First-time homebuyer reveals how apartment purchase left him $70,000 worse off – realestate.com.au

An Australian first home buyer ended up about $70,000 worse off despite taking advantage of first home buyer benefits, underscoring how entry-level apartments can erode wealth when tiers, borrowing and transaction costs snowball.

Melbourne buyer Nick Rabba bought an eight-unit boutique apartment in Carnegie about three and a half years ago, when mortgage rates were approaching 3 per cent, and qualified for first home buyer concessions, meaning he didn’t have to pay stamp duty and lender’s mortgage insurance.

“When I bought the apartment, I knew I probably wouldn’t make any money from it, but you only realize how bad it is when you really look at the numbers,” Rabba said. Yahoo Finance.

After selling the house last week, he estimates he’s about $70,000 behind where he would have been had he rented instead, once he added in mortgage interest, strata and buying/selling costs.

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He made a $70,000 loss on his apartment in three years. Photo: Nick Rabba/AllHomes

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Although strata fees are common among apartment owners, Rabba’s annual bill rose from $1,600 during his ownership to a hefty $4,000 per year.

“I don’t know why the tiers took up so much money. There was no pool, there’s no gym. It’s just a two-story detached building with a shared driveway,” he said.

“On top of that, there were special strata charges of $6,000 to repair the roof, which is fair enough, but the costs kept piling up. And the problem with strata is you don’t really have a say, if a majority votes for it you have to go along with what they say.”

In addition to escalating strata fees, Rabba also faced unavoidable transaction costs when buying and selling, such as broker commissions.

The prepaid interest portion of new home loans further deteriorated his financial position.

The ground floor house has not increased in value for more than three years. Image: AllHomes

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He paid about $700 a week to pay off his mortgage, while a similar rental home would have cost about $500 a week.

“I wouldn’t do it again,” he admitted to Yahoo Finance.

“I should never have done it in the first place, but I just had things going on and I just wanted to get into the market.”

Now a mortgage broker himself, Rabba advises clients against investing in apartments as he has heard numerous stories of rising strata costs, especially in high-density towers with extensive facilities.

While he recognizes the need for a place to live and the security of owning your own home, he believes that in many cases it can be more beneficial to “rentvest” (rent while investing your savings) with the long-term goal of purchasing a detached home.