r/AusFinance - How to own a multi-million dollar house

How to own a multi-million dollar house : AusFinance

Hi guys, I’m on a mission to buy a nice property by the beach in ~14 years time when I’ll be ~45.

I don’t wear designer clothes, I don’t drive a good car, I’m not driven by the need to impress people. My partner (28) and I (31) are located in Adelaide and just really love the beach and want to have a nice house by/or near it at some stage so I have a plan and I’m hoping you guys can provide me with considerations that I may not be aware off (e.g. kids, tax etc). At the bottom of the post I’ll add some questions that I’m hoping to get help with.

-Current combined after-tax income $11.2k per month (with plenty of upside for both)

-Currently live in a unit, paid $327k for it and have $278k left on the mortgage.

-Other assets: $12k cash, $80k in stocks.

-Currently putting aside about $5.5k in savings per month.

The plan

The plan is to save up $140k cash in 24 months, $40k of which will be spent on wedding and honey moon and $100k on a ~$650k house, at which point my unit becomes a rental.

The $80k stock portfolio will be untouched and I’m looking to ride the waves for the next 14 years. If we assume 8% annual increase, that would be a $235k portfolio in 14 years. The 8% annually is very conservative, I’m an active investor and since starting my portfolio in late 2017 my returns have been approximately 50% in 2018, 50% in 2019 and 100% in 2020 (very good exit and entry position into BNPL and tech before/after the March crash).

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After buying the $650k house, if I assume very conservative growth rates for housing (2% growth YoY) and stocks (8% growth YoY) then in 14 years I’d end up with something like:

-$235k stock portfolio

-$278k equity in unit

-$260k equity in house

-If I were to make the conservative assumption that I only save $1k a month for 12 years leading up to the 14 year target then that’s another $144k assuming I create 0% return over that period. The conservatism of $1k savings is super conservative, but it does allow for circumstances, such as partner going on maternity leave, kids being expensive and spending money on unit and house upkeep, slow down in housing market, and stock market etc.

Total (very conservative) networth in 14 years: $917k if I were to liquidate my assets at that point (actually a fair bit less due to tax). Regardless I feel like this provides me with a lot of options at age 45 to buy a nice house by the beach. In an ideal situation I’d keep both the unit and house as well as stocks (which at this point I’d put into high dividend-yield stocks for extra income). I’d then use cash that’s saved up to fund the deposit for the beach house and use the unit, house and dividend as extra income as well as the existing incomes of my partner and I which would be much higher by then (both work in finance).

I should also note that I’m not looking to live frugal like the FIRE crowd. I’ll still be going out, traveling, getting a car that’s not a lemon which is another reason why the conservatism is built in. Also worth noting that I’m not dead set on buying this house in 14 years, it’s just an approximation. If it happens earlier, later so be it.

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What am I missing? What am I not thinking about? What are some of the stumbling blocks that could derail this plan (to keep it simple, let’s assume no unforeseen deaths or divorces).

What are considerations for my unit and house, both of which I’m planning on renting out. I don’t have any experience in investment properties. Given my situating would it make sense to consider interest only loans for my unit over the next 14 years? I’m not looking for individual financial advice, more some guidance on considerations and things that I may not be thinking about.

If you’ve read through this whole post, thank you so much and I’m looking forward to hearing from you.

TLDR: I dream of owning a sexy beach house. Beach house is expensive. Details of my plan to make this dream happen.