I am looking for considered opinions regarding the position we now find ourselves in.
We are paying off two properties as follows:
Property A: is our family home, purchased in the inner East in Brisbane 3 years ago for $435,000. It is possibly conservatively now worth $600,000 as it has a unique location, bordering on a large plot of bush reserve yet 6km from the city. The house itself is comfortable with a few nice features, but not a Queenslander or new. We currently owe $285,000 on this property.
Property B: an investment property we bought in 2002 on the northern side of the Gold Coast (Coombabah). We owe $235,000 and it is currently rented at $310 per week. I've been approached by a couple of real estate agents in the past weeks as property is 'heating up ' in the area and they have little stock to sell. I've also been told we could get at least $50 per week more in rent, and my own research supports this. We've been told the property could sell for $400,000 in the current market.We are aged 47 and 50 and have minimal super – less than $100,000 between us. We bought the investment property with a view to selling it at some point to support our eventual retirement (expected to be some years off). I am currently saving 24% super and my husband the standard 9% – our incomes are $52,000 and $62,000 (approx) respectively.
My question is, should we consider selling the investment property now? My rough calculations seem to indicate that if we did, we could pay off our current mortgage in four years and then contribute more than $2000 per month into super. Some of the reading we have done points towards people of our age being better off putting as much into super as possible, ignoring mortgages, using later drawings on super to pay off the mortgage.
There are no factors in play which indicate our current situation should change, I'm just looking for someone who is a wizz with numbers to advise possible courses of action and likely outcomes. Should we consider selling now or wait a few more years? Indeed, should we take advantage of what appears to be a market about to take off and purchase another investment property? Obviously I don't expect the good folk on this forum to tell me what to do, but I'm very interested in the opinions of others with some financial nouse. While the obvious suggestion would be to talk to a financial advisor, finding one that is reliable and helpful (and doesn't charge a fortune) seems a very daunting prospect. I would be grateful for any thoughts, advice or suggestions.
Cheers
A few things to consider:
To me, selling the I.P now, especially if you can get another $50 p/w rent, is killing the cashcow . This extra $50 (less management fees) would be useful towards either paying off more of your PPoR mortgage, more into your super, or more off the I.P loan. In my opinion the most expensive money you have right now would be your PPoR loan – it's not tax deductible.
Superannuation, in my opinion, is for the uneducated investors and those who are not doing anything at all towards their future retirement/wealth. It is linked heavily to the stock market, and can therefore suffer great returns and great losses. I wouldn't want to bank my retirement money on a possible super pay-out sometime in the future. Is anyone guaranteeing your return on your super money? I didn't think so. I would rather have total control over my money and use my knowledge to invest into good, safe property with a good return.
If you sell the I.P now you will have to pay a good deal of Cap Gains Tax on the profit, and you will lose out on the nice tax deductions that come with I.P's, and any future cap growth and rent increases from it.
You will still have the PPoR, without the tax deductions, still with the loan, and no income from it in later years. There are many stories of older people who own their own million dollar homes, but can't afford to maintain them, or suffer a lifestyle change because of the costs of the upkeep on the house – rates, maintenance insurance etc.
In a nutshell; you are both on good incomes, have several years left before retiring and already have some good assets in your 2 properties as well as the super-annuation.
I would be looking at a plan to keep acquiring more property, keep going with the super (but don't go mad with it in my opinion), and maybe look at directing some investing dollars into shares if you wish. I think shares are in a similar basket to the super and managed funds – therefore tread very carefully in that area.
When you hit retirement you can always sell off some of the properties and retire the debt on the I.P's and the PPoR. By the time you retire the properties (if well selected) will have increased significantly in value and you should be able to be debt free with an on-going passive income (rent).Marc, thanks so much for taking the time to reply. Your advice (as usual) makes a lot of sense. I might just start investigating some property purchasing possibilities. I didn't mention it, but I have also started investing directly in shares. Just pocket money at this stage while I'm learning, but it all adds up (plus I can still sleep at night).
thanks again
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