What I worry about when you sell up and move to the coast
Recently a friend of mine announced she was moving to the coast – once I got over my jealousy (J) I wanted to suggest to her that she consider all of her options around selling her current home in Sydney, and of course I have a tool which can help her drill down to the real numbers so she can make an educated decision.
Now why is it I am so concerned about this? Because I’ve seen this happen time and again, and while I know she is unlikely to want to come back to Sydney, it’s not impossible - and in what is traditionally such a rapidly moving market it can be very hard to get back in once you’ve sold.
I’ve seen friends sell up and leave forever (in theory) and be forced to or simply want to come back to the area and find they cant afford anything like their former home.
Granted you might buy in another equally fast paced market, and be happy ever after, I wish this for you.
But at very least you’re going to eat up some money in your ‘changeover’ costs (agents fees and legals selling, legals and stamp duty buying again), which is rarely any less than $50,000 of your equity gone. And potentially a lot more.
You’ll only do what is affordable, but how do you know what is affordable or not?
So, what other options do you have?
Renting where you want to live - and having tenants in your former home. This can be an exceptional idea if you’re moving to a completely new area so you can work out where exactly you want to settle
Renting initially then doing the buy sell thing when you’re very certain
Draw on the equity and buy another place without selling – leaving tenants in Sydney
Be mindful you might have some tax breaks with your new investment.
So how do you make a decision on what to do? Apart from asking someone like me to run the numbers up for you, you could start with looking at an annual cost for the property – adding up the:
Loan repayments
Maintenance costs
Rates and strata
Management fees for any tenant
Insurances
And
Working out the rent
How much will you be out of pocket, if at all.
Even if the rent doesn’t completely cover the cost of the property, and if the difference is only the cost of some rates or strata fees this will seem very small biccies in 10 years if the property continues to grow in value, subject of course to it being affordable for you to manage.
It still may not be a good idea where you have a load of equity and end up with an uncomfortably large mortgage up the coast, but you can say you’ve considered all of your options.
Of course, none of this goes to tax advice or suitability for your personal situation – you know the drill, it’s about opening eyes to possibilities.
