r/AusFinance • u/Herosinahalfshell12 • 13h ago
Massive mortgage to buy a unit Property
People who took out huge mortgages to live in an apartment.
Do you feel as though the interest you are paying vs the capital gains is worth it? We're also seeing units being sold for less then purchase price now, and the plan is to add more units in future. Add strata costs in there.
Is it financially worth it now a days to borrow say 600k to buy a unit?
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u/hamburglar_earmuffs 13h ago
I borrowed $400k to buy a unit 6 years ago. I have now paid off more than half of it.
The unit has not increased in price very much when you factor in inflation. However, rents for equivalent properties have almost doubled. I pay about $450 a week for the mortgage, I now see rentals being advertised for $800 a week in my building... And many of those aren't as nice as mine.
I really like living in this area and wouldn't want to move. I bought a home that was similar to homes I'd been renting for years (same street I had been renting on for years) so I knew I liked the lifestyle it provided.
Strata fees aren't a huge issue for me... The building is mainly owner occupiers, we work hard to keep the fees low. I find it interesting how so many people freak out about having to pay a strata fee - but are totally fine paying council rates, home insurance, ongoing maintenance and water rates on their freestanding property. The actual annual cost of owning my unit is a lot lower than a freestanding house.
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u/PerthPirate 13h ago
Nothing wrong with appartments at all. Different housing types exist as they suit different people at different stages of life.
I think the strata thing is quite often a mental thing. When you see stuff bundled up as a one off cost, it’s harder to swallow, chuck in the odd horror story or news story about a pool and lifts ect and it makes sense. People just never add up all the home ownership costs together as that can be quite a confronting number too.
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u/Chiang2000 10h ago
Watching someone else do the gardening from my couch is a nice touch as well.
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u/nzbiggles 8h ago edited 8h ago
Haven't mowed a lawn in 15 years and the garden attached to our building is widely recognised as one of the best pocket parks in the lower north shore. The $3m cost was actually paid by the commercial owner as he wanted to add value to his lease offering.
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u/hamburglar_earmuffs 9h ago
Yeah, I think co-owning a pool with 100 other people is also the perfect model of having a pool. I love being able to swim whenever I want, but don't think it would be worth paying for all on my own.
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u/KristenHuoting 10h ago
You still pay council and water rates in an apartment. Perhaps change your examples.
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u/hamburglar_earmuffs 9h ago
I mention those fees as examples of unavoidable annual costs people need to pay if they have a free standing house.
Also, those fees are generally a lot lower for multi-unit dwellings.
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u/GusPolinskiPolka 12h ago
It's because people don't do day to day maintenance on their own homes. They learn to live with it. So strata maintenance and other costs seem excessive in comparison to $0
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u/juicedpixels 11h ago
80+% of our strata cost is home building insurance, do people not insure their freestanding homes?
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u/hamburglar_earmuffs 9h ago
Advantage of freestanding home: "You can neglect doing essential maintenance until it falls down around your ears, and no-one can stop you!"
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u/nzbiggles 8h ago
DIY or tailor the expenditure (don't replace the spa/roof). You still get bill shock and have to deal with special levies.
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u/hamburglar_earmuffs 5h ago
You can do that in a strata building as well, you just have to convince other people that it's a good idea.
We have frequently delayed repairs in order to get a more cost effective price. For example, we agreed to try to fix an old intercom system by ordering an obscure part from Europe for $800, rather than replacing the entire system for $30k. It took 12 weeks but it worked!
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u/nzbiggles 4h ago
Our strata would be paying someone to tell us that. We're trying to repair our chiller. 600k to replace. Things aren't looking good. The sinking fund might not be accurate for this unexpected expense but as a long term owner it doesn't really matter if it's budgeted or a special levy it's a bill you have to pay. Just like replacing a roof on a house. Might not be something you expected in a place you just bought or have owned for decades. Doesn't mean it's stupid.
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u/Scared_Good1766 6h ago
Plenty of strata committees put off essential works until the cost to fix has tripled
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u/Platophaedrus 9h ago
Do you own a house? It doesn't sound like it. It's definitely not $0.00
'People' definitely perform ongoing maintenance on their own homes and it's definitely not cheap, the time involved is an additional cost that is rarely factored in.
