Am I Ready to Buy a House?

Lkamex on 12/12/2019 - 17:09
Last edited 12/12/2019 - 19:34

Hey guys, so the basics are I'm 21, and considering buying my first home in the coming year or 2, aswell as my options. I'm on the side of building and taking advantage of the FOHG, which would be 450-500k and have a plot of around 300m², or I can also buy an established, ~20-30 year home for that price on 6-700 m².

The numbers are, 20,000$ saved up in my ubank savings account, I'm on 50k a year +OT and have set up a salary sacrifice under the FHSSS of 300$ pw, I'm estimating I'll be able to save another 10,000$ myself aswell as 15,000$ in the next year which means I will have 45-50,000$ (10%) saved up when I do decide to purchase the property.

I spend 130$pw on rent, ride a motorcycle, so insurance rego & fuel for that is about 100$ a week, I would spend around 100-150$ on food (and alcohol.) Other than that, I live quite frugally.

My logic behind this is I want to just get into the property market as soon as possible, and just set up my life.

Feedback on whether to build/buy, if I build, when to start planning/talking, or any companies I can talk to for this (SE Melbourne) and in general if this sounds like a reasonable plan, or am I just in over my head, and should just live life and worry about purchasing the property on my late 20s/early 30s once I have a comfortable 20% saved up with a bit of fallback money.

Edit: It seems that it may be possible for me to get a property, I'd have no security for it, and no real chance/opportunity for a career change or any changes in life.

At this stage, I will keep salary sacraficing and saving what I can, and will re-evaluate buying an established home in a few years once I have considered other routes for employment and have a greater deposit ready.

I appreciate the input you guys have put forth.

Financial

Comments

  • JuryWheel on 14/12/2019 - 20:33
    +2

    I'd be buying a place that's cheap but near a uni and rent out the other rooms to friends /students

    • TEER3X on 14/12/2019 - 22:13

      agree, but it doesn't have to be near a uni.

      just buy a place and rent out all the rooms. pretty soon you'll be earning more money from your job and hopefully will have enough savings from renting the rooms to do whatever you want with it.

      • kamex on 14/12/2019 - 23:07

        I will definitely be renting rooms out when I buy. no way I'm going to pay almost 2k a month by myself on a house.

  • Willy Bargin on 14/12/2019 - 23:59
    +1

    Why does everyone 21-year-old want to buy a house? a house is a Liability

    1:Rent where you want to live and invest what you can afford.
    2:Don't put all your eggs in the one basket.

    saving money for a rainy day is fine - but go traveling, enjoy life.

    I've personally seen a lot of heartbreak shit with 30+year old
    (Medical problem like cancer, Stroke, placing careers on hold to care for aged parents, starting a family)

    The last thing you want to do is have all your money tied up in a house.
    Go buy stocks or if you love property, buy into a Property Portfolio/managed funds

    Property points:
    1. Property is one of the worst investment when regarding: entry> maintenance > exit cost ( stamp duty, restate selling fees, selling cost cleaning, lawyer fees)
    2. Most overhype/value asset class
    3. Yearly yield is less than most saving account (most investments property are negative gear)
    4. ‘Land Appreciates and Houses Depreciate’ - which is just inflations for the rest of us

    • TEER3X on 16/12/2019 - 12:02
      +1

      Because they are smart.

      Houses are going to be even more unaffordable with our population surging. It's as simple as that.

    • serpserpserp on 17/12/2019 - 20:53
      +1

      This logic is fine if what OP wanted was a pure investment play, however it appears from what OP said, they want to start to set up their life which means it is more than just an investment vehicle.

      It is true that people can have a lot of heartache in their 30s for various reasons. One of those can be the realization that they will not have the ability to be able to buy their dream home, or even have the ability to buy any home in the area that they live in because they have left things too late. A least if you buy something when you are younger, and manage to hold onto it into your 30s, you will be in a very strong position financially through your 30s to be able to have a security net beyond that age. Also if something happens, you will have a lot of equity in your home 10-15 years down the track and these days (and I assume in the future) that equity is much easily access than in decades past.

      Buying into a property portfolio/managed funds requires education and monitoring beyond what is required to by a property to live in. I wouldn't recommend this at all unless you know what you are getting yourself into and have the willingness and time (and also risk appetite) to keep on top of your investments beyond it initial excitement period of entering the market.

  • moneyhungry on 15/12/2019 - 08:52

    I say go for it, there's always the option you can sell or rent it out if you find you cannot pay the loan repayments. I see everyone's logic of saving for a bigger deposit but this could also backfire as property prices could keep increasing which puts you back to square one. Also get the bigger block with the older house that you can subdivide, will be worth way more in the future. Good Luck.

  • screensaver on 15/12/2019 - 10:46

    Look for the highest interest rate on your savings, I am with Macquarie 2.65% That brings in a few dollars

    • Baysew on 15/12/2019 - 15:46
      +1

      That is an introductory rate for four months only.

      • screensaver on 15/12/2019 - 18:33

        and after that I have the next highest sorted

        • serpserpserp on 17/12/2019 - 20:54

          Awesome, you might just keep your head above inflation.

  • Nillionaire on 15/12/2019 - 12:28

    I spend 130$pw on rent

    If you don't mind sharing, where and what kind of place?

  • Tnetennba on 15/12/2019 - 13:34

    You're only 21. There is no rush. Don't lock yourself in just yet. It doesn't really hurt in the scheme of things to save for 2-5 more years. You'll be in a way more comfortable position, probably have a higher salary, and will have time where you're free to travel, do other things etc. while you're young.

    This is coming from a 25yo who bought their house at 22. I don't really regret it.. but it'd have been nice to wait a few more years in hindsight.

