A question from my DH

My DH wanted me to post this to the wise women of BB ;)

Out of these two scenarios, which do you think you would be more in favour of doing:-

Scenario 1
? Buy a more expensive house (but not really expensive, just more expensive than scenario 2),
? maybe one that needs a revamped kitchen or bathroom etc,
? located in a good area
? most probably 10-20 minutes from work
? live in it for 5 years, until we can have 2 wages in the household again
? then sell to basically buy/build the house we want to live in long term, hopefully making some profit in the sale to assist in the new house.
? Although said profit would be marginal due to not being able to pay off a lot on the house due to the fact mortgage would be higher

Scenario 2
? buy a cheaper house than scenario 1
? either one that needs some revamped kitchen or bathroom etc, but ideally one that has already had this work done.
? Located in what is deemed to locals as a ?dodgier? area (but really just not as good as scenario 1)
? most probably 5 mins from work, so save money with fuel,
? potential to ride pushbike to work and save more fuel/money
? due to the fact that mortgage will be lower than scenario 1, should be able to make much larger payments
? therefore pay off loan quicker.
? live in it for 5 years, until we can have 2 wages in the household again
? then buy/build ?dream? house so to speak, and keep other house as a investment property.
? Due to lower mortgage repayments, rental received should cover mortgage and running costs of property, therefore paying for itself
? Then in future either keep investment property
? Or sell it, and most of the monies will be ours to pay off on our ?dream? house mortgage because hopefully we would have paid off the investment house mortgage.

Opinions please! :D

If the reason option 2 is in a dodgier area is just because of a local snobby thing then I'd go with option 2. But if it is because of quality of life/safety for you and family I'd go with option 1.

either way they are both short term places so i would go option 2! just get good insurance and security if it really is that bad of a place to live!

Its not as "dodgy" as some other places in Launceston - but its certainly not the best place to live - it has a reserve at the end of the road that probably has a tendency to attract druggos and dealers and stuff, but I figure you keep your head down and get on with life, people are less likely to annoy you ;)

And yes I have insisted on a security system and crim mesh stuff on the windows if we get this place. And we do have a dog, although perhaps we need a bigger dog than a beagle.. LOL

And to give an idea - the more expensive house would be around $260,000 - and the cheaper one around $215,000 - so not a huge amount of difference, but it would be in weekly repayments for us - we could nearly pay double on the cheaper one, plus still go up to Queensland to visit family a few times a year.

Hey mate my sister lives in one of the most expensive suburbs in Brissy and there are still weirdos lurking about IYKWIM.

That's a tough one, the cheaper house means you can visit family which is a huge bonus but you have to feel safe. I guess only you and DH know if you'll feel safe.

Here's an idea, ring your insurance company and ask for an insurance quote for your contents for both suburbs. If the break in / crime rate is higher there will be a big difference in the quotes. Just an idea.

W

I'd go option 2. That's similar to the scenario we are living in right now - we bought our first home in a slightly dodgy area, but it is a really nice house and was much cheaper. We've been here 3 years, and have made great friends who all live locally (awesome mum's group!), because more and more young families are buying here as its affordable. Apart from the bogan hoons doing donuts in the street at night on the odd weekend, we don't have any complaints...

What would your immediate neighbours be like?? Can you get a sense of that by just looking at their house/yard? Or could you just go and ask them what its like and see if you like them??! We have great neighbours on one side, and dodgy ones on the other, but its mostly ok...

GL!

I'd go option 2.

Id go option 2. there are dodgy people everywhere, and drug dealers can probably afford to live in the more expensive areas ;)

Seriously though, it sounds like you could pay a lot more off for mot much $, so save on interest, and make a larger profit in the end.

Ask the real estate person (ask a few) about the appreciation on properties in both suburbs - if the more pricey suburb is going to double in 5 years while the dodgier one only goes up 50K then thats another thing you need to consider.

How are you finding the Launceston hills?

faking....

option 2

Opion 2 you will have a better chance of renting it out at a later date than to hope too make money when selling the opion 1... you dont know what the market is going to do, it might drop, you might end up having to spend alot more on renos than you thought...

Option 2 :)

Option 2. That's where we are now. A few more years and we will be outta here! But still raking in the bucks with the rent from this place. It is more prudent of us to stay put now, pay whatever we can off the mortgage and go where we want when I can work full time rather than live in a nicer place now. It would ultimately take us longer to get where we wanted if we did it that way. In the future we are better off renting out our unit than selling too, the rental return is much higher than selling value would be, even 6ish yrs later!

I thought I'd ask my DH Mel because he's pretty good when it comes to finances and property :). He said that if you were to choose option 2, make sure you have an offset account. That way when you want to rent your property out you can claim your interest as a tax deduction (I hope I'm describing it right LOL). If you just pay it off on a regular mortgage, you can't claim interest later on when you want to make it an investment property. Talk to your bank and they'll be able to explain it to you better :p.

Keep an eye on how much property values have gone up in the past five years in both suburbs too. It may be worthwhile choosing the area with the highest growth. Our house's value doubled in the the first five years that we owned it, so it's definitely worth researching before coming to your final decision.

Good luck!

Trish - ooh thanks for the tip - I think thats what we had in our last mortgage - is that the same as an account with a redraw facility? I'm not really up with banking terms. :redface:

Thanks for everyone - it looks like everyone would do option 2, and we have a good feeling about it too. Going to check out the property tomorrow. I wonder if I can put a link in so you guys can see it - heheheehe.. dunno about links to houses on the market is that allowed?

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is that the same as an account with a redraw facility?

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Yep, that's the one ;)

As much as you need to use logic with buying, it is always good to get the "good gut" vibe. I'd go scenario 2, life is a bit better if you have a bit more in the pocket after paying the mortgage.

I'd go option 2.

For me its the convenience of being closer to work! Makes such a big difference. Save time, money, etc.

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.

Take one. Don't do dodgy areas... Quality of life is important, you need to make life as easy as possible. Close to work. Walk to parks...

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.