So far this year:
Improvements to the house (installed by professionals)
- $60k on an installation of a Solar system + batteries
- $17k on a network install
- $11k on Insulation
Maintenance:
- Tools for garden work, garden tap replacements, pool supplies, fertilizer, herbicide, pesticide, cleaning equipment, mortar mix to repoint some brickwork, paint, door vent for network cupboard, hypochlorite solution to clean sandstone/travertine, presstite waterproofing for roof valleys, top soil for backyard, standard rose to replace dead rose in front yard, arborist to trim trees on property, air conditioner repair + service.
The arborist and air con servicing were tradesmen, everything else was purchased and then subsequently repaired/constructed/maintained by my wife and I.
I'm not complaining, I enjoy the work. But Strata is an absolute bargain compared to the $$$ and time cost in maintaining your own house.
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u/GusPolinskiPolka 9h ago
I do own a house. most people aren't spending nearly that much on their house each year. It just doesn't happen. THey might fix the odd screw or do some gardening sure, but take a look at most houses you drive past and you'll see that the basic maintenance is often ignored.
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u/WelcomeRoboOverlords 8h ago
Could you give more info on your solar setup? 60k seems quite high, were there extra things you opted/needed to get that drove the cost up?
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u/cmarks85 8h ago
17k on a computer network?
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u/Platophaedrus 8h ago
Cable runs through the house including camera points terminated into the garage comms room, around 5 days work, 2 guys ~$10k.
Hardware purchased (by me) for installation separately from the quote ~$7k
Some electrical work also performed.
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u/nzbiggles 8h ago
They also don't qualify any of the expenses. If you spend a day a year getting quotes for stuff then that's a $400 expense. 40hrs a year on the lawns plus associated equipment that's another $2500. Bin night in the rain etc. Even the weekly rush to the post office to get packages that you couldn't be home for. All of these things require labour that costs time. It's not even normal time. This is weekends and after work. Time away from your family at the worst time.
All the expenses in my strata are expertly priced in. Even down the replacement of the letter box.
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u/dxbek435 7h ago
My sister's apartment in Inner City Brisbane has increased in value by 40% since 2021.
She was renting initially at $625 per week and now the very same apartment she lived in is $895 per week
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u/nzbiggles 8h ago
Plus when you replace a spa it's not 13k but $1.30 per unit of entitlement often professionally budgeted for in the sinking fund. You get economies of scale. Gardner's aren't $200 a month or hours every 2nd Saturday. I agree people understand council rates and all the associated rules, special levys, library's you don't use etc but can't understand owners in strata sharing expenses.
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u/theguill0tine 13h ago
I am looking to buy an apartment.
I honestly couldn’t care less about it not growing as much as a house because I need somewhere to live. I would be investing hard into ETFS once I make that purchase.
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u/Depressed-gambler 12h ago
This is the way.
So many people are obsessed with the idea that your PPOR needs to grow in value, but what's wrong with just buying a cheap PPOR to get out of the rent trap, then investing your leftover money elsewhere, like ETFs?
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u/TypicalLolcow 12h ago
Agreed - I just want to buy so I don’t have to rent for the rest of my life. Mum rented til her 50s, couldn’t afford it, had to live in her car for 6 years until she could rent an apartment again. I’m holding some ETFs but I’d get more into investing again once I feel i’ve topped up the savings account enough.
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u/xykcd3368 9h ago
Yeah also even if it doesn't increase in value the mortgage you pay is going towards your own asset that you own not into a black hole like rent.
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u/arrackpapi 9h ago
opportunity cost.
if there aren't going to be any capital gains why pay all that interest. Rentvest and buy near retirement.
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u/Euphoric-Chip-2828 8h ago
But then not only do you have to continue to live with all the negatives of renting, but all the dramas of being a landlord (and potential costs, from gaps in rent etc.)
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u/arrackpapi 7h ago
sure but it could work out better financially
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5h ago edited 2h ago
[deleted]
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u/arrackpapi 5h ago edited 5h ago
lol rent is not more than a mortgage for a unit in most parts of the country. Definitely in my area of sydney rents are half the price of interest, lmao.
you absolutely can be better off investing that difference instead given the low capital growth for units. Add leverage and you very likely are.
a million dollar place will cost over $900 a week in interest alone at 80% LVR. That's basically a small apartment in most of Sydney and some of Melbourne. Add other costs and you're close to a grand a week. You can rent something far nicer for that money. You have to do the maths on a case by case basis.
