Combined Income $360k Yearly. Property $1.75million, Savings $400k

Dear ozbargain,

My Wife and my family are pushing me to purchase a property worth $1.75 (pre-approval in place)which is ofcourse very nice and will serve us for many decades. They insisit we can easily pay it off given our combined incomes. We have 2 dependents under 8 going to public school for now.

Alternatively, I have my eye on a property around $1.3m which is a bit safer, no LMI.

With changes to foreign buying lockdown, I am apprehensive to take out such a large loan.

Any suggestions?

Thanks in advance.

*** EDIT***

I am pleased to advise that we have picked up our new house today at Auction
Thanks all for your valuable opinions.

All the best!!

closed Comments

  • +100

    No idea, I just wish I was you

    • +28

      Well you can be me.
      We both are migrants and got here from scratch in 16 years.

      • +2

        wow that's amazing! may i ask what you do for a living? good luck with the decision. I think on that level of income you could fairly comfortably service the 1.75mil loan, that said I agree with you that prices could cool off and the less exposure you have the safer you are.

        EDIT: saw your post below! cheers.

        • Thanks for your views mate.

    • i honestly think you are too conservative and in fact you should be looking at something above 2m without any hesitation. At the same time you should also look at the unit investment opp. Bear in mind, no pain no gain. And in your case there will be minim pain. Good luck my friends

  • +1

    I know it`s not relevant but would you mind sharing what you and your wife does that you could earn 360k annually.

    • One of them is likely a director on a company or have assets that generate this income or the easiest explanation doctor :D

      • +2

        Good on you champ. 16 years and 360k income is an achievement if you started from scratch.

        • +16

          Thanks Guys,

          We both are in IT.
          I am IT sales and run my own Business unit now. This year I will make between $230k-$350k

          She is PM. She will make around $140k

        • @ilsan: Thanks for the information. How much deposit do you plan on putting down to purchase?

        • @GameChanger:

          I have $400k in savings.
          Thats about 16% on a $1.75m house.

        • @ilsan: hmm I personally wouldn't feel too comfortable going for such a large loan.

          What is your yearly income after tax? I hope you have a good accountant as there is structures to ensure you minimise tax.

        • +1


          Yearly its about $200k net.
          Cant claim much on tax as we dont have any investment property.

          Can only claim car allowance for both of us and other basic stuff.

        • @ilsan: When you run your own business, how do you get such a large loan - i thought banks were quite hesitant to loan to entrepreneurs

        • +3

          NO, I dont run my own business.

          I run a Business Unit within a IT company.
          I have my own P&L and get paid Base+ Comms + Profit Share.

        • -1

          I'm not sure if you've noticed the mistake, but 400K is about 22% of a 1.75m house, which is a pretty good position to be in, avoiding mortgage loan etc as you wanted.

        • @schwinn:

          Not sure of OP's calcs, but $1.75m sale will attract $82k in stamp duty within NSW. Netting that off the $400k deposit will make it an 18% deposit.

        • @ilsan:

          Cant claim much on tax as we dont have any investment property.

          When you're making 350k and paying 150k in tax, getting a 5k deduction for a negatively geared property isn't much.

          Unless you're planning on buying 10 properties to get a 50k deduction (a very aggressive strategy), I wouldn't suggest negative gearing as a tax minimization strategy.

        • +1


          I am sorry, you are right. It's about 18% after stamp duty

        • @sp00ker:

          I see, never thought of going down negative gearing route.
          Looks like not much to it with 1 property

        • @ilsan:

          In fact, if you think your income will remain high, you're better off having a positively geared property in another structure - company/trust/low income spouse/children over 18.

          This is because all properties should eventually become positively geared, when the rent goes up. Then you'll just be stuck paying a high tax rate again (good problem to have), but not the best outcome from a tax planning point of view.

        • @ilsan: wow that makes me feel a bit better about my degree choices, i have my last final exam in 2 weeks. than off to find a job, any ideas where i should start op?

        • @striker5950: Not OP but would recommend a good grad program to start.

        • +6


          Invariably at the bottom.
          Word hard but more importantly work Smart!

