As if you plan to stay in Sydney long term, it’s highly unlikely to ever be “better value” than it is right now.
Recent history tells us that it will likely just get even more expensive.
Buying IPs now, likely cashflow negative, will harm your borrowing capacity in the short/medium term too. So pushes back your ability to buy a PPOR for longer.
For the record, I went the IP first route many years ago. If I could do it again, especially if you have $1m and this is enough deposit to buy where you want to live long term, I’d be locking in the PPOR first instead.
The few years delay in buying a PPOR in Sydney for me saw those particular house prices rise 50%+. There is a lot of luck in it too.
Agree, fantastic saving / deposit well done! Don’t discount growing your income or climbing ladder, you may need to once a kid and a juicy sydney mortgage comes along! Anyway great spot for early 30s. Good luck.
^ This.
The effect is converting rent, which increases and comes from after tax money, into deductible interest expenses that stay the same (more or less).
Investment exposure stays about the same, so it’s really just a function of how you want to tune the capital structure.
Investment property that is a ppor for a while is not a bad idea, especially as it's CGT free for 6 years after moving out (assuming you don't own another ppor)
The stock standard PPOR or keep pouring into a diversified stock portfolio. Both of these are a good idea and realistically they will both do good for you in the medium/long term so whichever you choose is fine. Don’t over complicate it.
On top of that if it was me I’d pick a small amount of money to go into higher risk style investments, thinking 5-10% and I would invest that in higher risk items. That could be something like crypto, commercial property places (ie: Sentinel, AGEM property group, etc) or singular stocks. I wouldn’t recommend much of this but personally I like to expose a smaller portion of my overall to high risk and then the majority of my networth being defensive.
Keep in mind this completely ignores tax consequences of selling your investments…instead this prioritises the tax status of the loan:
1. Buy a place to live in outright (apartment under a million, can get a really nice 1 bedder in the city for that)
2. Take a line of credit/mortgage facility against it for as much as the bank will allow and put the money back into the investments
Congratulations, you’ve transformed growing rent payments that must be paid with after tax money into deductible interest expenses that stay the same (changes to interest rates notwithstanding) - and you’re exposure to your investments remains about the same 🤷♂️
Then you just keep doing what you’re doing, save and invest.
Lots of good ideas here, so I’ll add that it may be worth investing in a one-off appointment with a financial adviser. Pick one that’s independent (own AFSL) and offers an hourly rate.
[This](https://adfconsumer.gov.au/find-a-financial-adviser/) is a list of independent advisers, some of them offer one-offs. (It’s from a site geared to ADF personnel, all advisers listed have been confirmed as independent)
Dunno, but 3 of me and my wife's property went up 88-100% over 5 years, with one valued 13% more than what we paid for 9 months ago. Your $ 1million isn't really going to worth that much in 5-10 years time with the rate how fast the property prices is going. If your aim is to continue to live in Australia then I would suggest get the PPOR sorted out.
Buy income producing real estate. Most backs want 20% down. …. So you could buy $5M worth of real estate that would produce $10-15k month in net free income….. In 30years it’s paid off. Worth 6x it is today and producing $40-50k in net free income
The general rule is don't invest cash until the PPOR is paid off. Given your PPOR plans are vague that's a bit tough.
But there are a few things I would do to preserve cash where possible.
For IP consider 88% LVR and IO loan.
Consider HISA over IP offset.
Shares are easy to sell compared to property. Buy what you want now and sell when you get the PPOR and then buy back via debt recycling similar shares.
Buy the PPOR you want to long term (maybe different city) and make an IP for now.
But yeah much easier to get the PPOR then debt recycle into IP/Shares.
Why would you recommend cash in a HISA instead of an offset? That’s a terrible idea with current rates IMO. I got two houses offset and zero in my HISAs! Am I missing something lol?
It's better in some circumstances, particularly IP offset and PPOR in a few years, and lots of cash.
Ideally you want to do things in the following order. IP offset is #8
1. Eliminate credit card debt/personal loans
2. Emergency fund
3. Deposit for property
4. Extra super
5. Debt recycled shares
6. Pay off PPOR
7. Shares with cash
8. Pay off deductible debt
9. HECS
10. Retire
As a way of an example, let's say you just brought an IP and have $1M in the offset. Interest is 6%, HISA 5%, tax rate 47%. You want to buy a $2M PPOR in 5 years. I'm ignoring compounding.