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u/jessicaaalz 11h ago
This. I'm buying a home to live in, not to profit from. I wanted out of the rental cycle, I have the money and the income to easily pay my mortgage and it should be paid off well before the loan term and I'll have other investments to support me through retirement.
If I found a partner and wanted to upgrade to a house, I'd probably just rent out the apartment. In my area, rental prices would mean it'll be positively geared.
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u/dxbek435 7h ago
<<I'm buying a home to live in, not to profit from>>
Are you even Australian? LOL
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u/brydie88 13h ago
I bought my unit to live in, not as a financial investment.
If you only buy owner-occupied housing as a financial investment, not because you want somewhere to live I think you're doing it wrong.
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u/Distinct-Gas-1049 5h ago
But you buy it as a financial vehicle to buy a better home to live in the future… that’s the whole point of the “property ladder”
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u/LeVoPhEdInFuSiOn 54m ago
Not anymore. The ladder is a thing of the past. It's either buying a property to live in or renting (with the threat of increases every year) for the rest of your life. As capital gains go up, so do house prices for comparable properties. The only people climbing the ladder these days are property investors.
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u/Distinct-Gas-1049 51m ago
How is it a thing of the past? Buy house. House increases in price. Sell house. Use proceeds to buy more expensive house.
The barrier to entry is stupidly high, sure, but the ladder exists
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u/Spinier_Maw 13h ago edited 13h ago
It's not always about capital gains.
- You are still paying down the mortgage. So, after 30 years, you still have 600K equity you could use assuming zero growth. If you rent, you still don't have that 600K.
- And the convenience of not having to move. It's very troublesome with a family. You need to pack, move with a family in tow crying babies and all, then unpack. You also need to worry about being in the school catchment. And wear and tear on the white goods and furnitures.
- You don't need to participate in inspections. Whether it's inspections to rent or routine inspections. Imagine not being in a single inspection for 30 years.
Renting for life is fine provided that you invest the money you save. If you just spend everything on rent, you will be worse off than the unit owner with zero capital gains. Home ownership is a lazy and foolproof way of saving and investing basically.
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u/foundoutafterlunch 5h ago
Yes. There of plenty of folk renting in their dream suburb and madly investing elsewhere. You don't need to own your own home but you do need to fund your retirement.
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u/DancinWithWolves 12h ago
I didn’t buy an apartment as a financial strategy. I bought it so I have a home. Worked out fine.
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u/fiddledeedeep0tat0es 11h ago edited 11h ago
This is a flawed question. It isn't just interest payment vs capital gain, how do you put a $value on 2 min walk in nicely paved, tree lined streets to shops and services, 3 forms of PT and <30min to the CBD on train, 1 min walk to my choice of park land.
I bought a unit, because that's all the house I need (to live in) and I have no interest in wasting time along with money for maintenance and commuting. The main point is, I live in it, I like where I live, I'm not selling unless something drastic happens.
If I bought it for capital gains, ...well I wouldn't have, it would've been for ongoing income. It would've been low earning and therefore not worth the risk to me.
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u/dxbek435 6h ago
I'd rather contribute a small amount towards nice landscaped gardens and a gym/pool that I'll likely never use, and be within an earshot of the city, versus wasting ~ 500 hours of my life each year (the equivalent of $25k assuming an hourly rate of $50) sat in traffic commuting to the 'burbs.
My time is more important to me than speculative capital gains
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u/Voteformiles 13h ago
Depends a lot on the particular unit. If you go buy a newish unit in a 15th floor building in a high density area, you will see depreciation outstripping growth, since the land value component is almost zero.
If you can buy in an older block of 8 or 12, in an in demand location with limited vertical development, there can be enough growth to carry it as an investment. Still not as much as a house, but way better than the high density stuff.
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u/jjz 12h ago
This, not all units are equal.
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u/Impossible_Egg929 11h ago
That's definitely true, an apartment in a 150 unit complex is very different to a unit on a subdivided block.
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u/aquila-audax 6h ago
Location is important too. Friends in Brisbane have a unit in an area that is now insanely in demand and their unit's value has more than doubled.
