Hi all.
My wife and I have been throwing ideas around recently as to how we can speed up our investing.
I am posting here to get other peoples opinions, ideas, experiences, on the situation.We have nearly paid off our home, and have came up with some scenarios.
– Sell our home and rent elsewhere, use the proceeds of our sale as deposits on approx 5 – 10 investment properties.
With this, our expenses will go up due to paying rent, but with deposits on well selected properties, we would aim to receive cashflow.– Stay in our home, and use the equity we have to borrow 100% against more investment properties.
We wouldn’t be paying out rent, but would be narrowing our choices of property to purchase as being 100% borrowed would cause a lot of properties to be negative cashflow.– Rent our home out, therefore creating a positive cashflow from day 1, keeping the equity in the property to invest in more property. Again, the rent we would get would pretty much pay for us to rent elsewhere, cancelling out that cashflow.
So, as you can see, we’re confused. [?][?][?]
Has someone out there been in the same situation, and what decision did you make, one of the above, a completely different one we haven’t thought of?
Your feedback would be greatly appreciated.
Hi Ryanmel
Another option, Access the equity in your PPR and purchase multiple IP’s, borrow from multiple lenders at 80% LVR with 20% deposit, no LMI and no xcoll,
Cheers
Steven.[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Hi ryanmel
First question is whether or not you would be happy to move? Also whether you want to go from being able to put as many holes in your walls as you like, to having to ask if you can put any holes in at all to hang pictures etc. Also the chance of having to move on every couple of years as your landlord decides to sell/move in/renovate etc. etc.
If you do decide to move out and rent, and rent your place, remember that you could keep it as a rental for 6 years before it would become subject to CGT. If it’s in a good growth area, perhaps it’s a good idea to keep it.
As Steven suggested, you could get a LOC, or an offset account against your home, and use it to fund the deposits on your new IPs, only borrowing 80% against them. This may increase your repayments, but if you focus on your portfolio being positive, rather than individual IPs, it could be a good balance (remember, you are getting rent for your house, against which there is no loan).
Also, if you sell, you’ve got all the selling costs, so that will take a chunk of your cash anyway.
Cheers
MelHi Ryanmel
My husband and I have had many discussions re the same and we have decided to sell our home and use the money investing in property.
This was not an easy decision to make and we took a lot of things into consideration such as:
– Our future goals – where we wanted to be in the next few years and what it was going to take to get us there
– The financial figures for every option so that we could make proper comparisons
– Advice received from a qualified accountant on all the options including taxations implications
– Best and worst case scenarios for each option
– How we would feel about losing the security of owning your own home
– How we would feel about doing things differently from everyone else (i.e. negative feedback from family and friends)The way that I see it there is no absolute wrong or right with property investing or if you want to get deep with your life – it is about looking at the pros and cons for each option you have and moving with the best option you have at the time.
Best of luck with the decision you make.
Lucinda
Hi ryanmel,
In IMHO, i would go with this option you provide though i would slighly change it.
– Stay in our home, and use the equity we have to borrow 100% against more investment properties.
We wouldn’t be paying out rent, but would be narrowing our choices of property to purchase as being 100% borrowed would cause a lot of properties to be negative cashflow.But instead of purchasing properties that are -ve geared, why cant you purchase properties that are both +ve but provide passive income.
dont limit your self, there are many differnet options out there available.
cheers,
s.i.sthanks for your comments.
steven, when i said borrow 100%, i meant using the equity as you mentioned, as a 20% deposit, and 80% lvr, but at the same time, by using equity, that 20% will still be borrowed money, therefore 100% financed for the property.
melbear, we have discussed moving, which has never been an issue for me, i have not emotional attachment to my home, just my bike. heheeh
i do understand the consequences of renting as you mentioned, but to me, i can live with this.we already have a LOC which we have used effectively for the last 3 years now and we have less than 6 months to pay off our primary (non-income producing) debt.
we have a seperate account setup within our LOC for the investment properties, to keep the interest payments seperate from our everyday money (easier for tax). but by drawing down on a line of credit, in effect, wouldn’t we still be 100% borrowed (20% non deductible/80% investment)as you can see i’m confused
s.i.s. – believe me, we are looking for +ve property, what i meant, sorry if i was a bit vague, was that by having to borrow 100% against the property (using equity), would narrow our options down.
anyway, thank you all for your ideas, and we realise that it is our decision to make, it’s an interesting one, to say the least.
our goal is to retire (from HAVING to work)at 30, so we have 4 years to create the cashflow we need to not be dependent on our jobs.
