Hi everyone
Dh and I have found the perfect new PPOR for us. Our timing totally sucks, but we ‘want’ it.
So now we need to get this place ready for sale or rent in 2.5 weeks (we’d list on 13 Dec). Not the best time to sell, but perhaps not the best IP to rent.
On paper we can afford to buy the other and then rent or sell this one. We do want to buy our first IP in the next 12 or so months, dependent on the market but we never really planned to have as our first one a 4 beddie 30 yr old house in North Belconnen. But perhaps keeping this one, and avoiding sell & buy costs is an idea. Does anyone know the rental market here well?
Question too: is if we take this back up to 80% LVR, can we only claim interest on the original mortgage (about 50% LVR now), not the extra mney because we are using it to buy new PPOR? Finance guy advised that way and from my reading, looks like ATO are cracking down on such practices. We have done about $40k renos on the place, I think we can count that in?
I’m thinking that perhaps we put it on the market and if it doesn’t sell at a reasonable price, we rent it out. I’ve no idea what agents charge if you do that? Anyone?
Also, we’d only be happy to about 8% (int rate). We’ve got two young daughters and we are only in our late 20’s. While we want to get started on investing, we also don’t want to risk too much at this fairly vulnerable stage.
What are thoughts on the Canberra market in the next 2-3 months? New PPOR price wasn’t outlandish, given that the market has levelled off here. But we need to be very smart about whether to sell or rent this is purely business.
I think we should sell. I think if we price the place reasonably (well know what we want and have it be reasonable) that the market still has a few months in it here.
Thoughts?
SamSam
drop me an email at melbear7(at)tpg.com.au
Also, to check out the current rentals available, have a look at http://www.allhomes.com.au, then choose your suburb. If you advertise that you’re happy for pets, you could ask a higher rent, and would get it too. I know my brother has just been looking for somewhere that will let him have his dogs, and there haven’t been many options.
Cheers
MelHi dreamergirl,
I’ve been in Canberra a while now and keep a close eye on both the buy/sell and rental market here so I feel I can give you my opinion. I have my own place and one IP which has never been vacant in 5 years so you can weight my responses against that.
Firstly if you can rent your place in Belconnen for as much as it costs you in interest (or even close) then hold on to it. Canberra over the past 5 years has had an extremely low rental vacancy rate and though the number of vacancies is climbing right now but it usually drops off again after Xmas. Meanwhile the sell rate is dropping off pretty quickly and to sell will cost you heaps in fee’s. Be aware tho’ – there is only one way the interest rate is going for now and that is up. Be sure you have a good margin to cope with this. If you can’t sustain another 1-1.5% then sell.
One disadvantage I can think of when turning a PPoR into an IP is that all the fee’s you paid when you bought it cannot become a tax deduction because you lived in it to start with.
As for claiming the mortgage interest on the portion of the loan you plan to use to buy your PPoR – I believe your financial adviser is right. If you can show that the reno’s where done for the purpose of turning the place into an IP you should be able to claim them but you would want to be careful. You wouldn’t be able to pass off work done 12 months ago as for the purpose of making an income later. If the taxman checked he might disallow such a claim.
I’m not sure what would happen if you got an agent to try to sell it and then changed your mind and decided to rent. But I do know that you can usually make sure the agreement you sign with an agent is for a set number of weeks. If the place doesn’t sell in that time frame you can rent it out instead and not owe the agent anything. Best just ask them.
Melbear is totally right about the pet thing. If you allow pets your chances of always having a tenant will rise significantly. It’s hell trying to get a place when you have a cat, never mind a dog.
Finally this is all just my opinion. I’m not a real estate tycoon (yet
. Do your sums thoroughly.Best of luck.
Namasté
“God in me recognises God in you”
Dreamgirl – agents charge about 10% (+GST) in the ACT to manage properties – but you may be able to negotiate this to 8.5-9% (+GST) – particularly if it’s an agent nearby who doesn’t need to travel. My wife and I are similarly considering whether (if we move interstate for work) the advantages of renting / selling. Just check out the credentials of the agents though.
Vacancy rates are low and lower in some areas – not sure about north Belconnen to be honest but all over Canberra is better than most other capitals – also because of the homes lost in the January bushfires.
. Do your sums thoroughly.
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