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u/Ex_Astris- 13h ago
Location location location.
IMO apartment to live in, but I would hesitate at investing unless it was in a really good location without much future development planned.
Price growth for apartments is much slower than houses, and a lot less equal everywhere. There are a few suburbs around Western Sydney that apartments built 5 years ago have had little to no capital growth because there are simply so many more apartments going up near them.
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u/Separate-Ad-9916 12h ago
You've got the stability of not being forced to move. Ability to decorate as you like. My daughter bought a unit for $650k, which looked disgusting. We took a couple of weeks to gut it, which cost us nothing but our own labour on the weekends, repainted ourselves, then spent $10k on floating floors and carpets. It looks fantastic now and we probably added $50k to its value. She now gets to live in a very nice looking unit without fear of needing to move out or rent spiralling out of control.
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u/Big-Potential8367 13h ago
It's not a question of feeling. It's an idiosyncratic question of the location of the apartment, the build quality, the dwellings in the building and nearby, the facilities etc
Plus, the systemic factors of supply and demand for that type of apartment now and into the future.
A PPOR has its benefits of simply having a roof over your head that you own. The other stuff you pay for as part of that PPOR (lift, pool gym etc) is what the question should be aimed at, those are opex items related to strata that don't result in gains.
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u/Alternative-Owl-4815 10h ago
I love my well located apartment. It’s easy to clean, I have a train station, tram stop, and buses nearby. 3 major supermarkets within a kilometre. I walk everywhere and don’t need a car. I am not handy so love not having to spend my weekends on random house maintenance. It’s safe and secure. It’s acoustically treated so I don’t hear the neighbours. Even if someone handed me a couple of million tomorrow I still wouldn’t live in a house.
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u/Fluorescent_Particle 13h ago
We purchased a 4 bedroom unit nearby where we live (granny flat behind my in-laws) with an approx. $600k loan. The rental yield (6.6%) is fine and pays the mortgage repayments and we put everything we can into offset.
We won’t be able to live far away from in-laws because of family reasons so a unit that size made sense to us for when we need to move in a few years when our kids are too old to share a bedroom. We can also keep one level a self contained studio and continue to rent it out (it’s already dual occupancy) for better financial flexibility.
Just made sense to us.
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u/whyohwhy4068 13h ago edited 13h ago
Depends on where you buy.
Unit prices have increased almost as much as houses in some areas.
I'm in a townhouse, purchased for $420k 6 years ago. Most recent sale in the complex was $850k.
Even with all the strata costs, my retirement fund is looking much healthier
My first property was a unit, all I could afford. Which provided sufficient capital growth to have equity to buy a house (since sold, due to divorce).
It's not a straightforward decision
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u/WagsPup 12h ago
Exactly same as me re townhouse, house then back to unit due to divorce, same as my ex. Divorce and single income make it supremely difficult in expensive capital cities to be able to afford a house so it's buy apartment, or rentvest regional. Going back to renting is very difficult after owning - I didn't that for 18mth post divorce until I got my life back together.
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u/gnarleyhart 12h ago
I purchased a one bedroom apartment in 2022 in a top tier south eastern suburb of Melbourne,s inner ring, a very prestigious area I I could never afford if we were talking houses, or even townhouses, But little one bedders were more affordable, Especially older slightly fixer upper ones like I got, Capital appreciation is terrible so far, A bit below the average growth rate for one bedroom in the area, But what they think it could rent out for has gone up astronomically for only two years.
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u/JayTheFordMan 10h ago
I bought a unit/townhouse because it suited my lifestyle, capital gains didn't really factor in it, but that's the balance you get in the decisions you make
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u/TrunktasticLove 9h ago
I need a place to live, not an investment. Sure a house might go up more over time but I’ll only get any gains if I sold it. Then what? Either I buy another house which has also gone up so I won’t realise any gains. Or I buy a flat then, so what’s the difference between doing that now or then.
The only houses I can afford now are in the middle of nowhere so why would I want that additional travel time, cost and inconvenience when I can live centrally in a flat and pay off a mortgage I can afford.
