Buying my first property - a holiday house??

SkMed on 20/01/2017 - 16:26

Hi all,

Recently i've saved a good chunk of change and now that i'm almost 30 I guess its time to invest in a house/property.

My partner and currently I rent in a sharehouse in Coburg (Melbourne).
In order for our lives to not be miserable we need to be in the inner suburbs where our friends are and we can get to work within an hour or so using PT.
My partner and I aren't having kids so luckily that's not going to be a financial burden in the future.
My industry is changing fast, and although i'm well paid now, its only because i'm working freelance (full time). But because of the industry I could be forced to change/evolve into a new position. So long term financial security isn't really something I can count on forever.

Option A - Ideally buy a a small townhouse in Brunswick/Coburg/Thornbury etc. but considering there is nothing below 800,000 it seems all but impossible.
Option B - buy a small 2 bedroom apartment in Carlton/Brunswick/Coburg. This would set us back around 450,000 which is achievable over maybe a 15 year mortgage, however I don't like the idea of owning/living in an apartment (I grew up in the countryside)
Option C - Buy a holiday house on the coast a few hours outside of Melbourne and rent for the rest of our working lives in the city (probably move out of the sharehouse and rent an apartment in the near future).

As crazy as it sounds, option C is appealing to me the most at the moment.
For about 200,000 we could buy ourselves a 2-3 bedroom house by the beach which we could use, our family/friends can use. and possibly we could sometimes air bnb out etc. If we do it right we could have it paid off within a handfull of years.

What are peoples thoughts on this? Insanity? Or is this actually what the housing market has come to, buying a holiday house and never buying a home.

Cheers,

Financial

Comments

  • colinjames on 20/01/2017 - 16:51
    -3

    a holiday house is a home, you are just too snobbish to live there.

    • SkMed on 20/01/2017 - 16:58

      Lol, I mean a holiday house as in being too far away from where I need to work to make a living.

  • chumlee on 20/01/2017 - 17:14
    +2

    Go with your gut feeling. The worse decision you can make is to make no decision.

    Watch vacation house for free on channel 94 for an insight into your beach house idea

    • Euphemistic on 21/01/2017 - 12:49

      Most of the episodes I've seen of that reason they are getting them ''for free' is the massive amount of savings they have as a deposit, well over 50% usually.

      They also aim to rent out for the whole peak season, meaning you don't get to stay there when you would probably want to. Makes sense, but it depends whether you want to maximise the income from it, or enjoy your holidays there.

  • dave999 on 20/01/2017 - 17:16
    +3

    Generally a holiday house is not a good financial investment - although it might have benefits to you if you use it - but usually doesn't give a good return.

    It sounds like at the moment you cannot afford to buy where you want to live - but there is nothing wrong with renting a place to live and have an apartment as an investment.

    • SkMed on 20/01/2017 - 17:36

      I guess I wouldn't be buying it as an investment directly. More as a fallback. Keep it forever as security, have somewhere to escape the rat race/apartment living and retire there eventually. There may be the potential for me to stay there for extended periods and work remotely before retirement too.

      Buying a property purely as an investment seems like a a lot of added life stress to me. I dont think I could buy a place and not be the one using/living in it. It just seems stressful to me :/

  • try2bhelpful on 20/01/2017 - 17:20
    +1

    My views only. Do your calculations and see if you can afford a house, they will always appreciate better than an apartment. You could rent it out and look into negative gearing to see if this helps. If you do get an apartment get a solid older one in a smaller block rather than an off the plan in one of the newer ones, especially avoid developments with a lot of apartments. If you want to get a holidy home find somewhere that is very popular, but they are generally something that is sold off if the economy drops significantly. The most important thing is to get advice from a professional.

    • SkMed on 20/01/2017 - 17:28

      So although I could eventually save the deposit and buy a house with my partner, it would probably realistically take us 20+ years to pay it off. Considering my industry changes fast its probably not wise to assume I will be earning what i'm earning right now in 10 years time, I may have to start from the bottom of the ladder in different positions for the rest of my working life. Its really just not realistic unfortunately.

      Saving the deposit for an a house would probably take another several years (while prices continue to rise rapidly), where as with a little help I could probably have the deposit for and apartment now or after several more years just buy a holiday house outright and avoid the banks completely!