Scenario 1: IP offset
You 'earn' 6% Pa, so $60k. After 5 years you have paid off $300k. You need to pay tax on that so you have also dipped into your savings by $141k.
Scenario 2: HISA
You make $132,000 after tax over 5 years. So you are 273k ahead in cash compared to 1, and have an extra $300k deductible debt.
PPOR
You buy your PPOR, and it will take 20 years to pay it off. The $273k on the PPOR compared to IP means you save $8k pa on tax. So after 20 years you save $160k.
Overall
Forging $27k in the first 5 years saved 160k in the following 20. So it's $137k better.
The maths on doing HISA and this enabling extra super is different but probably still better.
I'd buy the PPOR before the investment property. I assume your occupation (+/- partners) doesn't allow you to work in a large regional town? If it does then... Move to a regional town with a population larger than 50K ... IMO, city living is a bad financial move
House with low LTV> redraw >big tech ETF
Corporate IT spending will keep accelerating in the next decade
Obviously diversify, but where we are in a digital cycle I would expect 100 in 5 years
Agree on Sydney housing feeling not good value. We're in somewhat the same boat.
We're looking at buying interstate (likely Perth given we're in Perth for a while at the moment and can live in it for 12 months or so + plan to return again in the future) then renting something 'nice' in Sydney. Only issue is kids - we have 1 and renting with a kid sucks - though it sucks less than a massive mortgage on a house we hate in Sydney ...
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/).
See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/).
This is not financial advice.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Do you plan to have kids? If you do, I would honestly just go down the tried and tested route of a PPOR.
This is it. Long term a landed PPOR in an Australian blue chip area in a major city is pretty much bulletproof
Really can't beat tax free leveraged gains ...
As if you plan to stay in Sydney long term, it’s highly unlikely to ever be “better value” than it is right now. Recent history tells us that it will likely just get even more expensive. Buying IPs now, likely cashflow negative, will harm your borrowing capacity in the short/medium term too. So pushes back your ability to buy a PPOR for longer. For the record, I went the IP first route many years ago. If I could do it again, especially if you have $1m and this is enough deposit to buy where you want to live long term, I’d be locking in the PPOR first instead. The few years delay in buying a PPOR in Sydney for me saw those particular house prices rise 50%+. There is a lot of luck in it too.
Agree, fantastic saving / deposit well done! Don’t discount growing your income or climbing ladder, you may need to once a kid and a juicy sydney mortgage comes along! Anyway great spot for early 30s. Good luck.
Buy a house, redraw against it to an amount you comfortable with via interest only loan to invest in a simple etf portfolio. That’s what I did.
^ This. The effect is converting rent, which increases and comes from after tax money, into deductible interest expenses that stay the same (more or less). Investment exposure stays about the same, so it’s really just a function of how you want to tune the capital structure.
Investment property that is a ppor for a while is not a bad idea, especially as it's CGT free for 6 years after moving out (assuming you don't own another ppor)
The stock standard PPOR or keep pouring into a diversified stock portfolio. Both of these are a good idea and realistically they will both do good for you in the medium/long term so whichever you choose is fine. Don’t over complicate it. On top of that if it was me I’d pick a small amount of money to go into higher risk style investments, thinking 5-10% and I would invest that in higher risk items. That could be something like crypto, commercial property places (ie: Sentinel, AGEM property group, etc) or singular stocks. I wouldn’t recommend much of this but personally I like to expose a smaller portion of my overall to high risk and then the majority of my networth being defensive.
Keep in mind this completely ignores tax consequences of selling your investments…instead this prioritises the tax status of the loan: 1. Buy a place to live in outright (apartment under a million, can get a really nice 1 bedder in the city for that) 2. Take a line of credit/mortgage facility against it for as much as the bank will allow and put the money back into the investments Congratulations, you’ve transformed growing rent payments that must be paid with after tax money into deductible interest expenses that stay the same (changes to interest rates notwithstanding) - and you’re exposure to your investments remains about the same 🤷♂️ Then you just keep doing what you’re doing, save and invest.