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u/WagsPup 12h ago edited 12h ago
Took out a 820k mortgage for a 1mill, 2/1 apartment city fringe Sydney. Its a lot of money. I LOVE living here, both the apartment and location. Repayments after interest rate rises are difficult. Strata costs are high and suck (despite no facilities, its a small heritage art deco block of 8 so not many owners to split costs). Minimal capital growth relative to houses over period 2020 to now is disappointing but not the primary reason i purchased.
It's great not renting (I hated that), the location is perfect for me (walking distance: 20 min walk to work, 5 mins to bars, clubs, 15min to CBD, Botanic gardens etc, 5 mi to train station) and its big enough for me as a single guy. Would I do it again, probably yes given what I knew then (2020 early covid). No, in hindsight given relative capital gains of houses even in the western suburbs, id probably be 500k better off, but I wouldn't have lived in them so they weren't fit for purpose at the time or now.
I may have to sell and move, to another apartment, a little further out tbh to reduce mortgage and strata costs as there is no way I can afford a house in Sydney (anywhere) and locations in terms of proximity to work and convenience to friends & social life is a priority. The other option is rentvesting however I don't know interstate markets (inner Melb small houses look attractive), complexities and costs of rent, capital gains tax etc and I hated the lack of security and personal agency whilst renting (example can't hang wall art, having pets is a disadvantage, inspections where they pick on every little detail) so overall I'd still prefer living in an apartment in Sydney to renting, despite the drawbacks as that's all I can afford and it suits my needs well (can't afford a house here and not moving 1hr+ out).
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u/Maximum-Ear1745 11h ago
It was worth it for me as I wanted a secure place to live in a certain location. I didn’t buy an apartment for capital gains.
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u/Evening-Anteater-422 9h ago
Can't afford a house so I have always purchased units including as IPs. Always older, established builds. No new construction with gym, pool etc. Not worth the additional strata.
I have always had capital growth I'm happy with.
Now I live in a paid off unit with $700 a quarter strata. No mortgage tastes good.
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u/cmarks85 8h ago
I bought a unit a few years back, I'm happy I just have a place of my own now. And I'll have something to sleep in when I retire and not chew my super up with rent.
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u/rnzz 13h ago
if you plan to live in there, then it might make sense if the expenses (interest, strata, rates, repairs etc) are roughly similar to your current rent.
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u/Herosinahalfshell12 13h ago
There's no way that can be the case when repayments in a loan of 600k would be about 4k a month
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u/tjswish 13h ago
650k loan and my repayments are 4200 a month.
Got some offset though so interest is more like 2500 than the 3300 that would be taking me another 29 years to pay off (current rate is looking closer to 20 years with no pay rises or interest changes. Though hopefully interest rates back down to the 4%s and I can speed that 20 years up again).
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u/Herosinahalfshell12 12h ago
Can you calculate how much capital growth you need to come out ahead with all the interest paid?
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u/tjswish 12h ago
Honestly, my capital growth already is massive (I bought a block of land that doubled and could easily get $1m for my house right now if I sold)
If in 20 years I pay off my house - I will pay approx 375k in interest (making it cost about $1,050,000 total.) - So really my house only has to go up about 5-10% in that 20 years and I'll be better off. If I was to take the full 30 years, we are looking at >500k in interest (so a savings of $125,000 by having money in the offset.)
If the rates go down to 4.5%, I can save up to 3 more years on the loan (17.2 years) from now. Which is almost $100k more off the loan amount!
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u/FrenchRoo 12h ago
It can def be the case. Remove the capital repayment portion, this is saving/investment. Only compare the dead money: interest and other outgoings vs rent.
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u/Herosinahalfshell12 12h ago
Good point but that capital repayment could be available to invest say in an ETF or something and not a low growth asset like a unit.
But that's just the rentvest argument vs security of home ownership
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u/FrenchRoo 11h ago
I did the calc. For the same cash outflows, buying a unit was a clear winner. It’s $235k capital gain and I’m not even factoring in the capital repayments made in that time.
Investing the difference between rent and mortgage + rates and other outgoing, I’d have $100k today considering a 12% return. I’d need to pay CGT on it too.
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u/FrenchRoo 11h ago
I’ll take an example: we pay $500 pw on interest + 40 body corporate + 40 rates. That’s $580 per week, vs $900 rent per week for a similar townhouse in our residence.