  • justaverage on 20/01/2017 - 17:44

    Option b you mention you dont want to own/live in an apartment.
    Yet in option c you mention moving out to rent an apartement.
    Is it more the case you dont want to buy an apartment

    • SkMed on 20/01/2017 - 17:53

      Well I have never lived in an apartment before. I imagine I wont be too into apartment living. I love having a garden, spending time outside etc. Also if you buy an apartment you never really own 100 percent own it, stuck living wall to wall etc. Everything about the apartment living makes me cringe but realistically its the only option for young professionals my age unfortunately.

      I think if I owned a holiday house where I know I can get away from apartment living whenever I want then I could do the apartment living thing.
      Also if we rent an aprtment and just cant stand it anymore I could always cut the lease and find a small townhouse to live in or figure something else out too.

  • 2jzzzz on 20/01/2017 - 18:10
    +1

    Where would you consider buying a holiday house? Big difference between Portslade and one in Port Fairy.

    • SkMed on 20/01/2017 - 18:13

      Ive been looking at various areas about 3 hours outside of Melbourne, somewhere around Wilsons prom or in smaller town on the great ocean road maybe. Has to be on the coast, always dreamed of living on the coast one day.

      • bluesky on 20/01/2017 - 18:26

        Wilsons Prom is quite far away. Could you get something within your intended budget, in say, Philip Island, Mornington Peninsula, or Surfcoast? E.g east side of Mornington Peninsula (Shoreham, Flinders, Hastings) still retains the quiet charm of countryside/small town, and quite deserted beaches. Much closer, more capital gains potential, as well as more renting out possibilities.

        Also, is your occupation one where you can work remotely? If yes, it makes the holiday house a more attractive proposition.

      • chartparker on 20/01/2017 - 20:25

        You and me both. Would love to own a house in Portland or somewhere along the coast that way. Maybe in a few years time once we've paid off some of this house that we just bought

      • exulted on 21/01/2017 - 09:00
        +1

        Houses outside of Melbourne generally do not have good capital growth or if they do it is quite speculative but a reasonable, if ad hoc, rental return. Is this a factor for you? Do you want to increase your asset base? Units also can have little growth over the long term but if in a good area can easily be rented out with extremely low maintenance where you have someone else paying it off for you. Your outgoings will likely decrease and in 5-10 years it may be costing you nothing as you increase rent charged. As it would be in a good inner ring of Melbourne area it will always be in demand and land will continue appreciating over the long term. If buying a unit keep the maximum number of units in the building to 20, don't buy in these 100 unit blocks. A townhouse that you buy, live in for a year or two then rent out is clearly your best option, but if you can't afford the deposit it is not an option.
        It is always better financial sense NOT to live in your property except initially for FHOG obligations then move out. No exceptions!!!

  • rambutann on 20/01/2017 - 21:20

    I would opt for the apartment option. If/when you need a house you can easily turn that into an investment.

    You can generally have a small garden with an apartment if you are on the ground floor. Maybe rent an apartment for a year and see if you can deal with it and then buy a property from there? I bought a 1 bedroom apartment in the inner west as my first property at the age of 21 because its the same price as renting, plus its in a location that is easy to rent out/turn into an investment. I don't intend to live in it for the long term but it will pay itself off.

  • poboy on 20/01/2017 - 21:31
    +2

    You've got some tough decisions. Mainly because it's impossible to reconcile emotional and rational decisions. Here's an assessment:

    1. Stand alone home ($800k) - yes, this is a dream. It's the best financial investment, but sounds out of reach. If you can afford it, you will be scraping for cash for a longtime. This will drastically affect your lifestyle. But in 10-20 years you will be laughing as it will all pay off.

    2. Apartment - I am biased here. I think apartments are terrible investments. Land increases in value, buildings decrease. Plus you are one of many, so if someone in your complex wants to sell urgently - their low sales price is the new market value. The pros are that you can still live where you want. You won't see anywhere near the capital growth of a house, but the emotional value of living where you want and affording life is a huge plus. You only live once.

