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Rent, renovate or relocate?

There are plenty of decisions to be made around property in 2024, and Jacqui Lombard, Head of Avant Financial Services NSW/ACT, looks at three key choices facing doctors.

Property is one of Australia’s best-loved assets, and as we head into the New Year, many doctors will be wondering whether to rent, renovate or relocate. Let’s look at what to consider by breaking down the bigger picture.

Buying to invest

Renting a home can have its plusses, but for doctors who have a rural posting, they may consider other options such as buying a regional property as a first home which may provide benefits from various first home buyer incentives, including the First Home Owner Grant, and the possibility of further opportunities at a later stage.

It could spark the start of a diversified property portfolio, especially as the property may be an attractive rental home for other doctors who receive a similar posting to rent.

We see other doctors pursue ‘rentvesting’ – making their first property purchase an investment property while choosing to rent where they live. It’s a strategy that could work if a property is well-located and well-priced, and the cashflow stacks up.

More broadly, young doctors are taking note of the common saying ‘Your first home is not your forever home’ and buying with an investment mindset. In this scenario, there are various options for them to consider which could assist in building up their savings, which then could be used for many purposes and also help them to maximise taxation strategies. Doctors considering this should seek advice from a financial planner or tax accountant.

What’s interesting – for doctors of any age – is that buying a property as an investment is a very different choice today compared to just a few years ago.

Nationally, rents have jumped 9.7% in the last 12 months alone[1]. Across our capital cities, rental growth has hit 14.7% over the past year[2].

Yes, interest rates for investment loans are often higher than for owner-occupied mortgages. But the uptick in rental income means the cashflow on investment properties is often better than it used to be, illustrating it is still a viable investment strategy.

In addition, property price growth is expected to remain strong through 2024, giving investors potential capital gains.

As a guide, Domain[3] is forecasting 2024 house price growth of:

  • 7-8% Brisbane
  • 7-9% Sydney
  • 2-4% Melbourne
  • 3-5% Canberra
  • 2-4% Hobart
  • 7-8% Adelaide
  • 6-7%

Renovating – pitfalls to watch for

2024 may see doctors weighing up whether to renovate or relocate. It may seem like a no-brainer, especially as relocating brings a raft of costs, including stamp duty on your next home – money that could go directly towards improving an existing home through renovations.

However, as with many property-related matters, the picture is not always clear-cut.

Renovations almost always end up costing more than initially planned. Cost blowouts can be hard to foresee, and the escalation in building costs we’ve seen in recent years has made major renovations even more risky.

That’s why borrowers may discuss a backup of cash for contingencies with their lenders.

But it goes beyond this.

Variations in renovation costs may have to be met by the owner before the bank will hand over the funds for each stage of construction.

Alternatively, it may work out cheaper to build on vacant land.

It could also be a lot simpler to buy an established home. Every doctor’s situation is different, and it is important for them to consider the pros and cons of all scenarios.

Have an expert on your side

Regardless of whether you plan to buy a rental, or you’re considering renovating versus relocating, your first port of call should be a conversation with Avant.

Doctors are typically high-income earners, but when it comes to securing loan finance the biggest challenge facing doctors can be how they earn their income. Many have multiple sources of income so it’s not a tick-a-box exercise.

The Avant team only works with doctors. Our 130-year history of partnering with doctors has given us valuable insights into how nuanced the lifecycle of a doctor’s income can be.

Often, other mortgage brokers – and many banks – just don’t understand this.

This is why it pays to partner with Avant and leverage our wealth of experience working with doctors.

To know how much you could borrow for your property plans, or for expert support on structuring your loan, talk to the team of mortgage specialists at Avant.

 

 

 

IMPORTANT: The information in this blog does not constitute legal, tax or other professional advice and should not be relied upon as such. Persons implementing any recommendations contained in this blog must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular circumstances. Information is only current at the date initially published.

[1] https://sqmresearch.com.au/index_property.php

[2] https://sqmresearch.com.au/index_property.php

[3]  https://s3.ap-southeast-2.amazonaws.com/ffx.adcentre.com.au/domain/2023/CRTV-3129/Domain_2023+End-of-year+Report.pdf?utm_source=domain&utm_medium=article&utm_campaign=2023EndOfYearReport