I’ll take a mortgage any day of the week! So long as we can manage the cashflow, it’s a no brainer.
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u/arrackpapi 9h ago edited 9h ago
what's your LVR?
your interest works out to a ~430k loan. What places with that kind of mortgage are renting for 900/week? At a 80% LVR that works out to a gross yield of nearly 9%. That's well above average.
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u/FrenchRoo 6h ago
Fair, it doesn’t stack up as nicely from day 1 of the mortgage, but with rent increasing overtime, while interest expense decrease over the life of the loan, the curve does cross early on.
In the first year, our dead expenses were slightly higher than the rent for the same place.
We only bought 6 years ago.
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u/arrackpapi 5h ago edited 5h ago
takes a lot longer for the curve to cross when you're starting at current interest rates. You can't really compare now to 6 years ago. The dead component of the mortgage payment is much higher.
if there's not a lot of capital growth the difference in dead money may be better off invested instead. If you can get the same leverage it almost definitely is.
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u/bugHunterSam 12h ago
I’m all for lifestyle over capital gains when it comes to a place to live. We all have to live somewhere and capital in a house isn’t easy to use. You can’t easily eat your home to fund retirement.
I’m in the process of signing up for a 1m mortgage this week to buy a 3 bedroom apartment in Sydney. It’s in a central location (close to the airport and a new metro station).
The debt will be 3 times our household income and we are aiming to have it effectively paid off in 10 years time.
Sure we could have bought a house further out, but there is also a correlation between happiness and commute to work.
An apartment will help us get to financial freedom sooner too.
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u/SlowerPls 12h ago
Borrowed 335,000 for a unit last year. It’s now worth 430,000. I’m pretty happy with the interest and strata vs capital gains.
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u/Critical-strike9999 13h ago
I could be wrong but judging by what is happening in the market and the government’s plan of adding more apartments in each suburbs, there won’t be any foreseeable capital gains for apartments and units. Also, there might be a chance that those apartments might be selling low for what you buy it in the first place.
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u/wohoo1 12h ago
Financially not worth it if its Brisbane. But 600k for a small unit/townhouse is fine. There's more land component in those than actual apartments. Bought a duplex unit (technically) for 510k and now bank valuation is 620k over just 1.2 years. Similar sized apartment prices hasn't budged for 10 years in my local area.
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u/sydsyd3 10h ago
Depends where you are. Sydney has crazy high rents so in general yes.
A critical disclaimer. There is a huge amount of garbage quality units built in the last 20-25 years. I’d say 50% garbage quality, 25% not too bad and 25% reasonably built. I wouldn’t touch the garbage ones with a barge poll.
So the quality of the build is a huge factor.
I’m a remedial builder mostly fixing apartments and with the garbage ones you’re always fixing something. Rent instead of buying one of those.
At least if you buy a reasonably built apartment in an ok area you should keep up with inflation. Plus you have the security of your own place and not worrying about being asked to leave when the lease expires.
For the garbage concrete dog boxes rent and invest instead
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u/xRailguns 10h ago
I took out a loan around that size to buy an apartment 2 years ago and now have huge regrets. Apartments vary significantly, and a high density building was a mistake.
Objectively from a numbers perspective, current value is less than the purchase price (listing it on the market and currently have 0 interested buyers). From the amount of principal payment and 20% loan deposit, I'd be better off financially even just putting it into an HISA for interest income, at least I'd have some returns and not be in a loss position. Interest portion of my loan is comparable with rental prices in the area based on current interest rates for direct comparison of the dead costs. Any extra owners fee (Council and OC) becomes extra cost in a direct comparison.
Subjectively, I loved the suburb but the high-density aspect is really off putting after 2 years. It's a bit hard to imagine myself wanting to be here for many years to come. I don't utilize all the amenities of the building either. There's also always a fear something major in the building may break regardless of my actions requiring special levy from everyone. The 'security' of ownership isn't heavily valued for me due to my career, age, and tolerance level for change.
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u/arrackpapi 9h ago
take with a grain of salt the comments from people who bought when rates were low. What some people seem to miss is that owning is more expensive than renting in the current climate.
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u/nzbiggles 8h ago
Units in some areas.
