So are you like many other first home buyers who are priced out of their local property market? Are you on the edge of just accepting that you will rent for the rest of your life? Are you worried that you cannot afford to purchase property in general?
This is normal!
In this lesson, we explore a solution that many of our first home buyers are exploring.
It is important that you consider this approach.
Did you know?
Google images was literally created after Jennifer Lopez wore that infamous dress at the 2000 Grammys. So many people were searching for her outfit, the search engine added an imagine function.
Prefer reading? Here is the transcript of the video:
One of the comments we hear from first home buyers regularly is that they’re simply priced out of their local market. Take an average first home buyer living in the inner-city suburb of you to know, let’s say, Bondi or Newtown, want to purchase something for $1,000,000. They can only afford $550,000 to $600,000. What do they do?
Over the last couple of years in conjunction with one of our business partners, we’ve developed a solution. You can still live in your inner-city suburb and, still purchase an asset and get into the market.
Most of us grew up hearing all about the great Australian dream—the dream of owning our own home and a quarter acre block in the suburbs.
We get told to study hard at school, get a good job, save our money, find a good boy or a good girl to marry and buy a home to raise our kids. Some of us have decided that that’s the way to go, while for many of us, it couldn’t be further from the truth. Either way, many of us have decided that our great Australian dream is underpinned by purchasing a home. Most of us have a clear idea of where we want to live, and typically it’s more expensive than we had hoped. Even the suburbs a little further out are more expensive than we thought. So we bite the bullet and buy something anyway. We’ve now spent too much and spent the next couple of decades on the back foot, trying to stay ahead of the game.
Let’s take the example of John and Mary. They want to live in the inner-city suburb of HeavansVille. To buy a house in that suburb, they need to pay at least $700,000. They decide to move to the inferior neighboring suburb Hells Vale and find a property for $600,000. They use their savings of $90,000 as a deposit and pay the stamp duty and other costs. They take out a 25-year principal and interest loan of $540,000. It costs them approximately $840 a week.
Mary’s sister Kate and her husband Peter decide there’s a better way. They decide to rent in HeavensVille for $550 a week and decide that they will buy a property as an investment somewhere else. They sit down and do their numbers and find out that they can comfortably afford to buy a $450,000 property as an investment. They borrow $ 405,000, and it turns out that the property costs them only $60 a week to hold. That’s right, $60 a week.
They’re pleasantly surprised and realise that with their borrowing capacity and the minimal holding costs, they can buy two of these properties. They’re now in a situation with only $900,000 worth of investment assets, costing them $120 a week. They’re living in their preferred suburb for hundred and $150 a week. Their total cost is $670 a week.
John and Mary, on the other hand, are living in a suburb. They don’t want to live in, have $600,000 worth of assets, and it’s costing them $840 a week, which is a $170 more than Kate and Peter.
When both sets of assets double in the coming years, Kate and peter will have $1,800,000 worth of assets, while John and Mary will have $1,200,000 worth of assets.
It turns out that in today’s world, the great Australian dream may not be what it’s cracked up to be. The world has changed, and the way we use our money is changing with it. The great Australian dream has now become about lifestyle and smarter decision-making. Clearly, Kate and Peter won that contest, hands down.
If you want to find out what your numbers might look like, contact us today. Your future may be brighter than you think
Why not reach out to our office so we can speak about your individual circumstances!
Disclaimer: The information provided on this website is for general education purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should consider the appropriateness of the advice to your own situation and needs before taking any action. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy.