Hi All,
Firstly I would like to say that if it wasn’t for the onging excellent advise I’ve been getting from this forum, I would have made the wrong decisions to date.
Now back to my situation which I just want to get some feedback on.
Here is my current position :-
1. Married with no kids, 24 & 28. Planning for kids in the next 1yr or 2.
2. Have a house worth around $440k and owing $130k PPOR in a not so great area.
3. Have a fully paid off unit generating no income. worth $200k with $150k available to draw. (parents live here, no rent possible)
Now this is want i am thinking about doing.
1. Because we dont like the area we are in atm, I want to rent out the PPOR for around $220pw. Knocking off the exsisting loan which is $130k
2. At the same time renting somewhere where we are happy, perphaps paying around $300-$330 p/w rent.
3. During this period save up enough money and try to buy a PPOR of our desire while keeping our current PPOR.
Does this sound sensible ??
Oztexs
The trouble with that is you would be paying a lot of tax on the rent from your old home, and paying rent with after tax money, which would be painful. Why don’t you keep you loan on this so the interest offsets the rent abit, and then you could use it as deposit on your new home later on. Maybe a 100% offset account would be useful.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Oztexs,
So you are foregoing $80 to $110 per week to live where you want to… fair enough, quality of life is important.
One question though… why don’t you use the equity in either your PPOR or the IP to put down the deposit on the new PPOR that you want? Then your channelling your “rent” money to pay off the loan… Why rent now and forego that $300-$330 per week when you can be using it to pay off a loan (instead of trying to save ontop of paying rent).
Does this line of logic appeal to you? If you want me to run the figures to see if it’s feasible from a lending point of view it takes me 2 minutes[suave2]
Liz Wilson
Mortgage Lender
Hi Oztexs,
Firstly, let me just add a very important note….please do not take any advice in the forum as gospel (mine especially!!!!); always seek professional financial advice, before making any major investment decisions….much of what is suggested here (albeit valid) is often biased by individual experiences and opinions.
Your situation has many things that need work.
Starting with you PPOR which is worth 400k, and which you are unhappy in. You suggested moving to another area and renting same. By all means, rent elsewhere, but try and make sure the rent you pay to someone else is less than the rent you get from tenanting your own home. It is worthwhile considering renting it out, as at the moment, being your PPOR there are no tax deductions (i.e. interest on loan payments, repairs etc etc).
Maybe you could put your parents into it, renting it for a “nominal” fee; claim the tax deductions, and they might even be able to apply for “rent assistance”?????
I would certainly take a closer look at your “paid off” unit, as it may be worth considering drawing on some of the equity there to help reduce the cost of your current PPOR and then tenant it out. Or maybe you could use some of the equity to purchase a new PPOR in a more favourable area.
There are several options to consider, and it is vital that you sit down and do the “sums” especially as you have (a) large amount of equity in your PPOR, but no tax benefits from mortgage on same, (b) a non-income generating property, which also provides no tax relief, and above all (c) are unhappy where you are living at present.
There is much to consider, and it may be worth your while talking to a financial advisor who can help re-direct some of your plans, and help achieve your goals….especially if you hope to have a baby in the near future.
Good luck, and all the best,
Jo
Hi Oztexs,
Firstly let me say that you have done exceedingly well at your age.
One key point missing is what are you wanting to achieve over the long term? As such this will largely determine what is the right decision for you.
You haven’t indicated your respective income levels (and you don’t have too) but as you are considering a family in the near future you will also need to factor in a reduction of income levels.
This eventuality has the potential to make significant inroads into your cashflow – either one of you stays at home or you use child care facilities.
If you convert your existing PPOR to an IP then you will lose any capital gains advantages you did have.
You haven’t indicated why you would prefer to live elsewhere – it is possible that with a reflection on your reasons for moving that the current area isn’t too bad after all – sometimes a little sacrifice can be worth it in the long run. If this happens to be the case then you may be better off staying put.
Good luck with your decision.
Derek
[email protected]PS Jo – Rents need to be at market rate to ensure deductibility of expenses. Under the circumstances outlines (no debt – any claims would be confined to rates, land taxes and insurance and I am supposing the parents pay these in return for free board)
Property Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by Derek:PS Jo – Rents need to be at market rate to ensure deductibility of expenses. Under the circumstances outlines (no debt – any claims would be confined to rates, land taxes and insurance and I am supposing the parents pay these in return for free board)
Yes ofcourse [blush2]; I didn’t even think of that!!!! Thanks for pointing that out Derek…[biggrin]…a very valid and important factor; and yes no doubt the parents are probably chipping in for the costs mentioned.
Cheers,
Jo
Hi, I dont know where you live, is it possable to buy a house with a living area upstairs and down stairs, let mum and dad live independently down stairs and you and your partner live up stairs
Thus freeing the other property.I notice you dont charge mum and dad a rent , so you must get on ok with them ,so living in close proxcimity would more than likley be acceptable…Congratulations on being such a great Kid,although we all want to make a nice living with our investments…some times family come first.
