Home Owners Advice

[Tangles]

OK,

This is weird and all that - but after some advice. Parents are very single minded and do nothing but argue with me over "facts" etc, so after a 7th opinion (lol).

Simply, Im finding it hard on 1 wage to "afford" to have a resemblance of a life, once most bills are paid. Even with that ^^ comment, Im barely able to afford every bill we are receiving. This year I put thru my workplace around 3k of bills on our Fringe Benefits Tax scheme. But Im better off finacially with the wage if I pay that myself, as 3k on fbt is around 5k taxed on the group certificate. I want to reach next September fo the magical 10yrs of service, long service leave etc, but thinking of leaving work after that.

Family business, but my "services" get used to a certain extent. For example, my first year here I earned 16k before tax, and was buying a home on that, LOL! Never had savings, always put my earnings onto the homeloans, bills, and whatevers left over onto little monthly mods for a bike/car. But I over that now, not much more $$ will go on the car.

Simply put, Ive been buying a home since I was 18 (10yrs now), got first one for 90k, sold for 210k owed 45k, bought 272k home valued today at 320k, can sell and be out of my 103k debt and have roughly 212k plus sale of bike (10k) to buy outright another home (down south). Im luckier then most, for sure, but Ive worked damned hard for it, and dont earn much per year.

Should I do it? Look for a 220k home, big enough for my young family (3bed + study + 2living areas, 1or2 bathrooms) and owe around 8k on fees, or we could buy outright a 210k home plus fees and have no debt whatsoever.

I dont know - there are 4bed houses down south (Hackham) for under 210k, and 3bed 2bath houses in Morphett Vale (my current suburb) for ~220k. Need a backyard for the kids and dog. Pretty much a 7yr plan - live in it for 7yrs, save around $400pm, and have around $700pm to spend on bills and ourselves. After 7yrs home should be 250k+ and have say 25k+ saved to move back up in homesize again.

Current home has a pool that weve used on 10 occasions in 2 yrs, has no shed, and not much space for the dog and kids....... and inside there is a wealth of wasted space (parents retreat room, entrance foyer and part of the kitchen would equal a rumpus room in wasted space). A beautiful home, no doubt, lovely in fact and we do love it, but probably best suited for older buyers ie 50yrs old.

What are your thoughts? Those watching the housing market, where do you see prices going over the next 9 months? Am I wrong to use my current house value and debt level to get out of debt? Im getting very stressed about my knees, pain etc. Lots of pain, and not sleeping much at all. Getting hard to get outa bed in the morning. And all that. Dont want to come across as a winger, far from it, but for a while at least Id like to be out of debt and feel less stressed about my future.

Just after a bit of personal advice from the more mature SAU users, those with home and kids etc, and those who know the Adelaide real estate market.

Cheers, best wishes to all - Brendan.

[vange]

Hi Brendon,

You raise good points there. Its all about balance and what you want out of life.

There are many option. Having no debt is one of the best options because the way the market and interest rates are going now, having a lot of debt down the track may end up costing you more.

Like u said u can buy a home for 200kish pretty much outright, that means u have alot of equity. Now depending on how long you want to work for, and like you said ur knees are bad, i would try and work towards setting urself up so that in the next 7 yrs you can work less and still get the income.

With that money i would do the following. Use 75% of it to buy 2-3 investment properties (around 120k-180k, nice small unit that u can rent out for close to 200 pw.) now you have to find the portion of money to borrow to money to put down as a deposit, so that u end up positive gearing it.

You use the remaining money to maybe fix up the places a bit, and also rent out a place for at least 2 yrs max. In this time the properties you bought will increase in value, and if uve geared it right, will be able to buy another one, or sell and buy a bigger house. The main thing i would aim for is having them paid off so that u get a constant income from them and then can concentrate on ur health

Anyway hope that make sense. There some good financial planners out there that can come up with good ways of spending 200k and making more money from it.

if u do end up buying some, ill look after the properties for u at a special rate

catch

vange

PS Another note, with interest rates, ppl that have bough properties etc in the last 4-5 yrs will get affected the most and that will cause property prices to go down in the next 2 yrs, so thats the time u need 2 buy.

