Buying an apartment

[ABC123]

I really value the advice given on this forum and I have read previously that we should rather wait to purchase property once we are familiar with an area. We have permanent residency and are planning an LSD trip to Perth and Adelaide in June. We are not sure when exactly our permanent move will be, but would like to invest in some property in the mean time. We have been looking at apartments in the CBD and realised that, at the prices given, we would be able to purchase something without a mortgage, with the intention of renting it out, possibly to a university student. This would be a long term investment and would mean that we could be earning some Australian dollars to put in a bank account there. We would have no intention of actually staying there, so even if we do not end up in Adelaide, it shouldn't matter if we own property there. Please let me know your thoughts on the matter - are we better off waiting and leaving our money sitting in a bank account until we make the permanent move?

[ottg]

Get you money into investment properties asap.

While loans are dirt cheap opt to maximize gearing. However this may be a challenge as you havent got employment in Aus yet and lenders may see that as a risk. There are ways around this just speak to your broker (low doc applications). In short your loan serviceability will be based on 35% of salary plus 75% of rental income.

Where to invest? By now you know that Australia has multi economic cycles across the different states. Last time I looked; Brisbane is rising after quite some years of flat and declining equity growth, Melbourne is very hot and over-priced while South Australia is still dead due to bad employment figures. Perth is currently on the higher end of the property cycle however I'm still tempted to do my own construction soon (at xx% discount). While that said there are always opportunities outside your CBD areas. Best is to join this forum http://somersoft.com/forums/ and get a real time overview from other investors and purchase a few reports.

Free NAB Residential report here: http://business.nab.com.au/quarterly-australian-residential-property-survey-q4-2014-9323/

Edited February 18, 2015 by ottg

[Donovan83]

You're going to get two very opposite answers in this thread - those (like the one above) that say you better buy quick or you'll miss out, and others that say you're crazy to buy now because the property bubble is about to burst. My gut feel is that the reality probably lies somewhere in between... in the long term (10+ years) you usually at a minimum make back your money with some profit.

I recently bought a place to live in, with a mortgage. If I was in your shoes, I'd be really keen to buy and rent it out. Having said that, you'd need to do a LOT of additional research on the area. I am not sure about Adelaide, but I know that Aussie cities DO have shady areas. Personally I wouldn't want to buy in Northbridge in Perth (gets a bit rough during the weekend, especially late at night/early mornings), or in the CBD of Melbourne (too many high rises too close together, it feels claustrophibic).

Negative gearing is mostly irrelevant to you because you won't have a mortgage. Maybe consider putting down a deposit big enough so that you have no LMI, and so that the monthly repayment is covered by the rent. That way you're maximising the amount you can deduct for tax purposes. If you buy with no mortgage, then you'd only be able to deduct things like depreciation, strata fees, letting fees, etc.

Happy to give more info if you'd like.

Edited February 18, 2015 by Donovan83

[Mara]

I am with Donovan on this subject.

[ABC123]

Thanks for the feedback. Lots to consider and think about!