    Also remember your $130/wk rent will turn into about 400/wk+ mortgage. Your ability to save like you do now will plummet

    • kamex on 15/12/2019 - 14:12

      Yeah Im tipping if my situation permits this time next year I'll commit.

      Rent is 350, my portion is 130, I'll likely be able to keep these 2 Tennant's once I move which is 220$ pw off the mortgage, so it'll go from 130 to 2-300, bit more livable.

      • Tnetennba on 15/12/2019 - 18:48

        Even then mate, I highly recommend just waiting a few more years. Get set in your career, don't lock yourself into owning a house at such a young age. You'll have a much better time with even a 70k salary and a much higher deposit.

    • serpserpserp on 17/12/2019 - 20:58

      This is coming from a 25yo who bought their house at 22. I don't really regret it.. but it'd have been nice to wait a few more years in hindsight.

      But you only say this because you bought at almost the top of the market.

      If you were looking for the same house now, you might not even be able to get in at the level you did 3 years ago.

      I think OP just needs to keep his eyes open for a quality property, not jump into anything quickly. Waiting 3 years in this environment could see him priced out of the lower end of the house market that he wants to get into.

  • gezza90 on 15/12/2019 - 16:01

    I've heard that bank will only lend maximum 5x your gross salary. That means if you're on $50k, they will lend you $250k assuming that you have at least 10% deposit saved up. All other expenses like LMI and legal fees you'll have to pay for. I'd assume you don't have to pay stamp duty. I think you're overstretching it. With that salary, you'll probably need $250k saved up in your bank to purchase a approx. $500k property.

    I'm on $140k and bank is only giving me $290k loan lol. But hey that's because I already have two properties owing $2.15m…

  • syousef on 15/12/2019 - 17:05

    You are trying to get your financial advice from strangers on a bargain hunting site. I would say no.

  • kaleidoscope on 15/12/2019 - 22:01

    short answer is no.

    your annual income does not have enough borrowing capacity. If you’re with a partner with similar income, then you have a chance.

  • batkav on 16/12/2019 - 09:08

    I'm going to a bit against the grain here, but I bought my first property in my early to mid 20s and I deeply regret it. My salary was around 75k and I bought a house worth 365k. When you have a mortgage it ties you down a little bit; at that age, you're still trying to discover yourself. Getting a mortgage means you can't experiment with different careers; different living locations. Eventually I decided I was going to move overseas and rent it out. I bought the house in around 2008. I have paid 40k off; I have 100k in the offset. The apartment is worth about 600-650K but I hate my career. You're too young to be tied down. Then again; I'm a regretful, pessimistic person who's never happy with any of the choices I make. But I never regretted, quitting my job in Sydney, living in London for 5 years and travelling to over 40 countries in that time.

  • sheepzpal on 16/12/2019 - 09:14
    +3

    Bro… 21… Just go on a contiki trip and enjoy the ladies. Too young and horny to be stuck in a house.

    • batkav on 16/12/2019 - 10:39

      This post can't be upvoted enough!!!!
      Mortgage is for (basically) life. You're only 21 once!

  • Zondor on 16/12/2019 - 09:33
    +1

    As someone who is 24 and has just brought a house, make sure you do all the travel you want to do before you do this.
    Once you own a house, sure you can rent it out but it's a pain in the ass if you want to do any major trips.

    I don't completely regret it, but I do wish I had quit my job for a year or so before and spent it overseas.

  • screensaver on 16/12/2019 - 11:09

    I would say your 300 a week salary sacrifice is not compatible with buying a house. That should be going into a savings plan and history bearing in mind you will get interest on the balance (which is taxable). I think you can get 500 a year contribution from the govt into your super as you are not on the higher income levels. I dont know if that putting some super into house deposit came in but it might have. Stick with a house if you can and avoid strata fees

    • screensaver on 16/12/2019 - 11:12

      it is in, see below. Please disregard the above except for the 500 govt contribution

  • screensaver on 16/12/2019 - 11:11

    The First Home Super Saver scheme explained
    In 2017 the federal government announced a new scheme to help first home buyers get a deposit together for a property purchase. The scheme came into law on 1 July 2018 and applies to voluntary super contributions made since July 2017.
    First home buyers can access up to $15,000 in super contributions per year up to $30,000 in total per person. A couple buying a house could therefore use up to $60,000 in voluntary superannuation contributions saved over two years. The biggest benefit of the scheme is that you can earn a higher rate of return on money in a super fund (compared to a savings account) while paying lower tax on the funds (just 15%) while lowering your pre-tax income if you salary sacrifice.

  • screensaver on 16/12/2019 - 11:18

    I just realised that you do know about this because you mentioned FHSSS. So would be best to wait until you have the 30000? Plus add the other grants available.

    • kamex on 16/12/2019 - 12:30

      That's the plan. I'll let my super build up for a bit and next rear or so I'll keep my eye on the market for something that's good value that I can add a bit of value to.

  • screensaver on 16/12/2019 - 13:09

    So you will know how much you can get by adding all the above, plus deposit, so you can make enquiries about how much you can afford or be approved for.

  • jacknthebeanstalk on 16/12/2019 - 13:10

    24, VIC. I have an investment property and just bought a first home at 440k. I'd go back in time and travel first before entering the market.

    • serpserpserp on 17/12/2019 - 21:00

      Funny because I travelled all through my 20s and lived in lots of fun places and invested wisely and if I had my time again, i'd definitely buy the property I was looking at in my early 20s.

      You can still travel if you have a mortgage. You can't just blow 10-20k back packing for months on end through Europe etc. Which isn't for everyone anyway.

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