So I am moving town for a new Job, wondering to sell or rent out our house we bought in 2008 (sml 2 BR Villa).
Currently owe ~$200,000, worth 240,000, with potential rent of $270-$300 per week ($1100 moth). I like the idea of Tax-offsets of renting but we will have to rent when we move and probably looking to pay more like $350-$400 per week rent when we move. So is it really worth paying interest on a Mortgage and rent on a new place? Or should I cut my losses and sell up?
Here is my PRO/CON list for keeping the house (have I missed anything?):
PROs:
Rental income + extra repayments to build up equity in the current property (hopefully). I would eventually like to buy a family home in 5+yrs time, once the work location has been settled,
possible tax advantages from investment? Not sure how significant yet!CONs:
Paying interest on MORTGAGE (~$1200 month) and rent on place to live(~$1600 Month), seems like a large waste of money!
Could saving the cash I would be paying in interest, extra repayments, strata, insurances and rates be better than the potential property value increases.
Not to mention the thought of Bad renters?I would love to hear some thoughts. I am also wondering who would be best to discuss all this with? An accountant or Financial planner at the Bank? I would really appreciate the advise.
THANKSHi Jherden
Welcome to the forum.
The choice is ultimately yours, but here’s a few other things to consider.
The costs involved in selling property (such as real estate fees, bank exit fees, etc) can be quite significant- so while you’ve got $40k in equity at present, this can be eroded quickly after the properties been sold.
Look at your property from an investment point of view. Is it in an area that you believe will achieve decent growth within the coming years? What is the current vacancy rates within the area? Do you think you’ll have any issues attracting decent tenants?
If you decide to keep it, there are ways to improve affordability – you can convert the loan to interest only (to minimise repayments and increase cashflow) and there’s also depreciation to claim. There’s also the benefits of negative gearing which you’ve alluded to.
If it helps, you can have a play around with this spreadsheet to get an idea of how much it will cost to keep your PPOR as an IP – http://www.passgo.com.au/pass-go-investment-property-analysis-tool
All in all, you only purchased the property a couple of years ago – so the transaction costs involved in buying the place two years ago and selling now are likely to dramatically reduce any profits.
If you think it’s got potential as an investment, it might be worthwhile holding onto it. If you don’t think you can afford to keep it as an investment, then it might be best to sell up and move on.
I hope that helps and best of luck with the new job.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
without knowing the details of your situation it is hard to tell but if i were in your position i would try to keep the property as long as possible for investment purposes due to the unavoidable fees you will incur by selling up. It all comes down to supply and demand and the occupancy of the property.
These comments are very helpful thanks, I think I definetally need to investigate these options further with my accountant!
Hi Jherden
No worries, I hope it all works out for you.
I’m not convinced that this issue sits with an accountant though. It really is a matter of a) working out how much it will cost you to sell and purchase another; and b) whether your current property makes for a good investment.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Definitely keep it and rent it out.
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