          Dont play politics at work
          Dont suck up.

          Find a good boss :)

        • @ilsan:
          but i thought sucking up is the most important criteria in excelling in any work place no matter how much people on moral high ground say its not. Would you mind explaining this paradox for me.

        • @ilsan: everyone says start at a junior helpdesk or support role, I am leaning towards a junior sales position, what do you think?

        • @ilsan:

          What business your own IT unit is into? Just curious. I feel that with heaps of skilled professionals in market now, IT world is getting very competitive here in Aus.

        • +4


          Sucking up only takes you to a certain point.
          It comes down to the kind of boss you have.

          Also, when you suck up, everyone else can see it except you…

        • +2


          Sorry, Not prepared to reveal that mate.
          Too much information.

        • +2


          I would say go for it 100%.
          Pick up the phone and start doing cold/warm calls.

          You will get so many knockbacks/abuses etc that in 1 year you will be able to speak to any CEO/CIO.

          Its a great life lesson.

  • I suggest not to put all your eggs in one basket. Instead of buying 1 property, try buying 2 so it will be less risky. Or you may diversify your investments into property and another form like shares.

    The name of the game is risk management. The least we dont want to happen is to be financially stressed due to all our investments.

    • +7

      I don't think the OP is looking at investment, just a place to live.

      • Correct, not looking at investment.
        We bought our firsts SMSF unit this year with 20% deposit and still have over $100k in my super.
        Plan is to positive gear and buy more property through SMSF whilst living in our dream house.

        I contribute additional $250 per week towards my super and she contributes $150 per week

        • how easy to set up SMSF? do you need an accountant at tax time?

        • @baronseng:

          I got an accountant set it up for me. Costs around $2-$3k

        • @ilsan:

          one off?

        • @baronseng:

          Yep, intitally, however there are maintenance costs etc. All of this comes out of your SMS.
          then you have to pay every time you buy a property are some trust or something needs to be opened.

        • +1

          Just a query, why are you looking at property as your major investment, instead of diversifying your portfolio? I know this thread isn't about that (and is about you buying a property to live in) but why is there an Australian obsession with putting all your savings eggs in an investment in property?

        • +2

          @ilsan: holy smokes! $2-3k for establishing your SMSF? I hate to tell you this but you were blatantly ripped off. What are you paying your accountant per year for accounting for the SMSF?

        • @pernunz:

          I thought buying a property via SMSF was a wise strategy.
          Good or Bad, time will tell.

        • @Shamdog:

          Possibly, maybe less. Frankly,I cannot remember.

        • +4


          Thats certainly not uncommon, especially when you are talking about high wealth indivduals such as op.

          You or I may look to setting one up and have a few hundred thousand in it with a very basic portfolio whereas op is likely to have different types of insurances, a trustee company, a more detailed Trust Deed than the usual standard ones, legal advice on estate planning etc etc.

          Add to that that op may have gone down the Limited Recourse Borrowing path in order to purchase the property in the fund - if thats the case it will nearly always be $3k to set up no matter who you speak to.

        • @Shamdog:

          I wouldnt agree. Not knowing the actual set up but the costs in correct trust/ company structure would already cost 1.5k, ato compliance etc .. 2k- 3k is the norm.

        • @winnieblues: I am an SMSF specialist accountant and I establish an SMSF with corporate trustee for $990 and set up the borrowing trust for $990. So yes, establishment off the bat is just under $2k but that is one-off. Ongoing accounting and compliance is $1660 including annual audit. I have clients with over $20m in their SMSF and I still don't charge them anything over $5k per year, so for OP to be (allegedly) charged so much is heart-breaking.

        • @speedyjonzalas: Please see my comment below. I have clients with multi-million dollar SMSFs with limited recourse borrowing etc and they aren't charged close to $3k for establishment of both SMSF (with corporate trustee) and LRBA.

        • @ilsan: It absolutely is a good idea, however an SMSF is inherently administrative in nature and not suitable for everyone. Having a good financial adviser and/or accountant is essential in order to derive the most benefit from an SMSF. There are far too many property spruikers out there pushing people into buying off the plan apartments via an SMSF that is not suitable for the client.

