Hi everyone !
I am in desperate need of some advice !!!
I have been in my first home for the last couple of years and bought this property for a bargin price[
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I have been doing some renos (on the cheap) and the place is comming up pretty good, recently I had it valued and it has more than doubled [^] ” I was stoked, to say the least !!!!
But now heres the bit where I am lost, confused and stressed [] I feel I want to move on and get a nicer place for myself, but I think my current home would be a good rental property – in regards to the location, type of home and the mortgage repayments are very low, the rent that I could charge would be anywhere from $70 – $100 over the repayment amount ( Is this viable enough?) you know with extras – like landlord insurance & other things. Now being a” NEWBIE” I am very nervous about renting out the property – cause of all those horror stories you hear. Also is it better to have the loan for the investment property an Interest only loan? If I kept my property for an investment could I use the equity to buy a better place for my family. I really don’t know what to do
I am starting to confuse myself more and more []
I hope I’m not confusing you[]
This question has probably been asked by heaps of others before me, so I am sorry for annoying you all again, but after following the topics and responses on the forums, I feel you guys would have alot knowledge and helpful advice to offer. []Ginamarree,
Whilst we hear stories of the tenants from hell just remember that the vast majority of us experience hardly any problems with our tenants and when we do it is often just a matter of poor communications.
If you rent the property out and I paying off a PPOR as well then I would strongly recommend changing the IP loan to IO.
Unfortunately any equity you draw out for a new home will not be deductible. You can still do it but it will be classed as part of yoour borrowings for a home.
Well done on your achievements with the reno though!
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
ginamarree
We did the exact thing that you are considering a few years back and I would say it worked well. However, having said that let me add this. If you are the type of owner that is going to worry constantly about the way the property is being maintained (and I mean more than the usual interest you need to show for any property) while you are not there I would suggest it may not be for you. As mortgage hunter said, there are horror stories, but usually it’s miscommunication. But understand, the tenants are not going to look after the place in the same way as the owner would. From personal experience, tenants dont mind if their dog occaisonally runs through the house scratching the new polished floor boards, so what if the couch scratches the paint and dents the wall when its slid accross the room to make way for the party/kids/any other reason. You need to be able to emotionally detach yourself from the property and treat it as a rental and not as “our first house, with the room that we renovated for the new baby” or whatever emotional tie that we have attached ourselves with.
By the way our first two tenants we had looked after the place really well but the third – well, 13 dogs being kept (unknown to us until the neighbor complained about the noise) in the 2nd bedroom (yep you guessed – that was our emotional tie – the room we had renovated for our first baby) caused a bit of grief. But that was sorted quickly and the next tenant has been really good. Overall I would say we are glad we rented the house out and bought elsewhere.
Your thinking too subjectively. Gee I love my house and dont want to sell it.
My advice if you can afford to maintain two properties is to do the following;
1. Sell your existing PPOR.
2. Buy your new home.
3. Buy an investment house thats similar to the one you used to have and rent it out with a property manager and do an interest only loan.Why do it this way.
a. Any equity you have in your PPOR will be transferred to your new PPOR.
b. You can claim all interest on your investment property.
c. No problems with the ATO.Thats what we are doing and now we are onto our 4th investment property.
Hi everyone,
Thanks for the advice, it has made things a bit clearer[
]Cheers
GinamarreeIf you keep the house, rent it out and borrow against it, it likely will no longer be CF+.
If you buy another house in the current market you may in fact pay too much and have a big mortgage to boot.
On the other hand if you sell you will be paying fees left right and centre for the selling of one and the purchase of two.
At the end of the day you need to be happy with where your living, so maybe sell your home find a better home in a better area but with cosmetic renovation needed and renovate again, paying no capitol gains tax on either, make a conscious effort to find a house more suited and actually have money left over for a holiday or new car![^]
You need to look at the options, be clear about it and make your own decision.[^]Hi Markpatric,
I know what your saying about options, my problem is that I am not to sure on what options I have and what the pros and cons of these options are?
I just thought that my current place might have been good as an IP as I paid well under a $100k for it and its now valued @$220k or there abouts.[?]
And as you said IP’s are alot more expensive now !!Cheers
GinamarreeIt would be good as a rental but when you use equity in it to buy elsewhere this is raising the amount you currently owe on it to the point it may no longer give you any excess ($70-$100) cash that you talked about.
With the current market it may not be worthwhile, whereas finding a better home for maybe even less than you are selling your current one does not really have a downside.[^]
I`ve seen this done many times!.I just wanted to add, if you’re worried about the tenants from hell, take your time choosing your tenants then look after them. Hooker has an A1 rating card for good tenants and other agents may have the same type of system.
I knocked back a couple of offers from tenatns and finally accepted a pensioner couple. In a recent inspection I saw a neat as a pin, perfectly maintained house. I was stoked. In return, I’m putting a security screen on one the windows they requested, asap. They won’t want to move in a hurry and I don’t want them to.
So you see, it’s not all bad.
Regards
JillPS My next door neighbout moved out and put in tenants. He let the agent choose his tenant and let’s just say between homemade bombs in wheely bins, spray painted curtains and visits from the police, he wasn’t happy with the choice. It’s your investment, either be involved yourself or pay someone you trust to do it for you.
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] I feel I want to move on and get a nicer place for myself, but I think my current home would be a good rental property – in regards to the location, type of home and the mortgage repayments are very low, the rent that I could charge would be anywhere from $70 – $100 over the repayment amount ( Is this viable enough?) you know with extras – like landlord insurance & other things. Now being a” NEWBIE” I am very nervous about renting out the property – cause of all those horror stories you hear. Also is it better to have the loan for the investment property an Interest only loan? If I kept my property for an investment could I use the equity to buy a better place for my family. I really don’t know what to do
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