Hi. I currently own a property in Kingston Qld 4114 which is also my residence. By own, I mean I owe $108k on her (paying $453 per fortnight, on a $1632 p/f in the hand wage). No partner, no kids. Conservatively valued at $300K. If I sell her, invest $160K after taxes, fees and goodness knows what else, and rent another property at say $320 per week, whilst depositing the 'profit' in a strictly high rate savings account (no speculation), would the return outweigh the hassle? Looking to move on, but the calculations are starting to do my head in.
Any thoughts are much appreciated!
Paul.
You want to sell one property to buy another?
If you sell your home you will lose the only CGT free asset you can have.
Have you done the sums on renting this one out?
What about just using some of your equity as deposits on 1 or 2 investment properties.
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
Sticking the money in a high interest savings account is useless. Worst investment going.
Say you get 7% interest (ING pay that with their online Maximiser Account). You pay tax on the interest at your marginal rate, and there is also inflation eroding your capital at around 3% per year. Your nett return after tax and inflation is probably around 2%. WOOHOO!!
Even an average performing IP will easily eclipse that, and the capital is invested in a growth asset.
The repayments are only $453 a fortnight, if you rent it out, what would you get? $250 a week? More?
Allow for about 20% of the rent you get to be eaten up by the holding costs such as insurance, management, repairs, rates etc.
Meanwhile, you have all the tax deductions associated with the expenses on holding the house such as rates, insurance etc, and if the house was built after 1987 you have the depreciation as well. That will return you a few thousand in tax each year most likely.
As a tenant yourself, all you are responsible for is the contents insurance and utility bills such as phone, water, elec/gas.
There is a pretty good chance that, as long as you don't go too high in the rent you are paying for your place for you to live in, that you would end up with the rent from your home, plus the tax returns, wiping out your loan repayment and a chunk of the rent you would have to pay.
The other option is as Terry says; take the plunge in an IP. It looks as though you could do it comfortably.
Hi and thank you for the replies Marc and Terry. I sense I am way out of my knowledge depth here! As much as an investment property interests me, I can't see how my wage can support it. Time to seek some advice I think. Thank you, Paul.
Hi Paul
I think what Terry and Marc are indicating is that you are actually in a v.good position with your own home and only a small mortgage. Also to trade your asset and current financial position to rent a place and putting the proceeds into a bank or cash type investment seems like a poor alternative.
I'm sensing you're quite risk averse and conservative. So this is a possible very conservative scenario.
With your home valued at $300K you could easily borrow another $130K (on top of your $108K existing mortgage ). That would mean borrowings of $240K against your home and possibly a little over double your current repayments (say $1100 per fortnight). You could explore some of the 'over 55' retiree units with some 'guaranteed' income in the Logan or Caboolture area, or some other small residential unit (not in Logan as these are highly priced now) elsewhere and look at buying one outright. This is about as simple as it gets having just one mortgage (and one property owned outright) and it's probably even more conservative than most investors would consider.
You might need to just talk to someone over a cup of coffee (for piece of mind) and then approach a broker when your thoughts have crystallised.
I'm sure there must be a few people on this forum who are investors themselves that may take the time out to talk to you. If not, I have a friend who lives in the Logan area who was in a similar predicament but who is now an investor with a few properties. If you're interested, email me at [email protected] with your details, and I'll provide his details to you.
All the best.
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