Hi ryanmel
is there a specific period of time you need to live in your property before you rent it out so you can use the 6 year rule.
for eg i buy a house live in it for 6 months move out and want to use the 6 year rule to avoid capital gains tax. ie i sell it 4 years after i moved out.
cheers
Hi ryanmelFirst question is whether or not you would be happy to move? Also whether you want to go from being able to put as many holes in your walls as you like, to having to ask if you can put any holes in at all to hang pictures etc. Also the chance of having to move on every couple of years as your landlord decides to sell/move in/renovate etc. etc.
If you do decide to move out and rent, and rent your place, remember that you could keep it as a rental for 6 years before it would become subject to CGT. If it’s in a good growth area, perhaps it’s a good idea to keep it.
As Steven suggested, you could get a LOC, or an offset account against your home, and use it to fund the deposits on your new IPs, only borrowing 80% against them. This may increase your repayments, but if you focus on your portfolio being positive, rather than individual IPs, it could be a good balance (remember, you are getting rent for your house, against which there is no loan).
Also, if you sell, you’ve got all the selling costs, so that will take a chunk of your cash anyway.
Cheers
Melpmaurice,
Hi and welcome. I was new a week ago too[
]Re your question – my understanding is the proprty has to have been your principal place of residence for 12 continuous months minimum (or pretty close to it!).
Cheers
Karen
Don’t you dare sell your own home. A home is more than just money.
Oh, if only more people would realise that in their quest for quick wealth they are giving up their greatest wealth of all – their peace of mind.
This is NOT the time to be jumping into the property market. Listen all you starry eyed hopefuls. This is the end of the boom and the start of the doom. It is the time to sit tight, pay off debt, save your pennies – and make love to each other. Ah yes, that reminds me.
The best things in life are not things.
With love
Bec
Hi Bec,
Speaking of boom and doom, how goes the property market in the UK atm.
Thats where I would like to invest….UK, but in the doom that is, definately not at the minute. couple years from now maybe.
I do like your suggestions as to what to do in the meantime[
]Hi Bec..
“just” about finished Real Estate Mistakes, next read is ‘maximum achievement’ by Brian Tracy
Ryanmel..
All depends on your personal situation, a PPOR definetly gives you stability and somewhere that is ‘yours and yours alone’, it all depends on your comfort zone and your future plans..
I’d go with mobile mortgage and have your cake and eat it.. access your equity
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
pmaurice, kazonthebeach
I don’t think there is a rule regarding length of time you must live in the house for the 6 year rule to kick in. Although you cannot have another PPOR in that time.
To be safe, I would consider living there for at least 3-6 months before leaving if all you are doing is buying it for the CGT exemption (which seems an odd way to do things though). If you have good reason for having to move out – like can’t afford payments (although shouldn’t have bought in first place – unless it was a job loss that killed your affordability), or left state etc., then timing should not be an issue.
The CGT exemption is a lot different to the FHOG which will be policed more heavily if what we read/hear in the news is correct.
Cheers
Melthe market seems to dictatewhat we can do. I have just sold an investment property and am eagly awaiting the “doom” with any luck the doom will be bad enough for me to buy two properties with my proceeds. With doom and boom come opportunities take hold of these and do well. There is a time for everything!
[:p]My personal preference would be to keep the house and do what Steven suggested, ie borrow against it and use this as 20% deposits.
I have actually done hwat you suggested about selling a house to invest, and I regret it now. Don’t forget all the costs and hassles involved. real estate agents commissions, people comming to look, dealing with lying agents etc. And then when you eventaully purchase a new property, you have to pay stamp duty etc. Lots of costs.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Why pay tax, when you can avoid it and redraw and use that money to invest in more properties and still keep your current property portfolio.
Cheers,
s.i.sI think to save on tax if you are up to it move every 12 months or so, saves stamp duty on purchase. If the market is right sell if not rent it out. 12 months of slow renovations. convienent as you are on site. market wrong rent it out. trick is to keep money in an ofset account to keep investment money tax deductable and ppr with little debt little interest. a trick I use.
Quoted
– Stay in our home, and use the equity we have to borrow 100% against more investment properties.
We wouldn’t be paying out rent, but would be narrowing our choices of property to purchase as being 100% borrowed would cause a lot of properties to be negative cashflow.Agreed
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]well, thanks for your replies.
we are more than likely going to stay where we are for now, and use out equity to get into some +ve IP but we are also looking at businesses. we need cashflow to pay down our debts fast, our plan is 4 years to retirement. we need to be able to invest in as much +ve IP as possible and pay down as much debt as possible, and, well, to be honest, i don’t want to work for someone else anymore, i would rather work for myself, even if it meant more hours. that would suit me to a T.
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