Mastering the One / Two / Three of Sydney Property Ownership.

​Warning: This article delves into the realities of purchasing your dream home in Sydney. Fear not, with the right approach, it might be more achievable than you think.

​In the business realm, the term “agile” is frequently employed to describe a philosophy that embraces change, adapting swiftly and with versatility. In a similar vein, today’s Sydney real estate buyers need to embody these principles, especially if they are entering the Sydney property market for the first time or striving to attain their dream home.

The world has undergone many changes since our parents and grandparents initially ventured into the Sydney property market. However, the changes are not as drastic as one might imagine. Previous generations, particularly those of the post-war and 1960s era, generally adopted a one-step approach to the property market. They entered a single-family home, often remaining there until poor health or end of life. The exceptional appreciation in Sydney property prices particularly over the past two decades has rewarded these single-asset homeowners with continuous capital growth.

Whilst all homeowners from this generation became asset wealthy, there were those that became downright stinking rich by simply climbing the property ladder, using capital improvement (renovation) and flipping (Buy-Improve-Sell for profit) to grow equity and increase personal wealth above market growth.(A very important point to focus on – read the above point again.)

In the 1970s to the 90s, the surge in apartment development in Sydney provided the next generation with an alternative entry into property ownership. Typically, as careers and incomes progressed, the appreciated value of the apartment was liquidated to fund the purchase of a family home. This one-two approach often involved renovating the apartment to generate capital gain above market growth. The plan then shifted to acquiring an un-renovated, often aging, original family home, intending to renovate over an extended period.

What was once a One / Two process for home ownership, as experienced by your parents, now requires a One / Two / Three approach.

Equity is the reward for climbing the property ladder and holds the key to answering the question, “How do people afford to buy in Sydney?” While some are fortunate to come from affluent backgrounds or possess high-paying careers, this is the exception rather than the rule.

The reality is that utilising a principal place of residence in the One / Two / Three approach to property ownership allows anyone with the appetite for hard work (and an immeasurable level of joy and satisfaction) to create equity in each property they buy. This equity then finances the next rung of the property ladder and, eventually, the home that leaves others wondering, “How did they afford that Home”

It’s essential to note that the One / Two / Three approach is different from the investment strategies often written about in financial magazines. Those strategies pertain to investment properties, not your principal place of residence. Investment properties are run more like a business, involving the purchase, holding, and leveraging of multiple properties. Tenants are used to create income, and capital appreciation requires payment of government taxes on the realised gains upon sale. Often, the monthly operation of the investment results in a loss to take advantage of income tax deductions. This investment vehicle is best suited to a long-term time frame of 10, 20, or 30 years.

In contrast, the One / Two / Three approach specifically targets the owner-occupier, operating on a much shorter timeframe of property hold (a two year hold per property for the first two property’s will see you enter your third property at the end of year 4 with a substantial level of capital - of course this can be done over a longer timeframe if family and work commitments get in the way.) Property improvements are key, with each property sold to finance the next purchase as you ascend the property ladder. The combined capital gains (equity) from previous properties, along with a mortgage, enable each subsequent purchase with greater capital (personal wealth). A significant difference is that the capital gains made by an owner-occupier are entirely tax-free, ensuring that all your hard work is rewarded in cold, hard, take home, Capital Gain.

The secret to home ownership hasn’t fundamentally changed—hard graft, good strategy, short-term sacrifices for future gains, and, most importantly, choosing the right type of property for above-market capital growth (e.g., the worst house on a good street).

At MCS Real Estate Buyers Agency, we understand the path to home ownership. We enjoy working with clients willing to invest spare time in home improvements, relishing the journey over the mirage of instant gratification offered by a shiny new but fully maximized home.

If you believe the One / Two / Three owner-occupier property ladder approach to entering the Sydney Property market is something you could embrace, please reach out to us at MCS Buyers for an obligation-free chat to learn more about our buying services. The type of property you purchase is by far the most critical element in climbing the property ladder, and at MCS Buyers, we bring market experience and expertise to ensure you acquire a quality asset and untapped potential.

Important Note: The above article is not intended as financial advice and serves as an example of a strategy practiced by clients we work for in securing quality property in the Sydney Real Estate market. It is strongly advised that anyone looking to buy property should first seek professional financial advice from a licensed accountant, financial planner, and mortgage broker to review their individual financial circumstances and abilities.