Would really appreciate some warm and fuzzy feelings from anyone out there. I just negotiated the sale of a negativlely geared property I purchased 4 years ago (before reading Steve’s book)….but have not yet signed the contract. Since becoming enlightened by Steve’s book last October, I decided that this is an opportune time to get rid of my negatively geared property while the market is up. The other reason is that while I am living overseas (in Hawaii) with little Aussie income, I am also minimising CGT on the sale. This enables me to start again when I return to Oz in a year or so. The market may have fallen somewhat or at least gone off the boil so that will be a good time to start looking for +ve cash flow property. I will also be local.
I made an average profit on the sale even after the four years of neg cash flow are considered. Here’s the stats:
Purchase price $129,000 in 1999 plus $6,000 costs.
Sale price $197,000.
Property Type: Unit part of a 8 unit block, inner city Brisbane.
Current debt on the property: $127,000.
Finance: Was fixed for 3 yrs, int only, now paying it off.The profit would enable us to almost eliminate any debt left on out PPOR (which is now rented out). The rent savings while we are OS would go towards a deposit on investments in a years time.
The question that’s bugging me is…..is this th eright logic, should I get rid of this property for the reasons stated above or should I keep paying the place off to get it into the +ve cash flow debt level and just learn not to buy any more -ve geared properties again.
Any comments out there…..Richard.
Keep your principal place of residence PPOR as a hedge when you get back from overseas. My wife and I went to San Francisco for 12 months. If we had sold our PPOR we would be in the shit now.
As for selling the negative geared property or not. As you have little income it may be worth selling and using that equity in your PPOR as prices may stablise and go down a little over the next 12-18 months.
I would love $5 for every time I have heard someone say “if I had not sold that palce it would be worth $XXX,XXX now”
I myself would keep the property and then later get some positive and negative geared properties.
Richard, is it still negatively geared? Unless it’s costing you money (and take into consideration the rent you’re getting for your PPOR as well when working this out) I would keep it.
I would keep it as interest only, and concentrate on paying off your PPOR with any spare cash. When you come back to OZ, you will have a good equity base to draw from. Then you can look at more positive cashflow properties.
Although you could also look at negative ones, if you can afford it, and you want growth in your portfolio. My preference is a mixture of both in the short term, so that I’m getting growth, but my positives will pay for my negatives, leaving me neutral. Don’t forget all your selling costs, and buying costs when you do get back into market.
Cheers
MelThanks guys[
]Don’t forget, with your own house the rules regarding
landlords & tenants change somewhat in your favour.I am not a laywer but last time I read the guidebook
I was surprised to see that you can charge more bond
and can kick out tenants much easier if you are letting
out your own home (as opposed to an investment property.)andy
I dont see you losing either way you decide.
I would think tho that the ATO will still have an interest in hit you with CGT given your assumed tax deductions granted in previous returns.
Im sure it can only be levied if you declare the sale – but if you dont return after 7 years – who knows?
Logic would dictate that you refinance your investments as int only while you still have non deductable debt on your POPR. Good luck.I would love to own our PPOR. It would make it so much easier when negotiating investment property loans with “The Bank” to be free of non-deductable debt. I believe that you are doing the right thing in selling your investment property & paying off your PPOR loan. When you return it will give you a good springboard to get back into the investment property market. Kind regards, Bob.
Richard did say this – “The profit would enable us to almost eliminate any debt left on out PPOR (which is now rented out)”
That last phrase tells me that his PPOR debt IS deductible! So is it really useful to pay down that debt? No more than paying down any other IP?
Who can tell me? It’s an interesting questionRe the unit, I would guess that it is close to +ve anyway now (from the figures). I agree with those that say “you can go either way”. For me, I’d be looking at WHERE the units are, WHAT is happening around them, is it likely to continue to appreciate in value…..
Reckon I wouldn’t be in a rush to sell, but, if I NEEDED to, NOW is not such a bad time. I’d check on actual CGT costs though, before selling – as CGT is really considered as Income, and added to your (non-existent) Income, then Taxed. So, if you’ve gained more than $60k, you are automatically in the TOP TAX BRACKET – or, do I have it wrong????
Richard, I’m NOT a guru, and only have a passing knowledge of these things – but DO check it out before selling….
Benny
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