Well, I was going to say option 1 based on location, location, location and presumably it will appreciate more than option 2.
BUT, if you think that reselling option 2 won't be a problem and you'll be able to pay off more in the meantime, then yes that's a good option too.
It really depends on how much you think each property will be worth in five years time. Have a look at prices in each burb from five years ago - that should help you make a decision.
I agree with Inanna, I would always take the better area, I'd rather love in the worst house in a good area than a great house in a bad one.
Having said that if it's not too bad it would be OK.
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