        • @ilsan: It is only for your own benefit to find out. If you feel like, let me know what you're paying your accountant every year for the accounting work and I'll let you know where you stand compared to the industry average.

        • @Shamdog:

          You're a specialist in the area which allows you to focus on SMSF, you never said so!

          Which i guess emphasises why you found the prices exorbitant, fair call :)

  • +16

    I'd be more inclined to buy a cheaper house. Put extra money into an early retirement fund. No point in earning a lot of money and not having time to enjoy it.

  • +2

    Thats a good point! Same advice. Purchase only what you can afford and what you are comfortable with. Otherwise, it will just lead to financial stress.

    • Thanks for your views

    • +34

      No, I aint Korean.

      I am thinking about private school but thought I will give them a fair shot through Selective and see what they are worth.

      I think its good for kids to go through public schooling for a while as it puts things in perspective. Just my theory

      • +3

        Its a sound theory! I went to a partial selective (half comprehensive, half selective) and transferred to a fully selective school. I gained a lot of perspective in both governmental schools, more in the partial-selective one. I'd assume its the same when comparing selective governmental with private.

        • +12

          Cheers, That kinda supports my theory.

          I was watching this documentary from "Where to invade Next" recently.
          Michael goes to Finland which is now No:1 in education across all OECD countries.

          They have done this by:

          1. Removing all homework
          2. Removing all private schools - Every school and student is equal!
          3. School timings 8-12

          I found this very interesting.

          Perhaps our whole thinking around education is wrong

        • +6


          The most important part is that being a teacher is well paid, and extremely competitive job in Finland. Your schooling system is only as good as your teachers

        • +1

          @ilsan: I knew about Finland's great education system, but seeing the interviews with kids in that doco put it in perspective, didn't it? They seemed so mature.

          Our education system is going downhill fast due to increased pressure on teachers from parents and school administrators, low pay for teachers, commodification of tertiary education and a lax "she'll be right" attitude prevalent in Australia.

          We're turning into America, and that is not good. Better education funding would be a start - it would show that the government is serious about the next generation. At the moment, we clearly don't recognise the value in investing in them. It's all about the bottom line - 'repairing the budget' and 'jobs and growth'.

          I'm glad I have a good job because in the future a lot of Australians will be underemployed and depending on the sharing economy for a livelihood. The ones who aren't will be the sensible hard workers like yourself (who, damningly for people who grew up in Australia, are mostly immigrants).

      • +3

        Agree with you on the private school part, I think a selective program at a public school would be much more beneficial.

    • +10

      avoid all the delinquents

      how do you plan for them to avoid all the prejudice and bigotry?

      if you plan for a school to teach your children positive values and attitudes, you are doing it wrong lol

        • +16

          Did you go to a private school? If so then I think that's all the information we will need on that debate.

        • -1


          Both public and private.

        • +17

          From who?

          from you - you are displaying both traits lol!

          they will passively learn to be judgemental from you through overheard words and witnessed first hand actions… You totally missed the point

          I hope your kids turn out to become prime ministers / CEOs/ chief surgeon etc….from the sound of it anything less will ruin the elitist future you created for them in your mind.

          Whatever happened to being content with a happy, healthy family who respect other people? when I have kids , that's all id want for them - they can flip burgers for life for all I care lol

          and the list of positives you spouted off sounds like it came front the landing webpage of any given private school. its a scare tactic to encourage middle class parents to scrape together money for fees to buy peace of mind against the falsehoods you are repeating

        • @Forrest Gump:

          If your family can easily afford private school education, then it's worthwhile, but I wouldn't move heaven and earth just so your kids can go to a private school. It's definitely not worth the $30,000+ per year fee that some private schools charge.

          I myself started out in a primary public school where there were more ethnics than Aussies. I was fortunate enough to get a scholarship to attend one of the 'elite' private schools (they all claim to be prestigious and elite anyway). I certainly enjoyed my time there and it was a bit of a culture shock. As expected there were always some kids who just reeked of privilege, but that's the way the business/corporate world works as well. I got my first job through a connection from school, so there are definite benefits from getting to build networks which you don't necessarily get at a public school. There is a much greater emphasis on co-curricular activities and many more opportunities to get engaged in activities outside of the classroom.

