Previously known as “The Property Planner, Buyer and Professor”
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Show Notes – The Family Home Puzzle
This week, the Property Trio tackle a follow up question from our listener Josephine, who writes in:
Hi Property Trio, thank you so much for answering my last question — your insights were incredibly helpful, and it was great to hear that we made the right decision in how we structured our first purchase. My partner and I are now looking to buy our second property, which we plan to eventually live in. The challenge is that our first mortgage is quite large, so our servicing capacity is limited — our maximum purchase price right now is around $650,000.
We’re starting to look because our son will be starting high school in two years, and we’d love to be settled in the right zone by then.
We’re hoping to buy in either the Parkdale Secondary College zone — so suburbs like Parkdale, Mordialloc, or Mentone or in the McKinnon Secondary zone, including Bentleigh, East McKinnon, or parts of Ormond.
We don’t want to buy an apartment, so we’ve been considering a two-bedroom unit, but even that’s a stretch in some of these areas.
We’d like to hold onto our first property for as long as possible — it’s a standalone 3-bedroom, 2-bathroom house, and we were both really adamant about buying a standalone home for our first purchase.
At the time, though, our budget wouldn’t stretch to buying in the school zones I mentioned, so we compromised on location to get the kind of property we wanted.
My question is: do you think it’s better to buy the two-bedroom unit now — even though we think we’ll outgrow it in 5 to 7 years — or should we hold off, build more equity, increase our incomes, and potentially buy something bigger like a three-bedroom unit, townhouse, or house in a couple of years?
Thanks again — love your work and really value your advice!
Josephine’s dilemma is a common one, and the Property Trio offers practical advice for others facing similar challenges. The episode is a great resource for anyone struggling to balance budget, family needs, and the desire to settle in the right school zone.
Understanding the Challenge of School Zones
The team discusses the difficulty of finding a suitable property within the desired school zones (Parkdale, Mordialloc, Mentone, McKinnon, etc.) given Josephine’s budget of $650K. Kate highlights the compromises involved in purchasing smaller properties or apartments, which may not meet their family’s long-term needs.
Exploring Four Potential Options:
- Option 1: Buy a Smaller Property Now – The team assesses the feasibility of buying a two-bedroom unit in the desired area, weighing the financial benefits versus the potential lifestyle compromises for a growing family.
- Option 2: Sell and Upgrade – Dave suggests selling the current property and upgrading to a larger home within the school zone, noting that this could provide long-term growth potential and more space for the family.
- Option 3: Wait and Build Equity – The idea of waiting to increase borrowing capacity through higher incomes is discussed, along with the risks associated with hoping the market won’t price them out in the meantime.
- Option 4: Rentvest – Renting in the desired school zone while investing in another property is also a possibility. Kate explains how this can help avoid the emotional and financial burdens of buying and selling multiple times.
Financial Considerations and Emotional Factors
The hosts dive into the emotional aspects of property decisions, especially when it comes to parting with the first property and dealing with loss aversion. They also touch on the financial realities of stamp duty, agent’s fees, and the potential for capital gains tax.
Gold Nuggets
Cate Bakos’s gold nugget: got so much right with their structuring and decision making when they bought their first property, but one thing Cate wishes they considered was schooling and desired zones. Schooling is a big part of a property plan.
David Johnston’s gold nugget: “We landed at the same point, Cate.” Everyone who hasn’t set a property plan yet should be asking themselves these questions ahead of time.
Mike Mortlock’s gold nugget: “Anything that doesn’t result in two sales is a win!”
Resources:
- Ep. 22 Why the family home is often the biggest piece of the investment puzzle
- Ep. 128 Upgrading and planning for the long-term home: how to keep a home as an investment, buying or selling first and more.
- Ep. 143 Property Planning Case Study #1 – What’s our next move? Renovate our home and invest, sell the home and upgrade, or upgrade and convert the home into an investment
- Ep. 267 Crafting a Winning Property Strategy – Navigating Asset Selection, Growth vs Cash Flow & Changing Property Purpose
- Ep. 228 All Things Apartments & Units Part 1 – From Boutique to High-Rise, Uncovering Opportunity, Oversupply & Lender Restrictions
- Ep. 229 All Things Apartment & Units Part 2 – Secrets to Selection Success, Finding Capital Growth, Land to Asset Ratios & Other Expert Tips
