Should I buy a unit now or keep money in cash for 2yrs?

Question

I am getting a property settlement soon and I am undecided on whether to buy a unit now, in a poorer area south of Brisbane (as this is all I will be able to repay on a single mother/student income). Or do I wait 2.5yrs till I graduate and have a better income, keep the settlement money in ING account and buy a unit in a better area then but risk missing another property boom in the meantime?

Any thoughts are appreciated

Answer 1

If you are close to the nicer area you will be considering in a few years, you might try getting an owner to sell you an option to by the property as of a certain date. The most you could lose would be the premium, that is, the cost of the option. It would not obligate you to buy the property.

This way you might be able to lock in today's prices.

Also possible: rent the property in the interem, with an option to buy it as of a specified date.

Answer 2

Keep it simple, come back into the real estate market when it gets hot again.  Always buy in a good neighborhood, your money is more secure that way.

Answer 3

Beside risking loss of a bull market and gains in it, you also risk losing a bear market, a time when prices take a real dive.

But as a general rule it is not a good idea to buy real estate with the expectation to sell it within the following 3 years. If you wanted to be exposed to real estate, consider buying stock units in a real estate income trust.  But be aware that small real estate companies may not be as liquid as you want. Plan to sell units before you go out to buy real estate directly.  

Answer 4

Don't let what has happened in the market in the past 7 years or so be your guide for what you do in the next few years. It would be very unlikely that property will "boom" again in the short to medium term. Putting your money in cash is fairly safe. However when inflation is high such as it is now you must factor it in as it will impact on your profit. Think of it this way, you deposit $100,000.00 as capital, hold for a couple of years in which time inflation has taken its toll and capital gains tax will also be owing. It could be a false economy.

Rates are set to drop with markets factoring in a decrease of 75 basis points by mid next year. This will return some confidence to the market and may see a renewed vigor amongst investors wanting to buy at the bottom and cash in on rising rental returns. Home loan approvals are low, demand is high (1000 people every week moving to SE QLD, I live on the  GC) but most are nervous about current conditions and are waiting to see what happens with interest rates.

Do we have more pain on the way due to the world wide credit crisis? some say we will soon see one of our own financial institutions fail and maybe we will. Maye we won't.

In saying all of this I am an investor and believe that every day is a good day to buy property  if your in it for the long term. Your study is important though and you don't want to get in a spot where you are mortgage stressed.

My advice to you is stop asking idiots like me for the answers to questions this important and go and fork out $300 to see a financial adviser. It may save you thousands. I'm serious.