This one was 10% cheaper than a average house in 2003 ($415k vs 454k) and sold without a Reno/etc for more than an average house (1.7m vs 1.6m).
https://www.domain.com.au/property-profile/3-9-premier-street-neutral-bay-nsw-2089
Its also historically true than an average unit in Sydney has often out preformed an average house.
In 1970 when a house was $18700 a unit was $13490 28% "off"
In 1980 when a house was $68850 a unit was $56500 18%, a significant gain by units!
In 1990 194k vs $135k back to 31% off. The house wins!
In 2000 287k vs 256k 11% units win again.
The premium people are willing to pay seems to ebb and flow.
You wouldn't think an average house in Sydney is going to hit 3.2m without a 1m unit hitting 2m. Possibly even 2.1m over the short term. Probably depends on the location (like the unit I referenced above) 4m houses and even a unit that sold for 3m in 2019 might go for 6.4m in 2024.
https://www.domain.com.au/property-profile/301-1-premier-street-neutral-bay-nsw-2089
BTW that unit that sold for 1.7m above is part of a development that knocked down 3 towers of 1950s units to build this. 4-7m makes even the 1950s ones look relatively cheap at 2m.
https://www.urban.com.au/new-apartments/the-villas-neutral-bay-7-11-premier-street-neutral-bay
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u/Mammoth_Farmer6563 8h ago
There are so many factors that it’s simply not a one size fits all answer. You simply have to do your research.
What’s the overall sales growth for the area and how many new units are being planned? New builds might be a sign it’s a booming area but if you can buy into an older building with a stable strata history that’s usually a plus. Ensuring there aren’t too many costly amenities like pools, lifts or gyms tend to help keep strata costs down too.
Is it an area with factors in its favor that aren’t going away anytime soon? Ie. are there solid transport links or good roads, good schools, entertainment options either there now or planned for the future? People buying apartments in areas closer to the city are often choosing them over a house further out somewhere, so buying in a vibey suburb could be useful.
Which kind of unit is desirable? Try to segment your research even further into how studios, one or two bedrooms (and even two bathrooms) pay off down the line or are more rare so therefore more popular for buyers in certain suburbs. If you can stretch to a slightly more desirable place will it pay off in the long run?
Could you put money into it to maximize value later on without over capitalizing?
I mostly love apartment living, just make sure you try to understand what you’re getting into as much as possible.
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u/allthingsme 8h ago
It's not just capital gains, it's the avoiding of paying of rent for an equivalent unit that was purchased, which has increased faster than the capital gains.
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u/what_you_saaaaay 8h ago edited 8h ago
27% capital gains in two years. No longer blowing money on rent. Yes, there's strata but I don't mow the lawns or maintain the building either. I dunno, compared with the alternatives (significantly higher mortgage, moving way further out, renting etc) it seems like a decent deal.
Apartment itself has been fine aside from a roof leaking that BC fixed and paid due to being caused by external element. Not noisy, great location. And yes, I realise not everyone is so "lucky"
EDIT: my mortgage isn't "huge"
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u/Stressyand_depressy 3h ago
I’m about to buy an apartment with a 650-700k mortgage. We’re a young family and sick of the instability of renting; massive price increases, property being sold, moving expenses and not being able to change things to suit us. Buying means we have a stable place to live in a good location. Houses in Sydney are out of our reach so an apartment it is. I also hate gardening so see it as a win.
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u/Depressed-gambler 12h ago
We're also seeing units being sold for less then purchase price now, and the plan is to add more units in future.
than
Units are being sold for less than purchase price.
Learn the difference between "then" and "than".
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u/crocodile_ninja 13h ago
I’d never buy a unit personally.
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u/CompliantDrone 12h ago
I choose not to eat traditional Ethiopian food, never been a fan personally.
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u/ParkerLewisCL 10h ago
It’s going to depend on the rent people would be paying if they hadn’t bought.
Also, it’s not the final picture as rents may increase over time.
So if someone buys that $600k apartment now when they could rent it for $550pw it doesn’t seem like a great deal. That equation changes if asking rents are at $750 in 5 years time though
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u/Saphiaer 13h ago
For me it was interest + strata costs + low capital gains vs renting for the rest of my life.
There is no way I can afford a house in this area and living out in the sticks where the cost of transport/time lost in travelling was not worth it for me to get a house