Why we gave up buying a family home in Sydney + what we are doing instead – rentvesting. The Sydney property market has been crazy lately, with housing prices increasing literally week by week, easily outpacing wage growth. This video is more a personal story about what we’ve been doing as a result of these crazy prices.
House prices have been so crazy that me and my wife felt it was not great value to buy a house in Sydney for the time being. We had a decent budget but it seemed like there was still so much compromise.
We didn’t really care about some of the benefits of owning your own home that others really like – such as being able to renovate, having a big backyard, the feeling of ownership etc.
In this video I’m gonna share what we’re doing in regards to real estate investing and how we’re still aiming to grow our net worth while renting in Sydney.
G’day there. Ray Corcoran here. So in this week’s video, I’m going to do something a little bit different. We did recently a video on rent vesting. And in this week’s video, I really wanted to talk about, I guess, my personal situation, both me and my wife and my son, and basically what we’re planning to do.
We live in Sydney, and as many people know property prices worldwide have been going crazy. Australia has been no exception, and in Sydney it’s been ridiculous. Me and my wife went to an auction just nearby, near our place out of curiosity. And it had a $1.8 million price guide. And we’re like, oh yeah, we’ll have a look. And there was a number of young families there, excited and probably naive thinking that they were going to buy the place. And they just got blown out of the water. And the property that was listed for price guide 1.8 sold for 2.51.
The scary thing about that is that there were three or four other bidders that were still bidding at $2.3 million range. So you can kind of imagine the next few auctions would have had people that were willing to pay 2.3ish million dollars for other properties listed for the same price. So it was just ridiculously competitive and not even good value. Just terrible value that the property was very average, about 600 square metres and needed a renovation. It was very old style. So to pay $2.51 million for a property that still needed probably a few hundred thousand to make it quite nice, it was just crazy.
So after sort of experiencing this a bunch of times, we had saved our deposit for a family home. And that was the thing that everybody does. So we’d saved our deposit and you have the Australian dream. You save up, you work in a job and you save up your money and then you typically buy a house that’s humble, maybe out in the burbs and you start off there. And then hopefully if you’re lucky enough, you’ll make a bit more money and you’ll move to somewhere a little bit nicer after a few years and potentially repeat the process a few times.
And everybody always talks about, you’ve got to have a backyard for the kids. I can’t tell you how many times I’ve heard that. Having your own place, being able to hang a picture and paint the walls or whatever. And this is a thing that everybody loves and we were on that path as well.
And the funny thing happened once we actually had the deposit saved and we started looking at houses and to be honest, I got pretty deflated because I was just looking at the houses within our budget. And I think we have a pretty good budget and the houses were still crap.
Our options were either spend a lot, regardless, spend a lot of money, but get a house that’s crap. That’s sort of not too far from the CBD in a decent area and probably have to spend a few hundred thousand on renovating. Or spend less, but live really far out, away from basically everybody and anything I know. And sometimes you got to do what you got to do. So it’s not like it would’ve been terrible living out that way. But for us, there’s no lifestyle, our friends and family aren’t anywhere near there. And work-wise, my wife would have to do a huge commute to work.
Sometimes you have to compromise. But for me, I just felt like we were spending a lot of money on something that wasn’t that good. I didn’t feel very excited about that plan. I had a conversation with my wife about it because I thought that she wanted the house as well. We’d kind of thought that we both wanted that. And a funny thing happened is, when we started to actually talk about it, we both actually realised that we agreed that we didn’t really want to do that path.
And the problem with renovating a place as well, you’ve got to pay heaps for the house, even if it’s crap. Second is you’ve got to pay for the renovation. You’ve got to take time finding the different trades. You’ve got to manage those trades. Even if someone else is doing it for you, it’s not hands-off. You’ve got to go through the process of picking every little finish and stuff. And if you don’t really get hands on there, it’s probably going to look crap.
You got to pay for rent the whole time this is being done. There’s a lumber shortage, I think worldwide at the moment. So certain things take way longer to do. Other tradespeople are quoting a lot higher because there are so many people wanting to renovate at the moment due to rising house prices. And it was basically a whole bunch of crap things.
For me, I’m quite busy with running my business and my wife’s quite busy as well. And we’ve got a young son. So there’s a lot going on and a house renovation and house hunting as well are both very time consuming things.
And the more I looked into it, the more I was like, I just don’t want to do this. I was like, for what? The benefit was you have a little bit more space and you can hang a picture and paint a wall and have a backyard for your kid. For me, I just thought, I don’t care about any of that. The more we broke it down, and the reason I’m telling you this is maybe that if you’re looking for a property in an expensive city, or you’re just looking for a property and maybe being priced out of the market, you might want to check out my rent vesting video where I kind of break it down.
