Is this a good idea? Investment property in Brisbane

flyflytea on 31/10/2021 - 11:13

So my partner and I currently live in Canberra and are building a house. We got lucky and signed the contract prior to the COVID property spike so we are paying a decent price for a 4 bedroom 2 bathroom. Once we move in we will get it revalued to see what equity we can leverage.

We lived in Brisbane a few years ago and loved it, and do think we might like to move back, but not for 5-7 years time as our careers are doing so well in Canberra.

We were thinking we could buy a property in Brisbane as an investment with the goal of possibly moving into it if we decide to move back up there. We would be able to use equity and cash deposit, or wait a bit longer and just do a cash deposit, so not relying on the equity completely.

Is this a good strategy? We thought Brisbane prices will keep going up so if we want to live in a house in Brisbane, why not pay 2022 prices rather than 2029.

We earn ~300K combined and our current mortgage is 645K.

Financial

Comments

  • holdenmg on 31/10/2021 - 12:53

    Your proposal seems to rely on the continued improvement in Brisbane Property Prices and Low Interest Rates at the present.

    APRA just shifted the goalposts.
    @ https://www.apra.gov.au/news-and-publications/apra-increases…

    Is your Current Mortgage Fixed Interest or Variable?

    • flyflytea on 31/10/2021 - 13:00
      +1

      It's currently variable, 2.69%

      I can only assume a property will cost more in 7 years? And we could do the investment loan on P&I to try and reduce it. It's ok if it's negatively geared and costs us money to hold if it's a solid property with strong capital growth. That's my current thinking but I don't know much about property to be honest

  • Porker on 31/10/2021 - 13:09
    +1

    Houses generally will always go over time, and your time of 7 years is a good holding period.

    I've got many stories to tell about houses as I've bought and sold a few.

    As example, just sold a house which I bought in 2014. In 2016 the valuaction actually dropped by quite a lot, but the price recovered in 2018. Just waited for good time to sell which was now.

    Property was neutrally geared though so very easy to hold on to.

    • flyflytea on 31/10/2021 - 15:13
      +2

      yeah and if we don't move up there in 5-7 years, we'd just keep it there as an investment property with no real need to sell

  • redfox1200 on 31/10/2021 - 13:11
    +1

    if property prices go up yes, if they go down no

    on 300k income you can probaly pay your current mortgage out by the time you want to move to brisbane

    • flyflytea on 31/10/2021 - 15:14

      yes we do hope to fill up the offset as much as we can before thinking about having having kids (in 5-7 years, we are still in our 20s) and our income may drop when we do that.

  • rektrading on 31/10/2021 - 14:25

    Real estate prices in major cities only go up. It's either buy now or pay 2x in 7Y.

    https://www.ozbargain.com.au/comment/11262932/redir

    • netjock on 31/10/2021 - 14:38
      +2

      I thought you are in the crypto camp?

      Tell OP to throw all their money into crypto then take out a loan against that crypto then take out another loan from the bank to buy the Brisbane house.

      • flyflytea on 31/10/2021 - 15:14
        +1

        haha crypto terrifies me..

      • rektrading on 31/10/2021 - 15:25

        I'm in the buy-any-hard-asset-to-short-fiat-money-to-the-ground-camp.

        I don't care what hard assets people buy as long as they don't keep their savings in fiat money.

        People should only invest in assets they understand and that gives a return that suits their risk profile. Those that don't understand digital assets should stay away.

        • netjock on 31/10/2021 - 20:45

          I'm in the buy-any-hard-asset-to-short-fiat-money-to-the-ground-camp.

          I don't think you know what shorting actually is. But you are also the guy who said 100% into crypto, take out a loan to tie you over if Bitcoin goes from 60k to 30k until it hits 60k again.

          • rektrading on 31/10/2021 - 20:51

            @netjock: Two of my favourite bookmarks.

            https://bitcoinity.org/
            https://usdsat.com/

            I hope I live long enough to see USD 1 = 1 sats.

            • netjock on 31/10/2021 - 20:54

              @rektrading: Doesn't mean anything. It is like wanting to live long enough to see $1 worth 1/1,000,000 of a Holden Commodore.

              I'd like to live long enough to see Bitcoin bank the unbanked. If they can't even get a bank account and pass anti money launder, know your customer and counter terrorism financing checks how are they going to send and receive bitcoin.

