Ok another dumb question. I’m trying to find info about how one classifies their place as their PPOR but it’s still a touch unclear to me? The ATO states the following criteria:

* the length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residence
* whether your family lives there
* whether you have moved your personal belongings into the home
* the address to which your mail is delivered
* your address on the electoral roll
* the connection of services (for example, phone, gas or electricity)
* your intention in occupying the dwelling.

How does the ATO know whether I’ve done these things? Do I have to be able to show and keep proof of the above before I am able to rent the property out?

Corey Batt wrote:

In saying that there’s money to be made in every market.

Yes I’m wondering if that is case and if anyone would like to share their story.

The place that I was eye-ing was listed at offers above $360K. I was considering trying my luck at around $360Kish if all checked out, but I couldn’t even get through to the agent after numerous calls and messages. Checked again this morning, and it was under contract. It was probably already under contract when I was enquiring about it last week and chances are it probably went for closer to $400K as you mentioned. I’d like to find out how much it sold for though. This is the place http://www.realestate.com.au/property-house-nsw-bradbury-118625943.

Benny wrote:

Main thing early on is to discuss your whole financial situation with an adviser who can then tell/show you where your limits might be, and even how to overcome them. Know where your ship is heading before leaving port…. ;)

What kind of adviser are you referring to? A Financial Adviser? Property Accountant? I’m keen to speak to someone who can run through my financial situation and give me advice on what kind of investment strategy I should be looking at.

Benny wrote:

DO you want to share the actual numbers re Interest, Rates, body corp, etc – maybe we can help you with those

Ok here are the numbers I’m working off. The below calculations give me a negative cashflow of $43.49.

Property: $320K
Deposit: $16K
LMI: $12,800
Stamp Duty: $12K
Interest Rate: 5.1%

Strata: $1360 ($340pq)
Council: $1040 ($260pq)
Water $720 ($180pq)

Capital Deductions: $1K (Not sure if this is reasonable?)
Rent: $320 p/w

Jamie Moore wrote:

What interest rate are you using to come up with these results? I’d use an inflated rate to account for future increases.

I’m using a 5.1% interest rate which isn’t inflated. Should I use an inflated figure like 7% instead to run my numbers?

• This reply was modified 10 years ago by  JZ_33.

Catalyst wrote:

Whether it is financially better to buy a PPOR or an IP depends on where you want to live. If you want to live in an expensive suburb it is often better to buy an IP in a suburb that has better yields and rent where you want to live (as it’s cheaper to rent than buy there.

I live in Carramar with the folks and intend on staying here for a while, so PPOR is not really a strategy I’m considering. It is definitely an IP that I want to get.

Catalyst wrote:

Negative VS Positive. Do you want to lose money to save tax or make money? Lots of debates on this. You can only buy so many negatively geared properties before you hit a wall.

This I am open to. I haven’t spoken to an accountant yet to understand what benefits I can gain from negative gearing. As mentioned you can only hold so many negatively geared properties before you can’t get anymore. Based on this, I’m leaning towards finding a positively geared one, or as close to one as I can get.

I’ve been tossing and turning over different ideas over the past couple of days and here are my thoughts and I hope you guys are able to poke a million holes and tell me where I went wrong (or right if you want to be nice). I’ve got two options below and I guess I’d have to lean towards Option 2, considering my strategy profile is a safe to moderate one. Maybe there are third and fourth options that I don’t know of.

Option 1
Buy a brand new unit in the $500K-$600K range. This will definitely be a negatively geared property but I will do my best to find a good one. My broker has assured me he can get me a 97% LVR loan through ANZ. At the very least, 95% LVR. Quite a scary amount of debt but I’m going to make sure there’s an offset account to allow me to theoretically leave the remainder of my savings there effectively reducing interest as though I’m 85% LVR.

Savings left following purchase: ~$70,000.

Pros:
* Portfolio worth $550K.
* First Home Owners Grant and Stamp Duty waived.
* Plenty of cash left in the bank.
* Potential for good growth.
* Tax benefits.

Cons:
* Negatively geared so losing money.
* Not risk adversed strategy
* Plenty of cash in the bank in the offset account. If funds are withdrawn for any reason, repayments will go up significantly?
* Very limited to the amount of value you can add to the place.

Option 2
Buy a property in and around $350K range. With a 97% LVR loan through ANZ.

Savings left following purchase: ~$70,000.

Pros:
* Portfolio worth $350K. Less than $550K but risk is also less.
* Plenty of cash in the bank. If thrown in an offset, should bring the repayments down significantly turning the property into a potential CF+ one? Would that work?
* Plenty of opportunity to add value by way of reno’s etc.
* Allows me to purchase a second property without affecting repayments too drastically.
* Risk adverse.

Cons:
* Lose the First Home Owners privileges.
* Growth is much more limited vs option 1.

• This reply was modified 10 years ago by  JZ_33.

In doing further reading via Benny’s wonderful thread, I stumbled on this piece about negative gearing, highlighting the pitfalls and misconceptions and will approach this with much more caution.

Having said that, the sentiment I get is that it is almost impossible now to find a CF+ property in Sydney. It seems the only way to get this is to find a property for a good price in a good location that has potential to add value to in doing renos etc.

If that is the case, would it be true to say that most CF+ properties are actually houses instead of units due to the fact you can only do so much to a unit?

And what would be some of the stock standard things you would look for that would be enough to add value to a place. Things like kitchen cabinets, bathroom, carpet?

Thanks for the very detailed response Benny.

I’ve just checked for FHOG and one of the conditions is that You or your partner have not previously owned residential property in any form in any State or Territory of Australia. Guess I’d be ok to forfeit this concession if it meant that all these other opportunities are available.

PPOR – as safe as this strategy sounds, I don’t think I’ll be heading down this path. More due to lifestyle choices.

I do however, really like the idea of starting out with 1 and then maybe 2 lower priced IP’s as it feels that I’m spreading my risk and not putting all my eggs in the one basket.

But on CF+, since the goal is to ideally find a place where the rent covers the mortgage, what if it is actually a slight negative cashflow property. And assuming that the growth is very slow due to the area, would you consider this to be a ‘bad buy’?

Also the FHOG only seems to be very restrictive as it only applies to new homes. This would rule out a big majority of the property market. Would you forgo the FHOG and buy something else or would you try and take advantage of the FHOG?