partner come on a visitor visa (country dependant) first to see whether this really is right for both of you.

    My friend (having spent around $10,000 to date) and his girlfriend have given up. The stress (two years so far) was too much for both of them.

    Good luck.

  • MontyMacaw on 11/12/2020 - 09:01
    +1

    Dear Mr Green Card provider, do you know the failure rate of arrangements like this? It’s just another Sugar Daddy situation with a 70% failure rate and many end up broke with maintenance for a child which helps provide the mother with not only a green card but also welfare payments to support her while she finds the next victim.

    What? Somebody had to say it.

  • OzHunterNSW on 11/12/2020 - 09:50
    +2

    How can you buy an apartment, when you even say yourself you don't even have the deposit?
    Why don't you wait and decide on these life changing purchases, when your partner arrives?
    Then you would have two incomes.
    Then you both have the feeling that the premises was chosen by both partners.
    You need to discuss which area you two would like to live in.
    Or are you going to dictate the relationship from day one?

    • MontyMacaw on 11/12/2020 - 16:42

      Last line says it all as far as mind set is concerned. Such is the fantasy world of some.

  • Olga on 11/12/2020 - 11:11
    +1

    Currently Banks are very tight at lending. You should check with a mortgage broker how much of a loan you will qualify for…..
    Currently stamp duty for first home owners exemption is for 650,000 then it increases stlightly upto 800,000.
    Once your partner is here and gets a job, it will make house/unit purchase much easier together…..

    Good Luck…..

  • Darayus on 11/12/2020 - 13:16

    Rent till you have save enough deposit to place it on property, because owning property means more interest outgoings and starta and insurance charges which currently your LL is paying on your behalf and he dont mind to go -ve since he save on his Income tax.

    meanwhile once you have deposit build up then look out for the property that suits your requirement and budget and location rather then jumping just now.

    currently its tenant market and LL are begging to occupy thier property so i request you to go slow and avoid any emotions and pressure to be the owner of property.

    i rented for about 12 years before i bought my first rental property.

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