              • rektrading on 31/10/2021 - 21:04
                -1

                @netjock:

                Holden Commodore

                Holden died a horrible death after 165Y. The same will happen with all fiat money.

  • sockpuppy on 31/10/2021 - 14:58
    +1

    Crypto boffens aside. For the last 50 years the best use of a marginal $ is having the bank ATO and a tenant help your equity gain in a property in a major capital city. The market is however characterized by years of relative stagnation punctuated by rapid gains, you just cannot tell in advance ( though we are in one now). Nobody could have predicted in 2019 the price increases in regional/lifestyle australia.

    That being said the land asset you purchase will almost certainly increase 2x ever 10 years, the house and the land doesnt care who owns it, it will probably double. Do it when you can afford it, buy to hold long term, my advise is to buy "boring", on a scale of 1 to 10 where 1 is a squatter druggie dive and 10 a house in Mosman, look for the level 3-4 house in a 5 area, walking distance has a school that you would send your kids too.

    Talk with a good mortage broker first, the money is the hardest thing to get right.

    • flyflytea on 31/10/2021 - 15:17
      +1

      yeah we would use a buyers agent to pick the property.. Happy for it to be a boring house that could be made 'pretty' with some renovations if we decide to make it our PPOR in the future. We have the advantage of not knowing many people in Brisbane and being super flexible on the location, as long as it's near the train line. North has Sunshine Coast, south has Gold Coast so it really doesn't matter to us.

  • p1 ama on 31/10/2021 - 14:59
    +3

    Is this a good strategy?

    Whenever anyone asks this, it just means that they've already made up their mind and is looking for confirmation from others.

    You sound smart enough to know the risks and the rewards of your potential investment. You need to make a decision based on the information you have.

    • flyflytea on 31/10/2021 - 15:18

      not really! The other option is to go hard on shares (which we will likely still do some of). I just don't know much about property as an investment. To me, it seems more volatile than shares

      • p1 ama on 01/11/2021 - 00:19

        Property is definitely less volatile than shares, returns (as crazy as they seem right now) are generally lower than shares, but you make your money in property off leverage and tax incentives, not raw returns.

        Not going to comment on specific market conditions or make any investment recommendations (always take this with a grain of salt), but let me say that as an investor, you have two things at your disposal - your capital, which you can use to invest, and your income and other assets, which you can use to leverage your capital.

  • Seraphin7 on 31/10/2021 - 15:05

    Is this a good strategy?

    If property prices keep rising strongly and your cashflow can support it, then it will be a great idea.

    If either of these points fails, you could be in a pickle.

    As ever, no one knows, but if you can hold the investment throughout at least one cycle, the probabilities are you will come out in front.

    • flyflytea on 31/10/2021 - 15:19

      yeah it would be a buy and hold for the long term strategy anyway, hopefully would have no need to sell it.. still have 6-9 months before we can feasibly do it but gives me time to research Brisbane and where would be good to buy

  • WreckTangle on 31/10/2021 - 15:35

    Brisbane has lots of room to grow, competes with the GC and Sunshine coast, and northern nsw. Its not land constrained like Sydney or as financially significant as Melbourne - lots of low paying tourism/service industries in SEQ. Its hot, humid & no daylight savings so in an odd time zone half the year. Prices likely won’t increase like the southern cities.

    • OzFrugie on 01/11/2021 - 00:13

      So, melb > brisbane in terms of future gains?
      Everyone seems so hyped up with Brisbane Olympics..

  • bobbified on 31/10/2021 - 17:39

    We earn ~300K combined…

    Welcome, you're on of the "average" household income for Ozbargainers.

    • netjock on 31/10/2021 - 20:55
      +2

      Average is more like $500k. $250k each and with $5m in crypto which they take out loans for day to days spend to avoid CGT.

      • bobbified on 31/10/2021 - 21:04

        Sorry sorry.. I've underestimated everyone's income! haha

  • Drifta on 31/10/2021 - 19:21

    Yes i think it's a good idea. Go for it if you feel your income can be maintained and you're willing to hold long term. I imagine you're working for a fed gov agency so in stable jobs? Where abouts in Canberra did you build?

    • flyflytea on 31/10/2021 - 21:10

      yeah we both work in IT so it's pretty stable, was the same when we were in Brisbane but the rates are higher here. I think we'd be comfortable dropping in salary a bit if we did have to, no one NEEDS to earn that much lol we are building in Ginninderry

      • Drifta on 01/11/2021 - 19:54

        Whats likely to happen is one of you may decide to drop work hours and work part time, especially once kids are in the mix or decide to step out of the workforce completely for a period of time. This is when things can get tight. But yes, on the salaries you both have if saved enough and you dont develop expensive tastes you should be more than comfortable. Investing in brisbane if you plan on one day returning is certainly sensible.