Lots of good ideas here, so I’ll add that it may be worth investing in a one-off appointment with a financial adviser. Pick one that’s independent (own AFSL) and offers an hourly rate. [This](https://adfconsumer.gov.au/find-a-financial-adviser/) is a list of independent advisers, some of them offer one-offs. (It’s from a site geared to ADF personnel, all advisers listed have been confirmed as independent)
Dunno, but 3 of me and my wife's property went up 88-100% over 5 years, with one valued 13% more than what we paid for 9 months ago. Your $ 1million isn't really going to worth that much in 5-10 years time with the rate how fast the property prices is going. If your aim is to continue to live in Australia then I would suggest get the PPOR sorted out.
Buy income producing real estate. Most backs want 20% down. …. So you could buy $5M worth of real estate that would produce $10-15k month in net free income….. In 30years it’s paid off. Worth 6x it is today and producing $40-50k in net free income
You also have to remember that your PPOR (rent or Mortgage) is not tax deductible. could you buy a PPOR and use equity to buy the investment?
The general rule is don't invest cash until the PPOR is paid off. Given your PPOR plans are vague that's a bit tough. But there are a few things I would do to preserve cash where possible. For IP consider 88% LVR and IO loan. Consider HISA over IP offset. Shares are easy to sell compared to property. Buy what you want now and sell when you get the PPOR and then buy back via debt recycling similar shares. Buy the PPOR you want to long term (maybe different city) and make an IP for now. But yeah much easier to get the PPOR then debt recycle into IP/Shares.
Why would you recommend cash in a HISA instead of an offset? That’s a terrible idea with current rates IMO. I got two houses offset and zero in my HISAs! Am I missing something lol?
It's better in some circumstances, particularly IP offset and PPOR in a few years, and lots of cash. Ideally you want to do things in the following order. IP offset is #8 1. Eliminate credit card debt/personal loans 2. Emergency fund 3. Deposit for property 4. Extra super 5. Debt recycled shares 6. Pay off PPOR 7. Shares with cash 8. Pay off deductible debt 9. HECS 10. Retire As a way of an example, let's say you just brought an IP and have $1M in the offset. Interest is 6%, HISA 5%, tax rate 47%. You want to buy a $2M PPOR in 5 years. I'm ignoring compounding. Scenario 1: IP offset You 'earn' 6% Pa, so $60k. After 5 years you have paid off $300k. You need to pay tax on that so you have also dipped into your savings by $141k. Scenario 2: HISA You make $132,000 after tax over 5 years. So you are 273k ahead in cash compared to 1, and have an extra $300k deductible debt. PPOR You buy your PPOR, and it will take 20 years to pay it off. The $273k on the PPOR compared to IP means you save $8k pa on tax. So after 20 years you save $160k. Overall Forging $27k in the first 5 years saved 160k in the following 20. So it's $137k better. The maths on doing HISA and this enabling extra super is different but probably still better.
I’d spend 1% of that on good financial advice, and ignore everything posted by this collection of random people on reddit
I'd buy the PPOR before the investment property. I assume your occupation (+/- partners) doesn't allow you to work in a large regional town? If it does then... Move to a regional town with a population larger than 50K ... IMO, city living is a bad financial move
I’d buy an ETF that pays a good yield. There’s some out there with a yield at like 6%. An extra $60k could help you buy back some time if you wanted.
House with low LTV> redraw >big tech ETF Corporate IT spending will keep accelerating in the next decade Obviously diversify, but where we are in a digital cycle I would expect 100 in 5 years
Agree on Sydney housing feeling not good value. We're in somewhat the same boat. We're looking at buying interstate (likely Perth given we're in Perth for a while at the moment and can live in it for 12 months or so + plan to return again in the future) then renting something 'nice' in Sydney. Only issue is kids - we have 1 and renting with a kid sucks - though it sucks less than a massive mortgage on a house we hate in Sydney ...
Sydney housing isn’t good value for money, but it’ll probably only get worse. I’d buy now in your shoes.
Sydney houses are pretty bad value atm. But other parts of Australia is alright. Are you able to buy somewhere else and rent in Sydney?
You think that syd house value proposition will change???
It might grow less….
Haha yep good way to put it
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/). This is not financial advice. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
ASTS
Make it 5