          That being said, I would have also enjoyed a selective school. I had many friends who attended them, and encountered many through tutoring. You'll almost definitely get better academic marks going through a selective school (scaling metrics, competition, peer influences, teaching environment etc.) but, unless you're hoping to do law or medicine at one of the G-8 universities, marks in high school don't matter terribly much.

          It also depends very much on the individual kid as well…

        • I've met a lot of delinquents that have higher morals than you. I hope your kids grow up properly and see that the true bottom feeders are their parents. It is migrants like you who totally wreck the Australian Education systems.

    • +7

      Wow ! Wonder what an emperor like you are doing in a bargain forum.

      Read the below link…

      "Sydney lawyer Ross Koffel says he has filed 10 claims on behalf of abuse victims against elite schools, including De La Salle College Revesby Heights, Knox Grammar School, The Scots College and the previous administrators of Waverley College, and more are in the works."

      Looks like your favorite private schools are run by a bunch of delinquents (and blindly supported by some stupid people)

    • +1

      So much prejudice, your children will traverse nowhere with the elitist bullshit you are feeding them smh.

  • +1

    I would look into buying an investment property for around $1m and then renting in a similar house to the $1.7m one you are looking at.

    The reason being that you can negatively gear your investment property and use that as leverage later. That will cost you next to nothing and will provide you with a stepping stone in 3-4 years when you can buy your owner occupier. Its not worth the repayments on a 1.3m loan. You cant claim any of that back on tax.

    Buy investment property using your savings and negatively gear it out. Then rent a nice expensive place.

    I know a number of developers and real estate investors and many of them rent $3-4m homes and buy investment properties because its insanity paying back such a loan without being able to claim any of it on tax.

    Good luck!

    • +1

      Thats sound advise but with foreign lock out laws, is this a good strategy in the short term?
      Also my wife is adamant that she wants he own dream house.

      I guess I can take her point.

      I am 37 and she is 41.
      I think we should enjoy our fruits of labour.

      Then again, its so scary as well :(

      • @ilsan can you shed some light on foreign lock out laws? what is that and what are the implementations and outcomes (current or future) that you are worried about?
        I have a similar long term plan but i was thinking to buy investment properties now for the same reason to use it as leverage later until I read your concern about this foreign lock out laws of which i have no idea.

        • Look, lots of it is speculation.
          How much it impacts the market itself, time will tell.

          Factors such as showing proof of residence whilst buying/selling property
          Showing local income when applying for Bank loan.

          Things like these.

    • +1

      Does this end up putting you ahead if you're paying so much rent? I understand the tax benefits of negative gearing etc but aren't all the benefits of that negated by the huge rent you have to pay?

    • @spondoolies84 do you mean to say that people people rent $3-4m homes and later buy them back from the owners once they accumulate enough money from there investments? and why Do the owners agree on selling the rented home as it was more like a cash machine for them?

  • +3

    You'll definitely be able to still live comfortably while paying off the house. We purchased our house around 2 years ago for $1.5m with combined earnings 300k. But before that (around 15 years before buying our house) we decided that we would purchase a few investment properties. Anyways, after the majority of both loans were paid off and the rents earned significantly greater than the prepayments we purchased our current home. The surplus rent now goes towards paying our current house. Funnily enough the house we are living in right now was overlooked when we had the chance to buy it as one of our investment properties years ago.

    • Wow you are in a great position. I would aspire to be in your shoes in coming years.
      Good job mate!

      Thanks for your views.

  • +7

    It is good to read success stories on the forum - congrats!

    That said, although $400k is an impressive amount of savings, it is only around one years gross salary/ 2 net, suggesting your lifestyle expenses may already be high. If this is the case, I would be reluctant to significantly ramp up debt. If you are not paying down principal quickly and are dependent on your very high income for servicing then recession/job loss would be devastating. Perhaps consider appropriate insurance if you do proceed with the purchase.