  • batfastard on 01/11/2021 - 07:32

    There are some good positive geared residential property investment options in the logan / Ipswich corridor.

    We'll worth doing you Homework on.

    • flyflytea on 02/11/2021 - 21:29

      Yeah haven't considered location beyond 'near a train line' so will suss out the area

  • MontyMacaw on 01/11/2021 - 08:28
    +1

    Brisbane is most likely going to be the hottest property market in Australia leading up to the Olympics.

    • flyflytea on 02/11/2021 - 21:28

      Thanks good point!

  • jrvb42 on 01/11/2021 - 08:56
    -2

    Southerners buying in Qld are driving up prices to insane Southern-like values.
    Southerners moving up here are depriving real Queenslanders a place to live/rent.
    Best you lot stay out of our state please.
    Just bring your money for holidays, otherwise keep out.
    Our livestyle and culture is different here.
    Thanks.

    • Rogaor on 01/11/2021 - 09:43

      Yeah, is everyone else fault…
      Useless people will always blame migrants instead of being competitive.

    • flyflytea on 02/11/2021 - 21:26

      haha I think there is room for both of us!

  • golfer dad on 01/11/2021 - 09:38

    With low interest rate, record house prices, migration from the Southern states causing housing shortages, elevated construction/renovating costs, etc - you are buying in at the peak. I would think better off buying in 2 /3 years time when home loan rates raise to 5% which could result in forced house sales as ppl who have completely over-stretched themselves at the current loan rate and paying top price for their home, run into difficulties serving their signficantly higher mortage payments in 2023

    • rektrading on 01/11/2021 - 10:15

      I would think better off buying in 2 /3 years time when home loan rates raise to 5% which could result in forced house sales

      People that think that real estate prices in urban cities will die down in 2Y to 3Y haven't been following the trend.

      https://www.ozbargain.com.au/comment/11262932/redir

      The prices will keep going at a rate of >20% 1Y.

      Australian House Prices Soar By 500% Over The Past 25 Years
      By Michael Yardney | 04 May 2021
      Australian housing prices have soared by more than 500% over the past 25 years but while capital values have grown, yields have fallen to all-time lows.
      https://www.yourinvestmentpropertymag.com.au/expert-advice/m…

      It's either bite the bullet now and buy while the prices are still cheap or pay 20% more next year.

      • sockpuppy on 02/11/2021 - 08:28

        Avoid Yardney, on any level he eclipses Harvey Weinstein, 60 women and underaged girls sexually abused in his surgery by Dr Michael Yardney before he was struck off. https://forums.whirlpool.net.au/archive/2081908, https://resources.reglii.com/VGG.1999.10.7.G40.pdf. ( This isnt a case of confused identity, this is the same person)

        That being said buying in the peak of a boom wont create wealth, though obviously in the course of time that becomes a rounding error particularly after 2 property cycles. My first house I purchased at $90K at the peak of the boom the agent said they where offered $120K, these days of course that is just a bid during auction.

  • born2reign on 01/11/2021 - 12:36

    seems like a sensible plan to me…

    be careful taking advice from the "what if gang", there's always going to be potential negative "what ifs" but if you let that always scare you and never take any action then you miss out on any potential positive "what ifs" too.

    there's no evidence to suggest that brisbane is already fully cooked either, still a fair bit more affordable then the other east side capitals, and if it's quite likely that you may eventually move there, then even more reason to pull the trigger and do it.

    • flyflytea on 02/11/2021 - 21:31

      thanks! yeah and the more we talk about moving back up, the more we want to do it.. so I do think there is a good chance it will happen eventually

  • rektrading on 03/11/2021 - 07:16

    BNOPML = buy now or pay more later.

    Everything you need to know about the big new home loan rules coming into force TODAY - as property prices surge at the fastest pace since 1989
    By Stephen Johnson, Economics Reporter For Daily Mail Australia
    03:07 GMT 01 Nov 2021 , updated 07:36 GMT 01 Nov 2021

    BRISBBANE: Up 24.8 per cent to $731,392
    https://www.dailymail.co.uk/news/article-10151219/Home-loan-…

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