Edited July 26, 2006 by vange

[Jinman]

Vange makes a very good point, you will have a lot of equity in your property if you decide to buy outright. This can be used in different investments (eg shares, rental properties) and you can choose the level of risk your comfortable with, you'll also be pretecting yourself from any downturns in one particular segment as you won't be putting all of your eggs in one basket. I would definitly recommend going and seeing a financial planner if you can.

I know you said you want to be completly out of debt, so it can take some pressure off you. Its worth considering what can be done to lower the stress on yourself and family while still using the equity that you've worked so hard for.

[Tangles]

thanks lads, and Vange for your generous offer. If I do go ahead with my thoughts I'd speak to you further about that.

Ive got some long term shares, so they might be of some value in 10yrs time...... and definately thinking that if I do downgrade and get out of debt, Id look into saving a deposit over 2-3 yrs for an investment rentable home in a growth sthn suburbs area. But thats a thought for the future.

Now, I just feel I should be selfish for the 1st time in my life, and just look after ME. Depression can be like a black plague, silent and creeps up on you. Those with severe pain issues would understand what I mean by that. Im worried about my future with my knees - a TKR or 2 isnt that far away, and Im going to need time to heal. I dont think I can manage that when in debt.

Anyway, pretty sure I'll be looking for a 200k home and just get out of debt. Try to find one that doesnt need $$ poured into it, just comfortable enough to live in with a little elbow room. Be out of debt and maybe spend a half a day less at work and that extra time with my young kids (3yr old and 7month old boys named Coen and Deontae).

To me, money isnt everything. I guess having 24/7 pain has made me realize that there is more to life then just working and trying to pay for things that I dont need. The way I see it is Im in debt of 103k plus interest over a pool, an entrance foyer, a parents retreat room and half a kitchen. Dont need those IMO.

Its a hard decision to make, as I know my current home in 8yrs time will be worth 400k. But thanks for the advice so far.

Problem is my family is realy narky at me for considering it, and I work with my old man helping to make him a nice profit per year - but its not as if they are the ones in my position. My bro and his wife have dinks 200kpa, my olds pull over that as well, whereas I try to get by on under 3kpm with 40% of that going on the home loan itself. With rising costs its getting hard. Just cant see myself staying above water paying it off over the next 12yrs+.

My stay-at-home wife supports me tho so thats the main thing.

(god damn I feel stupid for posting this shite, especially when on painkillers LOL, but I guess there is no harm in asking others for advice)

cheers :sorcerer:

Edited July 26, 2006 by Tangles

[mr_rbman]

i personally wouldn't be looking for a house round the hackham/morphet vale area. my partner and myself are currently looking for a house down south and many of our friends live down south.

220k will get you a reasonable house in hackham but i personally would rather live in not quite so good a house than live in a bad area! Try looking Old Noarlunga, Huntfield Heights, these areas are close to morphet vale etc but have a better reputation!

Just my 2c

[Iron Chef]

Firstly let me say, you're in a very enviable financial position. The banks will no doubt love you.

My advice is go to a financial adviser (I use Trevor at Anderson Financial Planners - PM me if you want his details, he's brilliant), and get them to plan out your future. You're in a position to create some real wealth if you plan it right.

You will lost likely find that a level of debt is required to achieve this. Owning your own home outright sounds fantastic, but it's a bit like having $200,000 worth of shares in one company. You need to diversify a bit and protect yourself. If the housing market went down the shitter, all that money you've made will be lost again.

You've done really well to get to where you are, so get professional help from here on in (as an aside, financial advisers make far more money for you than you ever pay them...).

Edited July 26, 2006 by vrfour

[Maxx]

morphet vale is okay, but Hackham is horrible

Brendan know what i used to do, and lot's of us will ignore the order from that area

[Tangles]

Top advice ppl's, thanking you all kindly.

As far as Im concerned Hackham really isnt that bad. There are some real nice homes in Hackham, just like any other suburb. Huntfield Heights is just a nicer name change to some areas of Hackham.

In 7yrs time I see Hackham as being a semi-desirable place to buy into, as homes in that area will still be affordable. But having said that Im definately looking around the Old Noarlunga area. Going to see a place in that area on Sunday actually.

At the end of the day, I guess this isnt really a financial decision as such - more of a life style decision based on finances. I now realize that seeing a Fiancial Planner is probably a very wise idea. Wonder how much they cost !!?? LOL

Cheers!