But in this video, I just wanted to share, I guess, my personal situation and thought process. Because it might give you some ideas, but in terms of having a backyard, yes, that would be nice, but I don’t really care about having a backyard. My son’s going to be in daycare Monday to Friday. He’s not going to go to be in the backyard much, Monday to Friday, most likely or minimal. And then on the weekend, we’re probably going to be out anyway. So he’ll be out and about at the park or whatever.
Next thing is about hanging a picture. Who cares? Paint the walls, I don’t care. Of course my wife would probably love to renovate a place at some point, but the huge cost and pain in the ass for doing all this was not worth it. We kind of weighed everything up and I was just like, I don’t want to rent a house that bad basically. And if that’s something that you want and you really, really like then, I think you should go for it. But for us, we just realised that, something that a lot of people like may not be right for us.
And we don’t care. And some people, they really want a house and they feel claustrophobic in an apartment. For me, my family home was small and I don’t really care about living in an apartment. It’s more than enough space for me.
And another cost as well. It’s just the mental head space of trying to figure out what you’re going to do. And house prices is getting more and more ridiculous and it’s just terrible value. And if you’re in an area where house prices are quite affordable, this might be a different conversation. But if you’re in a big major city where house prices are crazy or house prices are growing rapidly, buying a house may be a terrible decision. And I think, for me with my finances, I’ve always tried to approach it relatively flexibly.
So I’m never like, I’m a hundred percent doing this or a hundred percent doing that. Sometimes you just got to be open to doing things differently. I, in my head expected to get a family home and do it that traditional way. Things are crazy right now. And I just don’t think it’s good value. And I think I’ll actually be better off financially after doing some rough calculations by paying as little as possible for rent and taking all that money, spending hopefully none of it or very little of it, and then dumping as much as possible into regional investment properties and stuff like ETFs. And I think that’s going to be a much, much better path.
So in terms of how we’ve approached it. I’ve always rented and we bought a property, our first investment property a few years ago in regional Victoria in Australia. And we’ve since bought other properties. And we plan on basically taking the deposit that we had for the family home and then buying multiple smaller investment properties. And the thing I like about that is, I’m not going to have so much money tied up in the one asset. I’ve never been too super keen on having such a large amount in one property that doesn’t cash flow and I’m just genuinely more, and my wife is as well, I think we’re more excited about the idea of having five properties or 10 properties or whatever it ends up being that all cash flow every single month.
And it’s not without its problems. There’s dealing with property managers, tenants, repairs, reporting, tax stuff. It just gets confusing. But for me, I like that idea a lot more and I can retire on the cash flow, whereas, if I owned a house, I could have a bajillion dollar house, but it doesn’t cash flow anything for me.
I kind of am erring more towards that approach at the moment. And hopefully by the end of the year, we’ll have four properties. And then I’m planning to buy basically as many as the bank will let me between now and the next probably 18 months. So we’ll see how we go. I don’t know how, in terms of serviceability, I think it should be okay, but I’m self-employed so the banks are always a bit funny with that stuff and I feel like they’re a little bit harsher on self-employed people versus people in a job, even if they earn less.
So that’s basically our plan. This is sort of what we’re looking at doing. We used a buyer’s agent for the first couple of properties, and we’re currently about to buy our third at the moment, which is also with a buyer’s agent. I’ve learned a lot since buying that first property and I’ve still got a lot more to learn, but basically the plan is to start buying these myself and being a bit more involved in that process.
So I’m actually genuinely excited about it. So it should be quite good. And if you have any tips on great investment property areas in Australia, please let me know. But yeah, I just thought I’d just kind of share sort of what we’re doing. Nobody has asked me to do this, but just more so, maybe it might give you some ideas or if you’ve been sort of feeling, I guess, not pressured, but you know, you feel like everyone kind of expects you to buy a home, maybe challenge that. If you run the numbers and it’s actually better financially for you to rent cheap and buy elsewhere, then maybe that’s what you should do.
Where I live, there are huge amounts of apartments. As a result, the rents are quite low even if the apartment cost is high. So we can live in a nice, decent place for not that much. My favourite part is I don’t have to deal with maintenance or BS. I just pay them the money and I can go about my life and grow my business and work on projects. So for me, I like the simplicity and the flexibility of that. And for you, it might be a good option as well. Buying a family home may be a great option for you, but it might also be a terrible option.
So run the numbers, speak with your partner if you have one and just work out what’s best for your lifestyle. For some people it’s just not going to work and other people, it’s going to be a great option. So hope you found that useful. If you have any thoughts, please let me know and yeah, I’ll see you at the next video.