Buying property in Sydney – yes or no?

Published on August 5, 2015 2:24 pm, by

In my house this is the question to end all questions.  Do we do it or do we not?  And even if we do it, how do we do it?

All through the media we see the bad news.  An average earner takes 14 years plus to save a deposit and then surely the rest of their life to pay it off.  Before we get too bogged down in what is being said around us, it’s back to the drawing board (or budget) to understand our current choices and what future choices these bring.

Household, education, living expenses aside I want to understand if I was paying a mortgage on the house I’m living in what I would be paying.  I think we are lucky, we live in a 4 bedroom house in a nice area and pay $720 per week.  The same house given recent street sales would cost approximately $1.3million to buy.  I’m not even going to bother working out the deposit, how long it would take to save and how much the price would have gone up in that time.  I’m going to pluck out a figure of $1,100,000 for my mortgage – just over 80% and presumably the loan amount were we to have 20% saved.

Can we afford it?

According to my trusty resources – thank you Google – based on an interest rate of 5.00% I’d be paying almost $6,000 per month with rates, water and general maintenance adding conservatively another $500 per month.  So right now I am $3,380 per month ahead in disposable income.

This gives us more questions than answers, including could we afford that anyway?

Always up for a challenge, and given that we need to save in the event that the answer becomes yes, I figure that for the next twelve months we can see how much of that difference we can save.

Apart from property, what options can you consider

And now we have a new question – what do we do with the money?  For serious (and I guess not so serious) savers what are the options for saving and building wealth out there?

Everyone is different with different needs, so I won’t tell you what we did…..but I’ll tell you what we considered.

  • Unit trust – you can start these with a small amount and contribute a set amount monthly
  • Investment property – outside Sydney there are places you can find properties where the rent almost fully covers the mortgage, you can depreciate and negative gear and all those fancy tax strategies
  • Building a share portfolio

I’m sure there are lots of other ways to save.  For us the most important thing is to be in a position where we can make a choice.  One day when our kids leave home if we keep saving we might be able to purchase a one or two bedroom apartment somewhere, or we might decide it’s time to spend it all and take a gap year!  But if we have the money we will be in the position to have a choice!

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Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.

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