Hi again,
Good point from Terry – having a CGT exemption is a real asset when it comes time to sell your PPOR. So, if selling, do consider buying another, rather than renting, then borrow against the new PPOR for IP’s. Of course, it would make sense to buy low and reno any new PPOR too – cost less to buy, then add Equity to borrow against!!

Given the extra info (wanting to buy/reno/hold IP’s) is the PPOR a suitable location for keeping the various gear you will need if doing handyman things (e.g. storage of timbers, tools, various goods, etc) or is it better to be more centrally located – sell PPOR and buy another.

If wanting to buy more positive geared IP’s maybe the current IP is worth selling, or turning it around in some way so that it becomes +ve geared – can that be done easily? Do you want to share more data re that one? (e.g. location, value, rent, potential, etc).

For the reno’s of new IP’s, are you planning to “stay local”, or to set yourself up so you can drive a mobile home/workshop to “wherever” and spend some weeks fixing up a new buy?

I’m interested in what you decide.

Benny

I think the answer lies in “other things” not yet mentioned. Like these :-

Are you still working and what date do you have set for retirement?
Do you enjoy living in the PPOR you currently have?
Is your plan to buy Growth properties, or Income? Or a mix of both? In the end, the “numbers” will have a lot to say!!
Expanding on Terry’s answer, any borrowings against the PPOR can be Tax deductable if you still draw a wage (i.e. pay Tax).
If selling the PPOR, what is your requirement for the $500k+ that is released? Does it need to provide you with an Income? And how much?
If current IP has an LVR that low (180/340 = 53%) and it needs to be to give a +ve return, would you buy another one (negative geared), or shop for a better return?

The good news is that you have a truckload of Equity – and that can be a real blessing, and a catapult if you go about things the right way. Well done. Now, don’t be in a hurry to make your next move. Spend some time reading, posting more (asking more questions), learning more, and pull the trigger only AFTER you have a very clear, meaningful, and successful path mapped out.

Benny

Hi Adam,
That is a great question !!

Question: How long is an “acceptable period of time” so that my property remains my PPOR when I re-rent it out?

I believe the 6-year rule was brought in to assist where (for example) someone is transferred interstate or overseas, but plans to come back to their home down the track. Given that was the original tenet, an “in demand” person might arrive back at their PPOR, only to have the company they work for wanting them to move again within a matter of a few weeks/months.

The “reasonable man test” says this should be perfectly acceptable, so long as the intent remains to “come back home” in the future.

So, that I believe is the background to the 6 year rule.

Could it be that “just a few weeks/months back home” is acceptable for one who is returning from interstate – but might be unacceptable for one who is simply looking to legally minimise their taxes due. Perhaps a private ruling is the only way to really know??

Just a thought – and, no, I am not an accredited adviser,

Benny

Hi Alex,

My hunch however is that we won’t be able to push through the DA and associated paperwork if the title is still in the vendor’s name? Can we get some opinions on this please?

I have heard “There are ways” – these might include taking the vendor into the deal as a JV partner.

Or purchase an option from the vendor with a long enough time-frame and including conditions that have him sign as the owner. The situation with an Option is that you would have the right, but NOT the obligation to proceed with it. It may even (I believe) be onsold to another investor ahead of its expiry date.

The vendor gets the benefit of having a DA in place if you DON’T go ahead, thus raising the value of the place for his next sale. So, an option not completing is not that big a deal to the vendor.

Do note that was ALL opinion – just stuff I have HEARD over the years. I haven’t done it personally, but maybe RPI will add more ideas re these to the mix, and guide you through the various choices.

Good luck with it – sounds like it can be a real winner,

Benny

PS Nearly forgot – a big welcome to PI.com too !!

jmsrachel asked (in another thread)

Steve / admin – Don’t get upset I tried for hours working out how to start a new thread with photos. Ended up pulling my hair out.

Since that comment supports this thread, I wanted to put it here to add to the count !!

Benny

Originating post is https://www.propertyinvesting.com/topic/4990259-my-latest-reno/#post-4990259

Hi Angela,

Minus expenses it would be neutrally geared.

Cool !! So it is paying for itself then.

The “where to next” is the question you appear to be asking. And that is quite a complex question, so not one to rush to answer. Have a think of what your major goals are – e.g. to be able to have partner retire within 10 years, or reduce working hours/days per week in 5 years, etc.

This Queenstown IP sounds like a good start, in that it is not costing you to hold it. But what of its future? Here’s a few questions for you to ponder :-

1. What happens if Interest Rates rise by (say) 1%? Will you still be able to keep it?
2. What is the “feel” for Queenstown? Is it a booming city – i.e. growing at a good pace?
3. Is the area (suburb) that your IP is in a growing suburb? e.g. infrastructure spending – roads, trains, buses, schools being upgraded/built?
4. What are the effects if you were to change your P&I loan to IO? (Did you read the link re the differences, and did it make sense to go IO for you?
5. Can your IP be “reno’ed” or upgraded to allow you to 1) add Equity, and/or 2) lift rents?
6. If 5. is Yes, how much will this cost, and will you need to borrow to accomplish this? (You have Equity to be able to do this.
7. Does NZ give investors any Tax relief for providing housing?

