Hello all,
Well after much research and calculating my partner and I have decided to sell up our PPOR this year to rent, and use the cash to build an investment property portfolio. I just have a few questions that I hope you experts can answer for me!
1. Do you use an accountant and / or financial advisor that specialise in property investing? Or should all of them be knowledgable in this area?
2. We intend to invest for long term capital gain, using the strategy of buying something that needs works, in an area 10-15k from the city, sprucing up to raise equity and renting out. My question is – am I better off buying a unit in a better area or a house in a less desirable area (but still quite close to the city). We will be buying in Adelaide, so an example may be buying a unit in Norwood or a house in Clearview / Hampstead Gardens.
3. Is it worth using a buyers agent for our first property to ensure our first step on the property ladder is correct?
4. With the cash we will have from selling our PPOR (approx $100,000) should we purchase 2 properties using $50,000 each as a deposit to reduce MI and repayments, or buy 4 with $20,000 deposit?Sorry for the long post but I would really love any advice you may have.
Cheers,
BelindaP.S – In case this info makes any difference – I am 28 years old, and my partner and I earn combined around $140,000 a year. Taking out rent of around $350 a week, we can service quite a bit of debt at this point in our lives.
Thanks!
Using your PPoR as an I.P while you rent another place for yourself may be a better option. You can access up to 80% of the equity for investing, but of course, these funds are borrowed and will attract interest.
The interest is tax deductible, but will have an impact on the cashflow from your new investments.
By keeping the PPoR you will save a lot of money in selling costs.
On the flip-side, if you do sell, you will have more cash to use as deposits to help close the gap between outgoings and the rent. The bigger the deposits, the easier it is to create a positive cashflow.I would only use a buyers' agent if they can find you a pos cashflow property in your chosen area. Anyone can find you a neg cashflow property; they are all around you, so why pay five grand to someone else to do what you can do yourself?
Buying units really limits your ability to add value and increase equity, unless it is a total shocker. Body corps limit your movements on the outside of the building, leaving you with only cosmetic changes inside. Things like landscaping etc are usually not allowed in a dramatic way with units.
I always respect Marcs comments although we will have to agree to dissagree on his comments regarding units.
I would agree with Marc in relation to keeping you PPOR. Depending on how long you have had it and how much equity you have built into it. Selling costs will take away profit that is difficult to earn and you will never be able to replace that property for what you paid for it. It is also Cap Gain exempt at present.
Your comment – 2. We intend to invest for long term capital gain, using the strategy of buying something that needs works, in an area 10-15k from the city, sprucing up to raise equity and renting out. Depending on how much work you intend to do, I believe that the older cheaper units are a good example of reno and increase rent. Do not be put off by Body Corporate companies, they work for the unit owners not the other way around. Get involved and steer the ship, you will find that most BC companies will like having someone involved with future plans for the complex. It's actually cheaper to own a unit than a house and rents are usually higher.
Jon
Belinda,
My partner and I are in Sydney haven't bought yet. We both rent with high disposable incomes.
We are both entitled to FHOG and Stamp Duty concession, and we tend to agree that it is better to build an asset column rather than be mortgaged to the hilt with no tax deductible interest!
I agree that your investments also need to be + geared. Good Luck
CheersThanks all for your replies, much appreciated.
In regards to holding the PPOR and renting it out to avoid selling costs – I agree that this would be a better option. But we have a mortgage of $400K (repayments of $2800 month, IO would be $2500 month) so if we were to rent it out for a max of around around $400 per week we would be out of pocket ourselves of at least $1000 a month on just one property. If we then paid rent ourselves of $1500 a month we would not have the affordability to buy much more than one other IP, even with the equity of around $130K.
My rationale for selling and taking the cash is being able to grow our portfolio quicker. My other consideration is the fact that my partner and I would like to have kids in a couple of years, leaving us without a $70,000 wage each year that I don't work. Having a couple of positive or at least neutral geared properties would make things easier in this situation.Hi All,
1. Do you use an accountant and / or financial advisor that specialise in property investing? Or should all of them be knowledgable in this area?
I would really appreciate some advice on this one, thanks all.
Hello
I would recommend that you use an accountant that is knowledgable in property investments. When searching for an accountant ask them if they have any property investments themselves.
I hope this helps
Lisawhat sort of questions do you ask your accountant?
Hi Nicole
Why sell your home to only buy more property? This means you will incur extra costs. Having you considered just increasing the loan on it and using this as deposits for a new more?
