Should I buy an apartment while renting another one?

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My girlfriend (who is supplying most of the deposit) wants us to buy an apartment in the city while we remain in our current rented apartment in the suburbs. She says that in the city we can rent to two or three students and collect relatively high rent compared to the cost of the apartment. She says we should remain in our current rented apartment for several years until we later buy a house in the suburbs.

I don't have any personal objection to her plan. I would remain in my current digs, which I am happy with, yet I would be able to buy property.

My question is, is it a bad idea to buy a home while renting another, rather than directly buying my residence? It seems like it will at least be a lot of trouble to go to. I'll have to deal with two different real estate agents. Would I lose money from this? How much can I claim on my taxes for the apartment I'm renting to the students? Is it a good idea?

One of my friends did buy apartaments for rent while renting the one she was living in and she got profits on it, so in general, it might be a good idea.
But it's business, I find these things tricky, I can't tell you if it would be profitable in your situation. But in general, I think it's okay.

I would suggest discussing this with an independent mortgage advisor. I used one when I bought my apartment. They answered any questions I had about the process.

I'm starting to get cold feet due to the potential loss of my pension. The pension asset test won't count my principle home but would count an investment property. I was just looking at the rules for my pension online.

The good news for me is that the asset test only counts the equity. So if I had a 20% deposit in the short term the asset test would only see it as a $60,000 asset (the apartment being approx $300,000).

The bad news is that the pension counts income from rent. That could easily wipe out most or all of my pension, even though this "income" would be only slightly more than the amount I pay to rent the apartment I was living in.

In other words, if I bought this apartment and lived in it myself, I would have roughly the same amount of disposable income as I do now, but Centrelink wouldn't see that as income.

As a landlord, you would be responsible for the maintenance of the apartment which you own should it be occupied by other tenants.

That's the b***h about being a landlord.

I'd have to know more about the nature of your pension (is it Australian "social security," or is it from your company?). And how home ownership affects it. You're about 35 years away from collecting that pension, anyway, probably.

I'm still thinking of buying that apartment but perhaps I'll live there myself.

A couple of years ago I was in a rush to buy a place, now that I have the means to do it, it seems to be going too fast for me.

I've been collecting it since I was 22.

I thought you used to be "on the Dole," then got a job.

How can you be collecting it if you work? Or maybe this is some "permanent" thing which you get while you are working?

I wouldn't advise buying anything jointly with another person, especially real estate, if you aren't married.
That's the MUCH bigger issue here.

Bearing in mind what's happened to property prices and rents in most of the world (including Australia?) over the last decade or so (ie they've gone to the moon), I can't get my head around the idea of coping financially with such a situation, unless one is on a way-above-average income.

In the early 1990s, I owned a house (the one I currently live in), and rented a flat from my employer in London, but that was a different era - the house was bought for £19,000 and the flat had a hugely subsidized rent (around £130 per month). Just renting even the cheapest flat in London today would cost close to £1000 per month, and buying it would cost a minimum of £300,000.

Maybe things are different in Australia, but from what I've read the property market has gone berserk there as well, or is that only in places like Sydney?

I think one other issue you should bear in mind is the question of the management of the place you'd be renting out. I rented out my house for a while when I lived in London, and my experiences with the companies who supposedly 'managed' the property were dreadful. This industry tends to attract the very worst sort of spivvy people, whose main interest is in making large amounts of money for doing as little as possible.

No. I wasn't on the dole. Since I started working my pension was reduced. The amount it's reduced by is proportional to my income so if my income got higher it would go down to zero after a point.

Just don’t buy in a s**thole location otherwise you’re f****d. The thing that I’ve learnt about buying a home is that renters have more rights than home owners, so if you’re renting and you own a property as an investment, that’s a way better option than buying a place only to be driven out of it by all sorts of BS that you can’t fight. I’m talking from experience. On the negative side, if you own a home you can’t live in and end up homeless due to your rental situation, housing, Centrelink or any help agency won’t be able to help you because in their eyes you own a home. And as a high functioning person, well I can string a sentence together and I’m articulate so why would they want to help me. Ok sorry to get sidetracked but just something to consider. Buying is stressful but once you’re through that part, you can be proud that at least you own something. Good luck.

Bump.

Owners of property generally have a vested interest in maintaining the property. Renters do not.
I lived in an apartment for awhile. One of the tenants downstairs had a motorcycle. It broke. So he brought it into the apartment and tore it down and repaired it. The carpeting in the living room was destroyed by all the oil, grim and dirt from the motorcycle. It was a major loss to the apartment owner. The damage done was much more than the security deposit.

One of the individuals at work became an apartment manager for a large complex as a side job. One of the renters refused to pay their rent. He checked on the apartment and found out that the renter was no longer in town. She was in prison. Her boyfriend was living in the apartment and refuse to vacate. He contacted the cops and they said it would take 6 months to evict the person. In many cities there are very strange laws that favor renters, even when the renters are in jail and the person living in the apartment is not the one who signed the lease.

Also the advice of Isabella Linton applies. Sharing ownership of property with someone who is not your spouse can produce rather strange and unanticipated problems.