Once you have a few answers that fit with you, run your ideas by someone familiar with financing to get their take on things. There are several Mortgage Brokers on here (some of whom are also Financial Advisers) and their input would be very worthwhile.

You are in good shape right now – don’t be in too much of a rush to move on, but do move on….. Keep on reading, thinking, asking, and meeting until the situation can be SEEN to be one that works for you. Maybe another purchase like this one, or maybe something entirely different.

Question – how much will going IO save you per week based on Interest Rates right now?

Benny

Hi Adam,

Has anyone mentioned yet a less attractive but more realistic option? You purchase a negative cash flow property in a high growth area

We certainly have heard of it – look for articles or threads on “Negative Gearing”. It is a workable strategy for some, especially when combined with other +ve geared investments in parallel. It is also possible to have a negative geared yet cashflow positive IP, which might be what you are referring to.

Many though, when starting out, are on lower wages, so a cashflow positive investment is necessary – hence the focus on these forms of investing.

Benny

Hi exposed,
Wow, you are one hard marker – and your choice of words in several places won’t do you any favours either. I’m with TraceyB and others who see a lot of value in what oc1 shares on here.

On a quick look-around (assuming you have the correct address – it does look like oc1’s photos, so let’s say you are right), I don’t see a lot wrong in what oc1 has posted :-

COMBINED TOTAL (LAND & CONSTRUCTION): $606,500

The units would have a combined value of about $840,000 in today’s market. I reckon these will take about 4 months to knock up if all goes well. They are about 70m2 each in living space and single story. Rents would be around $850 pw. I’m sure the figures will vary as they normally do.

From the realestate.com listing for 7 Edith, there are some useful facts – the first is the Median price for 2bd units in that area – it shows as $279k (times 3 is pretty close to $840k don’t you think???). It also says the median rent for same is 5.4% (which, on that median price, this comes to $290 a week (times 3 is $870 a week).

The ONE thing you seem to be hitting on is the Sold Price. To me, it looks like Oscar has been using valid data to plan the whole operation. If indeed, ONE has been sold for $238k, then that doesn’t automatically mean the other two will go for the same price as well, does it??

Perhaps there was “more to it” if it did sell for $238k – who knows just what happened for that one to sell $40k under median. Could it be a “quick sale price” that allowed Oscar to un-encumber another property completely for some reason? Or perhaps he sold it at a “special deal” price to a friend. Who knows !!

Even in a worst case scenario, Oscar is likely to end up with an unencumbered asset and an income, even if sold lower than expected.

Speaking of deals, it sounds to me like you are making a big deal out of a projection that is pretty much in line with the market. And denigrating one who is willingly sharing the ins and outs of his projects for others to learn from.

What are you sharing, exposed? How about sharing some of your story, so we can learn a little about you?

Benny

Hi Raist,
Good on you for adding your thoughts re Penalty Rates. I can certainly see your point of view there, and agree that this could/would have an effect on many workers. And yes, any change there would directly affect their discretionary income.

On the other side of the coin though, in this 24/7 world we live in, the payment of double and “two and a half times” rates are a WHOPPING uplift that employers must pay, or they just cannot open on some days.

IF these rates were lessened, the employer might well be able to open, and even be able to employ more people. Any lessening of the “average” income (through lessening of those huge penalty rates – e.g. maybe make time-and-a-half the max allowable) would work its way through the system, likely leading to lower costs for many things too (including housing….). More people earning a less amount would help the economy by providing more people with a bit of discretionary income, while lessening the “Centrelink” burden on the Govt. It may also allow small companies to open on days when they currently cant, thus providing more paid days for those who can work them.

The supply/demand curve would be altered – but with more workers, that could lead to an overall better outcome, couldn’t it? It is a huge subject – and there are likely many angles to this debate. Let’s hear some more…..

JMO, (just my opinion), and thanks for putting yours out there too, Raist,

Benny

• This reply was modified 10 years, 5 months ago by  Benny.

Hi PS,
As Jamie pointed out in another thread, we are an Australian based forum, and some of the answers given are specifically Australian-centric. However, the comments may hold some clues for you.

Based on the questions, you are obviously quite new to the role. I’d be suggesting you find someone else in your area who is alrady doing it successfully, and learn from them. You might need to cut them in on some commissions as a sweetener, but they may already have all of the answers, and their help will likely speed you on your way and prevent you “doing your dough” on some deals through inexperience.

Good on you for having a go though – I wish you all the best,

Benny.