[32 4whore]

Have you thought of moving closer to the city?

Or is you work near the areas listed above. Just an idea. My family moved into a 3 bedroom 50's style house and I mpretty sure they paid around $250k for it. The house directly across from my house was sold 2 weeks ago for $210k. I live in South Plympton and it is a very nice area.

It is about 2 mins drive from Kmart on Anzac Highway if you are not sure where it is.

The price on our house has gone up a bit since we moved in 2 yrs ago. I understand you would like to get rid of the debt and not have the banks banging on your door wanting $$$ all the time. My parents took out a loan for this house and plan on buying another smaller unit and do that up and rent it out.

Although it is no where near your listed areas as above it would be a great area to have a family and let them grow up in an area where there is no bad name to the suburb.

Don't get me wrong i understand everyone has their opinions of every suburb in SA. I have just heard alot of bad things about southern suburbs.

Yes i am young, and i understand i wouldn't know half of the stuff the more mature guys on here know.

As you said you want to start thinking about yourself and not have to have that burden of debt on your shoulders.

I wish u luck in this adventure and hope to hear about what you decide to do later on.

[Iron Chef]

Tangles, the initial meeting is free - you only pay when you sign up, and their fees come out of the money you invest, so there's no physical out-of-pocket expenses. We've halved the length taken to pay off our house loan, and we're paying the same on our mortgage as we were before.

[Nozila]

Our group of companies have just established a financial department which has recently been offering loans at rates below the bank, this is what my business development manager has told me. So if you want to speak to a financial advisor/loans writer let me know, I'll pass your details onto my manager etc etc. So there is another option for you if you want to speak to one, like any other advisor the meetings are free. BTW economist predicts the RBA to raise interest rates rather soon and maybe even twice so keep that in mind if your looking for a loan. I would be fixing my rates thanks, no variable for me.

[Bl4cK32]

If the housing market went down the shitter, all that money you've made will be lost again.

Real estate never moves backwards....

[4door_Sleeper]

I would be fixing my rates thanks, no variable for me.

Don't you think that the banks predict the rates and future rises when they set the fixed rates (then factor in a safety margin for themselves). A Variable rate offers you the lowest rate at any given time, the fixed rates only offer secruity for those worried about meeting future commitments and are prepared to pay over the award rates for the priverlage..

[Cubes]

morphet vale is okay, but Hackham is horrible

Brendan know what i used to do, and lot's of us will ignore the order from that area

I grew up down that way.

M/vale, hackham, christies downs are all crap with regards to the people that live there, crime rates, little crews etc. Steer clear if possible head a touch more south and your out of the housing trust.

I'm with mr_rbman.

The southern expressway throws another 15-17minutes on your journey to town so its no real biggy, but I am used to living down that way and having to travel so it doesn't bother me. In fact I actually miss the relaxing drive with music pumping to and from since I've moved from down south.

[Tangles]

Received some fantastic advice today. Thanks to all who have shared their thoughts.

Good thing about all this is; Ive got a nice home so Im in no rush to make a decision, but definately going to watch the market and see if an appropriate option pops up.

Currently Im with Homepath for the variable homeloan, pretty much the cheapest rates and best deal in Aus.

BTW; always been a southener, so I know the layout. Like any area there are the good spots and the notsogood spots.

[Iron Chef]

Real estate never moves backwards....

If the housing market stays flat while the share market moves at 14% a year, I'd call that backwards

Not saying it is - in fact I think Adelaide still has plenty of room for growth in housing - interestingly enough we're the only state in Oz where rural property prices are higher on average than the capital city.

[Silver bullet]

Brendan

The best advice I can give you is to take your own advice. The scenario you've put forward sounds good and it sounds right for you at this time. You've done very well so far and it's OK to sit back and enjoy it for a while.

I run the Wizard Home Loans branch in the city and see a lot of people with different investment strategies/theories. I think it's more important to do your own thing that fits in with your lifestyle. You probably know the housing market in your area better than you know the share market.

My personal strategy is to buy the most expensive house you can afford in the best area you can afford and then try to pay it off (Good luck paying it off). This is the reason I haven't spent any money on my car (It sounded like a good strategy at the time). Good long term capital gain (hopefully should be higher than the mortgage interest paid), get to live in a nicer house than I would have bought otherwise. This strategy certainly isn't for everyone, but it works with my current lifestyle, most of the time.

