To whom it may concern,
Over ten years ago I met my partner and we moved into a rental apartment in Homebush, Sydney owned by his Aunty and have stayed there since as the rent is reasonable at $250/wk and is secure long-term. Five years ago he took a job in the mines in Newcastle and purchased a unit to live while away for $230,000. He has since accumulated the money to pay off this unit in full (however he hasn’t) and I have amassed $200,000 in savings. We would love to purchase a 2 bedroom unit in Sydney to live for approximately $700,000 as we both now work there. My question is, do we remain in our reasonably priced rental unit and put a tenant in the new unit and use it as an investment to help pay off the mortgage before moving into it at a later date, or is it better to just move in and rent it out later to avoid capital gains. The problem with this is that we will then likely lose our cheap rental property. Any help would be much appreciated!
Kind regards
DanaHi Dana,
Sounds to me like you and your boyfriend have some terrific options open to you. The first thing is to become aware of what options you have. Joining this website is a pretty good start. Have a look around, read some useful posts, and start to “get the idea” about what works, and then what works best FOR YOU. You seem to already have some knowledge (you mentioned CGT and its implications). That’s great.Look more in depth around the areas of finance, and how it works in your situation. This is where someone with knowledge comes in (like, a Mortgage Broker, Fin. Planner, etc). We have some of each on here – check out the various signatures, and look for posts from these individuals – you will likely find someone of them who seems to “ring your bells” so to speak.
As I don’t know just how much you do know, let me suggest you buy some books around the subject. Also check in the “Training Centre” on the home page – there is an absolute WEALTH o knowledge right there. Meet up with other investors, and shoot the breeze with them – look for “meetups” in the various centres. They are often posted on here.
In case it helps, you might get something out of this thread too:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/Benny
Hi Benny,
Thank you for the words of encouragement, as we were starting to feel quite demoralized with the Sydney housing market, so it’s good to hear we have some options! You’re right about the advice, we do need to find a financial planner and I’ll research one that has an interest in property and make an appointment.Hi Dana,
I have no knowledge of the Sydney market – except that it sounds like it is approaching “over-priced” in some areas. But then, Sydney has the advantage of being the place every new migrant seems to want to go. As such, there is a demand for Sydney that is unmatched anywhere else. With demand (and limited supply) comes price growth. But just when is “too high”?I believe you will have a list of several options that can benefit you (and I would think keeping on with the current rental would be high on that list). The only other thing I wanted to warn is “Don’t rush to do anything!!” There is plenty of time to breathe, to read, to learn, to take counsel. Take the time you need to plan your “best shot” – then take it!!
Benny
It depends…. if you have substantial cash/equity… i would buy a PPOR, pay it off or down as much as I can, then refinance it out the other way and use the euqity to invest as many IP as I could. this way you reduce non deductable personal debt into tax efficient deductable debt.. which will improve your overall position.
if you still need to carry a significant PPOR mortgage, I would say keep renting in homebush for 250 pw.. you know that you are paying half of market going rate.. so that is a big advantage.. ( pls buy your aunt some moet for her generosity) , even though the PPOR is coming out the other end as CGT free, but I found if you need to use a large portion of your after tax dollar to pay it down, not only it decrease your cashflow on other aspects in life, the most important thing is its’ hinder your ability to spread your asset base within the limited time frame that you can invest.
Hi Dana,
Coogee has come up with one side of the picture (buying your home first) and with the cash you have set aside, this could happen quite quickly for you (i.e. you DON’T have to save a Deposit, right?)One of the links in that thread I showed you earlier involves the age-old question “Do I buy a PPOR first, or do I buy an IP first?” Go have a read of that post. The link in that thread talks of those who are just starting out – and for THEM, buying an IP first is easier and financially better than buying their PPOR. But, will that apply to you too since you already have the cash/equity to go in different directions…?
Anyway, have a read, and perhaps discuss it with your favourite broker or other adviser.
BennyThanks for the great points guys. Certainly a lot to mull over, and as you said there is no rush so I will engage a financial advisor who has a specialist interest in real estate and go from there. Thanks again!
A few random points
– if you are happy where you are then I’d stay renting. It’s essentially free money and without doing the maths I would imagine you’d be better off financially if you stay and buy straight IPs (not your dream PPOR). You buy the PPOR later. Plus moving is annoying.
– blunt q. If the aunty dies do you have to move out? Just be aware that if you choose to stay you might need to move at short notice.
– where is the money invested now? Is the place in Newcastle rented? Does it have equity as well.
– how is your serviceability? Can you afford $1mil in IP loans – including rent earnt etc?-
This reply was modified 8 years, 11 months ago by
TheNewGuy.
His Aunty is 50 years of age so hopefully that won’t be a consideration for us or her for quite some time! We are currently in the process of renting the Newcastle property out (after we have our holidays there in Jan). The unit is essentially paid of with the money sitting in the offset account to pay it out in full. We were thinking of taking that amount and adding it to the $200,000 deposit I have to purchase the next property and keep the mortgage down. However if we wish to rent out the proposed Sydney unit as an IP and keep renting are we better to keep the funds in the Newcastle unit, the new Sydney unit, or do something else with the money? I’m trying to figure out the best strategy for us.
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This reply was modified 8 years, 11 months ago by
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