Don’t sign: it’s mad­ness

Money Magazine Australia - - Q&A | ASK PAUL -

QI’m 25 and my part­ner is 21. I work full time and make about $50,000 a year and my part­ner is cur­rently un­em­ployed but hope­fully will have work soon and be mak­ing at least $400 a week.

We rent in Ade­laide but get it cheap ($250 a week) due to my job. We have car loans of about $45,000 com­bined and a to­tal of $12,000 in the bank. We have no shares or in­vest­ments al­though I’m su­per keen to get into that.

I’m re­ally start­ing to worry about the prop­erty mar­ket – it’s get­ting too ex­pen­sive and I fear we won’t get in. I’ve got an off-the-plan block of land lined up. It won’t ti­tle un­til the end of the year or early 2019. It’s $175,000 for 900sq m about an hour north of Mel­bourne, as we plan to move back there in a cou­ple years.

I only need 5% for con­tracts then noth­ing un­til ti­tle. I should have 10% by then to get a bank loan if I save re­ally hard and my part­ner gets work.

How should I go about it? Should I sell my car ($27,000) and buy some­thing a lot cheaper? Should I not buy the land just yet and save more and risk miss­ing out and prices go­ing up, or put down the de­posit and be un­der my red zone in my ac­count but have a foot in the prop­erty door? Help!

Hi Codey, I un­der­stand your fears. The prop­erty mar­ket has had an ex­plo­sive run but right now it is slow­ing or go­ing back­wards. In the long run own­ing a prop­erty is a great plan but I don’t see a need to hurry at present.

I am con­cerned about your off-the-plan land deal. Hope­fully it is all le­git­i­mate but there have been plenty of scams here. Is it a longestab­lished and rep­utable com­pany? I’d be very cau­tious. Even if it is all OK, you need to get pre-ap­proved fi­nance. Len­ders hate va­cant land. I think it is mad­ness to sign a con­tract un­less you are 100% sure you can set­tle.

Cars are a de­pre­ci­at­ing, money-eat­ing dis­as­ter. If you can get by with one, sell it and bank the money. My feel­ing here is to build your sav­ings, wait for your part­ner to find a job and build from there. You are very young; don’t make a silly de­ci­sion now.

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