Good luck

Dan

[Silver bullet]

I would be fixing my rates thanks, no variable for me.

Don't you think that the banks predict the rates and future rises when they set the fixed rates (then factor in a safety margin for themselves). A Variable rate offers you the lowest rate at any given time, the fixed rates only offer secruity for those worried about meeting future commitments and are prepared to pay over the award rates for the priverlage..

By the time you hear in the media that interest rates might go up, the banks have already increased their fixed rates. It's a personal choice whether to fix or go variable.

[Tangles]

Brendan

The best advice I can give you is to take your own advice. The scenario you've put forward sounds good and it sounds right for you at this time. You've done very well so far and it's OK to sit back and enjoy it for a while.

I run the Wizard Home Loans branch in the city and see a lot of people with different investment strategies/theories. I think it's more important to do your own thing that fits in with your lifestyle. You probably know the housing market in your area better than you know the share market.

My personal strategy is to buy the most expensive house you can afford in the best area you can afford and then try to pay it off (Good luck paying it off). This is the reason I haven't spent any money on my car (It sounded like a good strategy at the time). Good long term capital gain (hopefully should be higher than the mortgage interest paid), get to live in a nicer house than I would have bought otherwise. This strategy certainly isn't for everyone, but it works with my current lifestyle, most of the time.

Good luck

Dan

Thanks Dan,

Yor advice is funny, in a sense, as its exactly what Im currently doing! My mods to the car have only come about as thats money I had set aside when I bought the car (had 25k, bought for 18k and out ~8k on so far)

The word is, I should play it out, see what happens with work (I see it falling over in the next 5yrs), and then, and only then, should I sell the home when its worth 375k and I owe ~50k. If I go down to a 220k home right now, in 5yrs time its only worth 275k, so I could in theory be castrating myself of up to 100k.

Dont know. Its hard when I see homes that would suit us right now, for 220k, knowing that wed be better off in the short term, and stuff the long term thoughts!

No harm in looking at the RE market tho. I guess if something came up, and I thought it had potential to be worth a bit in 5-7yrs time, then I'll probably act.

Cheers lads, receievd a lot of advice, via here, PM's, MSN's, hell Ive even been asking ppl on the street LOL (true!) Got a lot of varied and good sensible advice.

Brendan

[Nightcrawler]

Real estate never moves backwards....

That is a very naive/stupid thing to say mate - of course the Real Estate does move backwards (for short periods at least). Look at the attached pics for current info on Hackham (for example). Simple economics: markets rise and markets fall according to consumer confidence and suplly/demand. Of crouse over the long term values will always rise, but you need to be able to weather the interest rate/economic storm in the meantime. God forbid Labor get into power in the next few years, as their poor economic management will no doubt see massively higher interest rates etc etc. I notice they are trying to undo Liberal's excellent labour reforms, which are the only way for the country to move economically forward.

So, Brendan, my advice is: do NOT get completely out of debt (unless you are going to be unable to work in the near future). If you have $210k equity, you should lever yourself at a comfortable level of repayments, and as Vange advised buy a nice little investment property which basically covers its own mortgage - then you are laughing all the way to the bank. Remember - the rule of thumb is that property values double every 7 years (which is the understood property cycle timeframe). However, in my opinion the next cycle willl be more like 10 years, since the market has risen so quickly in the past few years. So, if you held your current house with debt of $210k, and borrowed say $100k more and used $50k more of equity from your home, you could find a nice little unit near(ish) the city for $150k, and the rent of around $200 per week would basically cover the repayments, and you would be net no worse off. BUT, in 10 years time, you will have paid a chunk off your normal home's mortgage, and you will have your home worth say $600k (if your value estimate, and market doubling predictions are correct), plus a unit worth $300k = $900k worth of assets, with under $250k debt!

Anyways, you get the idea! Fyi I am a property valuer, so I hope I know a bit of what I am talking about. I would also give Vange's (property manager), and Dan's (Wizard Home Loans Adelaide principal) advice some serious credence, as these guys are in the market and definitely know what they are talking about!

FYI another important piece of advice for all the punters out there: buy as close to the city as you can possibly afford - statistically, the closer your property is to the city, the faster the value goes up, and the less volatile these suburbs are to changes in the market.