    3. Holiday house - This is not rational. Capital growth is very slow in areas 10-15km outside metro zones. If you sell within 5-10 years, I'm guessing you'll probably make a loss. You are better off buying an investment property just outside the metro zone, near a train line.

    Best of luck with the decision. And don't entirely rule out kids. You can change your mind.

  • djkelly69 on 20/01/2017 - 21:44
    +1

    B seems like to best option to me. C will be tough financially as you have to rent and pay your mortgage (assuming little to no income from the holiday house), plus you end up living in a unit anyway which was the reason behind avoiding B. A just seems out of reach.

    Assuming you can afford B pretty easily given the other options noted, maybe use the spare money to go on regular breaks down the coast if that is what you enjoy. Then once you have paid down the apartment for a few years, you might be able to afford the beach house as well. Not sure if they have them down there, but the permanent holiday lets where you are entitled to stay there yourself a few weeks a year might be something to look at so you have more secure rental income.

  • Stewardo on 20/01/2017 - 22:15
    +1

    Just buy a house as close to a major city as you can and rent it out, the holiday house is not a good idea financially.

  • born2reign on 21/01/2017 - 08:39
    +1

    Holiday houses are widely considered to be below average investments, plenty of vacancies with the occasional wild party which causes damage and doesn't benefit from the growth drivers of a traditional capital city investment property.

    You might struggle with obtaining finance if you are freelancing, unless you can add someone else to the loan with a traditional paycheck paying job.

    It sounds like you are comfortable with renting for the foreseeable future, so how about expanding your horizons and buying in Brisbane or Adelaide as close to CBD/water as you can with your budget and renting where you like in Melbourne?

    It doesn't really matter how quickly you pay it off, what matters is the location that you purchase in, the average annual % increase for the least headache / additional funds (vacancies, repairs etc) as possible for yourself.

    i.e your $200,000 beach house going up at 2% a year with plenty of vacancies and likely extra money out of your pocket is $4000 capital gain minus whatever else.. or a standard $420,000 property in Brissy/Adelaide at closer to 5% is $21,000 a year.. after 3-5 years the difference is compounded greatly

  • drmarshall on 21/01/2017 - 12:12
    +1

    I wouldn't be buying an apartment in Melbourne right now. I'm in brisbane and not even entertaining the thought of buying something inner city until all the off the plan developments have started to collapse (financially).

  • 0FoxGiven on 22/01/2017 - 09:38
    +1

    Holy sheet! I'm pretty much in the same boat as the OP. Married,just turned 30, live in Coburg, saved just enough for making a down payment, would like to stay somewhere thats just 20-30 out of Melbourne CBD, no kids and not planning to have any in the near future (but things can change), confused between a house or apartment (not considering a holiday home though)

    • HeWhoKnows on 22/01/2017 - 19:58
      +1

      Definitely Stay away from holiday house

  • HeWhoKnows on 22/01/2017 - 19:57
    +2

    Golden rule of real estate: NEVER EVER BUY A HOLIDAY HOUSE AS AN INVESTMENT! You will lose big time!

  • SkMed on 23/01/2017 - 12:56

    Thanks for the info all. Some good considerations and opinions here!!

    First of all, I really have no interest in buying a property which I cannot use.
    Although financially it might make sense to buy a house way out of the city/another city, rent out for years then sell it for a profit and buy something I want seems like to much added life stress. I have been a renter for a good 13 years now and from experience I have no desire whatsoever to become a landlord myself.

    I did say "I guess its time to invest in a house/property." But I guess I mean that as more of a lifestyle investment, not necessarily a financial one. If I can buy a place that only holds its value and does not increase over time its totally fine by me (ideally it wouldn't decrease). I'm more interested in having the security of a place I can actually own, a place where I know I can retire to and something to put my money towards instead of just letting it sit in the bank doing nothing.

    It seems like an apartment may actually decrease in value in the future. Also feel if I bought and paid off an apartment I think would never truly feel like I own it. Especially with ongoing Body corp fees on top of rates, taxes etc.

    Because of this I think am still leaning towards buying a "holiday" house, something on the coast which us/friends/family can use. Just keep renting until a time when I can comfortably retire there or work remotely even.

Login or Join to leave a comment
Login Join