For long term capital gain, I would prefer houses. Buildings depreciate, but land just keeps on going up (usually?). It is also much easier to add value to a house. eg. it is hard to add another room to a unit!
Buyers agents can be expensive, so you may be better off using their fee for another deposit. But they can also find good properties sometimes which may save you more than the fee.
I would go to an accountant to ask questions on tax issues and structuring issues – eg whose name should you buy the next one in etc. But bear in mind some accountants have narrow views and they may just be trying to save you a few $$$ in taxes now, while not considering the long term effects.
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
Thanks Lisa and Terry.
In response to why to sell the PPOR – I am still struggling with it to be honest. The reason to sell is purely financial – We could keep the PPOR and live in it – and borrow just enough money to buy one IP and possibly have the the cash flow to fund it weekly, but then where to? I don't want to stop at just one IP if there is the possibility of buying many more! The other factor is a lifestyle one, I expect to start a family in a couple of years and we won't be able to afford to pay the PPOR, let alone the additional IP on one wage. Renting it out is an option, however I'm after some research I'm not convinced the area we live in is great for rental properties.
With the current market conditions, I'm also skeptical if selling the house now would be a smart move?
Ahh the decisions! If anyone has been in the same boat I would love to hear about it.
May depend on where the PPOR and if it is in a potential high growth area.
If you were to rent it out and rent yourself, you could take advantage of the CGT exemption rule for main residences, s 118-145 ITAA, and still claim costs (ie may be able to negative gear and save some tax). If it has the potential to increase in value, you could always sell later for a higher price and not pay CGT (up to 6 years of absence).
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
Hello all ,
just wondering if anyone might happen to know of someone in perth who would be good to speak to regarding starting out, a mentor as such.
All suggestions welcome, feeling a little like i missed the boat over here, that could be the Green in me talking.
keen and ready to go though.
Good luck to you all
Kind Regards
TimHi all,
I think i am in the same boat as Tim
I am a 24 year old female who is keen to get all the info she can about investing in property
does anyone know a mentor in Canberra or have any special tips for me ???
Tim, what have you done so far to kick start the process?Hi Terry – yes I had thought of renting it out but need some more info on CGT exemption for PPOR. If I were to rent it out, claim tax benefits, then move back in within 6 years would I then be required to pay back any tax benefits?
My property is in Mawson Lakes SA, a Delfin land development. It has fantastic amenities (schools, shopping centre, University of SA campus etc) and is 12km north from the city. The development is smack bang in the middle of the Port expressway meeting with the proposed northern expressway, and with all of the projects planned for the northern suburbs there could be great opportunities for growth. Our home is in what has been developed as a more "elite" section called the Bridges. Our home is conservatively valued at $520,000, with homes on the next street selling for up to $1M. I'd be keen to hear any ones views on the growth on these sorts of land developments – or Mawson Lakes in particular.
Santoriniwalk,
I must admit that I was for some unknown reason pretty wary of Delfin type estates but having looked at a few recently in SE Queensland I gotta say they seem to be very well planned and appealing to both investors and home buyers, they seem-to have a European feel about them. I haven't bought one myself yet but looking at resale value and layout I think they are far superior to any of the other new estates that are going up. A bloke I work with has two H&L packages on the go with Delfin of the plan and judging by resale and what new ones are going for he believes it is off to a good start. I was very impressed with the Springfield Lake model and Waterford my mate is in Sippy Downs with Delfin. I also noticed that Delfin are active in areas that Residex are predicting high growth for, so hopefully this bodes well for Mawson Lake and your chosen lifestyle.
We also live in Canberra and would love some help in getting ahead/mentoring. We currently have 2 investment properties and are looking for more but not sure the best approach in this market. Maybe a move into another market – even OS?
Hi, don't forget the holding costs. If you're 'struggling' now, selling to buy again triples your cost base. Selling costs, assuming you get $520K, will be in the $10000 category. Then buying costs of 2 properties, that's $20000 more.
Your $520000 house will struggle to make $500 pw rental. Every house I've ever owned costs a minimum of $2000 a year in rates, etc without considering management fees & maintenance.
Your potential new IP in Adelaide is likely to earn 3% yield, your Mawson Lakes house will probably be under 3% yield, hence selling to release cash, is not bad.
kum yin
I'm also in Canberra and just starting out with the IP process. I'm yet to get my first IP, but am ready to move forward. If anyone would like to mentor me or a group of us Canberrans, that'd be very cool, and definitely appreciated.
Please contact me to discuss.
Thanks
Doing some figures and commercial property has a greater return rate.
Thoughts?
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