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What’s the point of becoming a first home buyer? Am I missing something?
Topic Started: 12 May 2012, 01:24 AM (1,819 Views)
pomdownunder
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So I was doing some sums the other day. I worked out that to get on the market in Melbourne at $400k I’d need to find around $75k on the basis of a 10% mortgage, 5% mortgage insurance, stamp duty etc etc.

But being in my early 30’s with a wife with no dependants my logical (and to be honest only affordable purchase in the areas I would buy in) is going to be a 2bed. Yet one would think if life goes to plan that within a couple of years or so that 2 bed would need to become a 3 bed, and an upgrade of sorts would need to be made, but having made the original outlay of $75k in the first place, even taking in to account the biggest optimist’s projections, the property wouldn’t have increased in value much at all (that’s if it hasn’t gone the opposite direction!), so there’s no way you could recoup the costs.

I guess what I’m getting at in a rather convoluted way, is that the only sure way to increase the value of a property is to have it for the long term (debatable I know but leave that debate for another day), so if as a first home buyer you know you’re only going to own your first property for a short period of time before needing to trade up, what’s the point of jumping on the ladder at all with these prohibitive costs?

I have thought about the idea of stretching at that first purchase to a 3 bed, thus potentially being able to stay put for a longer period of time and stretch out the time before a trade up is needed, but the current climate probably isn’t the time for stretching or making such gambles.

Input on this would be much appreciated.
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hoofarted
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Hi... Welcome to the forum.... WTF are you saying? / asking?
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Trojan
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pomdownunder
12 May 2012, 01:24 AM
So I was doing some sums the other day. I worked out that to get on the market in Melbourne at $400k I’d need to find around $75k on the basis of a 10% mortgage, 5% mortgage insurance, stamp duty etc etc.

But being in my early 30’s with a wife with no dependants my logical (and to be honest only affordable purchase in the areas I would buy in) is going to be a 2bed. Yet one would think if life goes to plan that within a couple of years or so that 2 bed would need to become a 3 bed, and an upgrade of sorts would need to be made, but having made the original outlay of $75k in the first place, even taking in to account the biggest optimist’s projections, the property wouldn’t have increased in value much at all (that’s if it hasn’t gone the opposite direction!), so there’s no way you could recoup the costs.

I guess what I’m getting at in a rather convoluted way, is that the only sure way to increase the value of a property is to have it for the long term (debatable I know but leave that debate for another day), so if as a first home buyer you know you’re only going to own your first property for a short period of time before needing to trade up, what’s the point of jumping on the ladder at all with these prohibitive costs?

I have thought about the idea of stretching at that first purchase to a 3 bed, thus potentially being able to stay put for a longer period of time and stretch out the time before a trade up is needed, but the current climate probably isn’t the time for stretching or making such gambles.

Input on this would be much appreciated.
That $75k is not all sunk cost - eg you recover your deposit when you sell (assuming house prices hasn't gone down)
If you think it will go down and/or won't be staying in the 2 bedder for long, then you should seriously consider not buying the 2 bedder right now.

As for buying 3 bedder instead - thats up to your wants and what you can afford. I know people who have raised kids in 2 bedders and I also know people who bought a 3 bedder as their first home.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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themoops
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Just rent for now and soon enough you'll get a decent house in Melbourne for $400k or that 2 bed for $200k. Melbourne is the worst performing capital as far as I know and is down about 10% from peak. That's 40k already on your $400k dogbox piece of shit that only a douche would bring kids up in.
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Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments.
Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck!
See here
Property will be 50-70% off by 2016.
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NotFooled
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hoofarted
12 May 2012, 08:46 AM
Hi... Welcome to the forum.... WTF are you saying? / asking?
Maybe you should try using google translate to convert his plain English comment into you own native language? Although, I don't think google-translate has an English to Dumbass option just yet.
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TMR
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hoofarted
12 May 2012, 08:46 AM
Hi... Welcome to the forum.... WTF are you saying? / asking?
He's asking whether it's better to get a 2-bed place that he can afford now, then take a hit on transaction costs when trading up to a 3 bed in a couple of years when he has kids;

OR

whether he should go for the 3-bed place now, but risk overstretching himself financially.


That was rather obvious from the OP (so I have a suspicion i have been trolled or somesuch) but thought I would try to spell it out in simple terms for you...
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hoofarted
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NotFooled
12 May 2012, 09:03 AM
Maybe you should try using google translate to convert his plain English comment into you own native language? Although, I don't think google-translate has an English to Dumbass option just yet.
WTF are you saying? / asking? I don't speak troll.
Edited by hoofarted, 12 May 2012, 01:00 PM.
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Aussiehouseprices
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TMR
12 May 2012, 09:10 AM
He's asking whether it's better to get a 2-bed place that he can afford now, then take a hit on transaction costs when trading up to a 3 bed in a couple of years when he has kids;

OR

whether he should go for the 3-bed place now, but risk overstretching himself financially.


That was rather obvious from the OP (so I have a suspicion i have been trolled or somesuch) but thought I would try to spell it out in simple terms for you...
Presumably a third option is to rent an appropriate 2-bed place now, and then consider buying a 3-bedder when needed.
That's the option I'd suggest.
Aussie House Prices blog
Latest post: Real Estate 101 - Lecture 1: Never use the "F" word
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newjez
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It's never a good idea to buy a house for a short term because the expense is so high, and you need time for the capital gain to offset it. (The same goes for shares as well to a degree)

In a flat or rising market you could keep the 2 bed when you are ready for a 3 bed, and rent it out. But at the moment, (flat to falling market), you would be silly to undertake a short term purchase when you are looking at upgrading in the near future.

I think you answered your own question when you posted it.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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pomdownunder
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Thanks for all the replies. And thank you for confirming why I joined (being able to get some good market chat laced with the odd slice of humour lol :D ).

Yep I think it's a case of live the life of a renter for a while longer anyway, plus I believe the stamp duty concession will be 30% as of January 1st as opposed to the current 20% so that may make a small difference, and yes in answer to one posters comments, maybe it is best to wait until a 3 bedder is affordable, and then make the plunge then. Time will tell....
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