hi
was wondering if someone could give me some advice on this. i have an IP in queensland on which the rent ($310 week) covers the mortgage and agent fees. i have $160,000 left on the loan to pay, which includes $15,000 redraw. property is conservatively worth around $290,000. i purchased it feb 2006. i am now back in sydney and wondering if it is better to keep renting ($190 in share house) or to buy a studio (maybe at a stretch 1 bdrm) in the inner city area (potts point etc). so far i have found prices between $175,000 to $200,000 mark. i could possibly chip in $20,000 from my managed funds, but not sure if i want to or need to at this point. my other loan is fixed till aug 2008 for under 7%. anyway…. i was wondering if a studio in sydney is a good investment? i would probably rent it out in another year or 2. also can i add the extra onto my existing loan, which would see me paying less than $100 a week extra then i am now renting (including strata and fees)? where does this leave me in claiming tax deductions on my IP?? if i don’t buy in sydney, am considering another IP possibly back in qld, but was wondering if renting in sydney while i am working here is a bit silly? all a bit confusing. any help would be great. thanksRenting a place yourself while you rent out your other properties for most people is the finacially smart thing to do. All the interest and holding costs on your I.P's are tax deductible, and if you are a fairly high income earner it is even better. Many can't stand the idea of someone living in their PPoR though, but if it doesn't worry you then go ahead.
The problem with studios is quite often the size. Most lenders won't, or a reluctant, to lend on anything smaller than 50 sq/m.
You would want to check the size of the apartment, and also the body corp costs. They can be rather high in bigger buildings.Another possible problem is that traditionally the land content of a property is what appreciates while the building depreciates. Given this scenario, the likelihood of cap growth on studios should not be as good as say a townhouse.
But the demographic factor comes into play these days, with young, professional people seeking this sort of accommodation. Therefore you may get good cap growth anyway.
You may be able to rent a nice studio for yourself in Sydney, and buy one as an I.P, with the view to moving in there down the track, and it may cost you no more money out of your pocket to do so. This, if you can arrange it ,would be a good move in my opinion. But don't do it if the bottom line wil put you under financial pressure.
If you do some heavy due diligence on the history of studios in the area; who is buying them, are they in demand, is there a glut of them in the pipeline for construction which may devalue yours, is there a demand for rent for this type of property, etc. you will have a more informed view of the investment.
I it is always best to keep Investment Loans and loans on your personal property completely separate, That way there is no question at audit time.
Secondly if you do go ahead and buy a property to live in make sure your investment loan is 100% Interest only and your private home is principle and interest on the shortest term you can afford. That way you are knocking down your non deductable debt faster and maintaining the tax deductable debt till after you have paid off your home.
I don't think units are a very good investment, and studios more so. Maybe your managed funds would out perform the studio?
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
