Sooo .. here’s my dilemma.
I bought my first +ve IP Unit late last yr which has only about $10k equity so far.
The plan was to continue to rent and buy IP #2 ASAP (about now), then in another 6/12 mths to buy a unit/house for myself to live in and get out of the renting cycle.
I’m having second thoughts and feel I may be better to buy my own place as there would be some savings (mortgage v current rent) and would also mean that I’m paying off my own mortgage at the same time.
Im a single Mum with 1 kid still at home so want some stability. I have a fairly decent salary, but limited savings at the moment but working hard at sorting that out too.
I can probably afford Unit #2 now/soon. Should it be for me .. or another IP ?
Appreciate all thoughts [hmm]
Hi
It’s all down to how hard you want to push ahead.
I’m an owner occupier with a wife, 2 year-old & an 8 month-old. My plan is to pay off our house before I buy IP #2. (Already own IP #1).
If I were in your situation I would probably go ahead with the IPs.
I’m fairly new to all this, so there isn’t much fact to back-up my thoughts.
I hope this is of some use.
RegardsPatrick [suave]
Regards
Patrick
My situation is a bit different to yours but I am having the same debate with myself. Push on renting while buying IP or buy our family some stability and purchase our own PPOR.
The cost of continuing as tennants is an emotional one – no real stability (our “home” is on the market at the moment and we are hoping that whoever buys it lets us stay – we have moved too many times over the past 5 years and we all hate it).
The cost of buying PPOR is a financial one – the mortgage repayments and deposit could go towards building our IP portfolio.
At the moment I’m thinking that if I can find the right PPOR deal it would be worth the cost. But I’m still not sure what I’ll do with that next property…
Cheers
SonjaChickadee, there is no right or wrong answer in cases like this, it depends on what you value most.
In our case, we decided to buy our PPOR first when my daughter was 2 and I was pregnant again. THe reason for us was, that we wanted stability for the kids- it can be upsetting and costly too, to have to keep moving, we’d had enough of that. Especially when the kids turn school age, it can be upsetting if you have to keep uprooting them.
We paid off our PPOR first and only bought our first IP last year.
If I had to do it all over again, I certainly would have bought an IP much earlier, (as soon as we had enough equity to use as a deposit) and not waited till our PPOR was paid off.
I am now ready to buy our next IP.If we wouldn’t have had kids, I’m sure I would have decided to buy an IP first.
But stability became so much more important for me when there were kids involved.Learning…learning… better late (in our case) than never.
Decisions, decisions! Let us know what you’ve decided! Good luck.
Celivia
chickadee, it’s your personal decision, but Rob has made a good suggestion – ie. buy in trust name and rent from it – that way it is still an IP, but you can treat it as your own, and you’ll have the best landlord you can have.
Alternatively, you could ask for a longer fixed term lease from your landlord – I know if my tenant asked for a 4 year lease (with ‘some’ rental growth built in) I would welcome it with open arms…. You could also negotiate a ‘get out’ clause for yourself in that timeframe too….
Cheers
MelCelivia we did what you now suggest is the best way to go. We bought an off the plan unit in Blacktown while still owing $100k on our own house. Had a few payouts from wife being retrenched and father passing away so we were down to $50k. As the unit was negative geared and we had our first child and had lost my wifes income(oops) it was a strain to have to cover the mortgage shortfall and then the body corp payments as well. We waited until the 12 months was up and then sold the unit for $60k profit. This paid off our house which we then mortgaged for IP’s.
Now 3 years later we have 20 houses, ours plus 19IP’s. So dont be afraid of doing what you feel is right, because we got ahead so much quicker by giving it a go.Happy investing.
DD
Don’t sweat the small stuff,and it’s all small stuff!!
Dear Melbear,
What do U mean by “buying in trust name and renting it back”? Will this have tax deductibility advantages???
regards
lee
You set up a trust (don’t know much about this at the moment but am thinking I should look into it) and then rent the property, as an individual, from the trust.
You own the trust, the trust owns the property, you rent the property and pay rent to the trust. I think it works something like this anyway…
It is sold out at the moment but Steve has a book available from this site on this sort of thing. I’m waiting for it to become available again (no idea when that will be though).
Cheers
SonjaI asked my accountant about the trust thingy last night .. lots of different CGT advantages apply to a trust that dont apply to an individual and it should cost max of $2k to set it up through your solicitor I believe.
Setting up a trust in the early part is the best tactic given that properties need to be sold (from you) and bought (by the trust) for full advantages.
[suave]
Cheers,
A” plays well with others
… but sometimes runs with scissors”My friend I say always put your money into income producing assets so if your undecided between +iv cashflow IP vs family home, hands down IP. The day I get a morgage for the family hoime is the day my passive will cover it.
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