My wife and I are moving from Perth to the East in about 6 months time. We bought a house during our time in Perth and have been lucky to see it grow in value while living in it. We have recently started looking at investment strategies, the positive gearing model and have begun research into property investments. If nothing else the book 0-130 Properties in 3.5 years has prompted us into examining what we are going to do with our home when it is time to leave and provides us with the first step as landlords if we choose to go this way.
There is the conundrum (sic)??? If we were to sell our property, we have the potential to purchase up to 4 investment properties to 100K using the model in the book. However, the area we live in is experiencing excellent growth in both residential development and infrastructure eg train station, town centre and expansion to the current shopping centre. This is all due to be finished in around 2 years and is all within 5ks of where we live.
On the one hand it would be wonderful to begin building our financial independence by christmas, on the other it would be sad to sell prematurely knowing there is so much development going on in our area that may have a significant positive impact on home prices. If we didn’t sell we would most likely be able to purchase 1 positive geared property and keep our negatively geared property as well.
What effect does all this infrastructure and residential development have on the price of a home in the area?
Would a hold strategy now be wise noting that we are developing an investment strategy from now till 2011?
If we were to sell now we would not attract capital gains tax because this is our residence. Would that capital growth be subjected to capital gains tax if we sold it say in 12 months time after it had been an investment property?
Thanks in advance
JaknDi
Can you keep it and also buy more properties?
No need to buy four at once – one at a time and growth in the current property may be an acceptable strategy?
What do you think?
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
As Simon said, it’s not necessary to rush in and buy 4….
If you keep your house, and don’t buy another one to live in (but rather rent) then your Perth place will be CGT free for up to 6 years….
You should be able to borrow against it to buy your next IP to start with, and then reassess how you are travelling..
Why not contact a broker (Simon’s excellent[biggrin]) and run through a couple of scenarios with them?
Cheers
MelSimon, Melbear,
Thanks for replying to my questions. As a property investing virgin (so to speak) it is reassuring that there are others out there with various levels of experience and an objective view on another person’s situation. I hope that I will be in the same position to give back a little experience to the new kids, in the future like many people in this forum do every day.
We have looked at our situation and feel that if the right property came around (80-100K) between now and christmas we could get our first +ve geared property this year and keep our property in Perth (-ve geared).
Using fairly conservative figures we could manage another 2 +ve geared properties in 2005. Perhaps if we aimed to have the -ve geared property financially neutral by end 2005 we would be setting ourselves a realistic goal and starting a little more patiently than my initial 4 at once scenario.
I will take your advice Melbear, and contact Simon to discuss my options.
Sometimes when you think about it, you can have your cake and eat it too.
Thanks again for your advice.
JaknDi
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