    Your entire net worth (and several years to come) will be invested in/paying off the house, rather than being in any investment asset. The wife may also need the dream car, furniture, clothes to match the house… :)

    • Yeah, That is what I am worried about. Recession is a worse case scenario!
      Insurance will be included as I have less than 20%

      I am hoping to accumulate investment properties through my SMSF.

      • +5

        LMI doesn't cover YOU

      • Like @negger says, LMI is only for the bank to recover its losses if you default or fold. The insurance you're talking about in your <20% deposit is insurance for the bank, against you and the possibility of your failure to pay.

        Thanks for the interesting forum post though and congratulations on your success so far :)

  • +2

    Less is more Ilsan. I'm on a similar income and had 250k deposit. Committed to 1.15m mortgage but only reluctantly. Will pay off in 10y if interest rates stay v low (unlikely), more if not. Seek independent advice and stick to your limits. You must both be happy with this major decision before proceeding.

  • +2

    I'd personally go for the smaller loan and put the kids in private school from year 7.
    From what I've heard selective schools can be a lot of pressure which is ok if your kid is in the top 20%, otherwise it's pressure all the way.
    We have one child in a very good non selective public high school and one in private - out of choice, but if I did it over again both would have gone to private schools. There is no comparison - the private is worth every cent of fees. Just shop aroud and choose the right one for your kids - waiting lists in some schools are getting bigger so don't leave until year 6!
    Most state primary schools are great so no need to sent them to private school until year 7. (Btw I used to be anti private schools!)

    • Many thanks for your perspective.
      I will look into this.

    • +1

      I'm with you. I used to be against private schools as I am public schooled.

      Reflecting on my schooling experience, combined with property prices in reputable public school zones, I've changed my views on private schools. I still dislike the principle of private schools but that's a different subject.

      On the subject of parking your funds, I'd go smaller properties for investment and rent in a convenient location. Lock out laws will hardly effect investment properties as law makers won't do anything that will adversely affect them. Look at how quickly they dismantled the proposition to remove negative gearing.

    • +1

      im completely with you on this, I went through schooling in the top selective school but always averaging in the bottom 30% of the grade - it was a lot of pressure and I missed out on invaluable experiences and curricular activities that are emphasized in private schooling. I am now a junior doctor and reflecting back many of my colleagues had a much more diverse experience going through private schooling than I have had.

      • +1

        Bit mixed on this. The selective school I went to offered enough extra curriculars, and my experience was pretty decent over all…

        Only part I didn't like was the environment when exam results came out and everyone wanted to compare grades to feel better about what they got.

  • +2

    With that kind of salary you can well afford it! Me and husband are buying house for $840.000 but we only make $130.000! You are in a good position. Wanna swap :)

    • +14

      Does that include wife swap :)


      • +6

        Lol. You men are always thinking about one thing. Lol

        • …is the one thing…money? It's money right?

  • +3

    Nice position to be in. Life can change very quickly. Do you really NEED a 1.75m house or could something way cheaper meet your needs and still be happy with it?

    • +4

      Needs are unlimited.
      My goal is to be happy.

      However, happy Wife/Kids is also happy life.

      Need to find a balance somewhere…

      • Sure every basic human need is food and a roof to survive, anything else really is a want right? Is a wife's want really worth $1.35m of debt?

        • +11

          Yes she is worth more than that.

          I owe her a lot

        • @ilsan:

          I owe her a lot

          Hats off! Wish both of you a loooong happy life together!!! May you be blessed to see your great grand kids!!!

  • +2

    Could you get another job easily that pays you the same amount?

    If you worked in your previous Job would you earn the same amount? or have you just now jumped up a pay bracket.

    The only reason I'm so cautious is having worked in IT I know that the average tenure is about 12 months, where I think the average is about 3 years for other industries.

    I know plenty of people in IT who have earned significantly more in the past than what they now do.

    • I reckon I will always make good money in similar jobs. I have about $20 million in business that has followed me when I jumped ship from competitor to this company.
      I have also just received a significant pay rise and profit share when another competitor tried to head hunt me.

      Its good to be in demand, I do agree that it can all dissipate within no time…

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