EZY[buz2]Some great ideas put forward by some of the best in the forum, plenty for you to think about. With what you have already achieved i stand & salute you.
My thoughts, you are planning to start a family in 1 to 2 years, that will change your income so between now & then i would make a few scrifices. If you want to move i would sell, being it your ppor, buy in a better area & rent out the spare rooms, ie to students if that is possible. How you utilise that extra income would need some consideration. All the best.
CheersTake the Best & leave the rest
Thanks for all the replies.
I ll reply to some of your feedbacks ..
Terryw
Why don’t you keep you loan on this so the interest offsets the rent abit, and then you could use it as deposit on your new home later on. Maybe a 100% offset account would be useful.I alrealy have the deposit on my new loan through the equity on the unit $150k. The offset idea is good.
Lizzy
One question though… why don’t you use the equity in either your PPOR or the IP to put down the deposit on the new PPOR that you want?The problem is area we like (North Rocks/Carlingford)is going to cost us $640k+ so we are unable to also keep our existing PPOR as a result.
Monopoly
There is much to consider, and it may be worth your while talking to a financial advisor who can help re-direct some of your plans, and help achieve your goals….especially if you hope to have a baby in the near future.Thanks for your feedback. A financial advisor does sound the way to go.
Derek
One key point missing is what are you wanting to achieve over the long term? As such this will largely determine what is the right decision for you.Well I really want a PPOR in the area I love (North Rocks/Carlingford NSW) I really dont like where I am now (Auburn) and I am looking for a change especially a area where the schooling is GREAT!
Derek
You haven’t indicated your respective income levels (and you don’t have too) but as you are considering a family in the near future you will also need to factor in a reduction of income levels.I am earning 80k and my wife is earing 43k
Derek
If you convert your existing PPOR to an IP then you will lose any capital gains advantages you did have.Does this mean i will lose it if I had it as an investment property for more then x amount or straight away ?
Derek
You haven’t indicated why you would prefer to live elsewhere – it is possible that with a reflection on your reasons for moving that the current area isn’t too bad after all – sometimes a little sacrifice can be worth it in the long run. If this happens to be the case then you may be better off staying put.Auburn is not an ideal area to raise kids, our current PPOR is very very small for our needs. its only a 2br house. We have a indian temple near by and its very noisey along with dogs and screaming cars every day of the week. I have a neighbour who keep hitting his wife and the list goes on … I NEED TO GET OUT ! [confused2]
oz
Report the guy who is hitting his wife to the police. If you saw a stranger hit another stranger on the street, you’d report it. Maybe if the guy knows people in the neighbourhood think it’s unacceptable, he might stop it.
kay henry
Kay is absolutely right. That sort of stuff is way out of order, for you, the next owner but ultimately the victim.
Gatsby.I like the response from whoever that said get your parents to live with you! My mum’s mum lives with her and dad and it has it bonuses. Also, if you are contemplating a bub, perhaps to chip in for rent, if wifey still wants to work part time, ur parents could babysit/child care?
It would save you a heck of a lot of money and the child has active grand parents involved. Sit down together and run through every available avenue and come up with pros and cons for each of them. Do also seek proper financial advice and maybe just ahve a sticky beak at the suburbs either side of your dream suburb to see if it is more affordable/liveable.
good luck.
steph.Success is 1% inspiration and 99% perspiration.
If you convert your existing PPOR to an IP then you will lose any capital gains advantages you did have
Amatized for the period you have it as a PPOR and IP isn’t it..?
I.E- if you had it as an PPOR for 6yrs and a IP for 4yrs then sold..60% would not count towards CGT ???
With your current PPOR and Unit, you have a lot of Equity available to yourself..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by kay henry:Report the guy who is hitting his wife to the police. If you saw a stranger hit another stranger on the street, you’d report it. Maybe if the guy knows people in the neighbourhood think it’s unacceptable, he might stop it.
kay henry
My wife went to the police with the victim, but she refused to place an AVO, just wasted our time. I reckon we are all missing the point when it comes to issues involving alcohol. It’s seems to be the main ingredient in most cases of violence and inappropriate behaviour, yet we see more and more alcohol related commercials everyday while the community are more worried about smokers and cigarette advertising.
My folks are quite old 71 & 67, though its a good idea to factor them into our plans for a new place, I am sure they would rather stay where they are, becasue of the close proximity to their essential needs. I will raise this with my wife however.
OzTex,
I see where you’re coming from, and sorry to be discussing this wehn we are meant to be dscussing property… but to my knowledge, in 2004, the rules have changed. Your wife need not be involved, nor yourself. You just call the police to their house, and unlike the old days, the woman doesn’t have to request an avo, so she won’t be “wasting your time”. The police charge the guy if they see evidence of violence- it isn’t about her coosing anymore- it’s about the police charging him. Many women chose not to take action in the past. Now the police do it, because society is more aware of the complexity of domestic violence. Let the police sort it out next time he beats her.
kay henry
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