I currently hold 5 properties, 4 of them Sydney based. My question is should I hold or sell. I currently live in one of the properties which has a mortgage of 500k.(this equates to over $700 a week in payments). The other properties are:
1) $90K mortgage $375pw rent, current value $450K
(very much positive)
2) $320K mortgage $430pw rent, current value $450K
(negative, but only just)
3) $315K mortgage $520pw rent, current value $400k
(neutral)
4) (out of Sydney) $160K mortgage, $185pw rent, current value $185KI am recently married and our combined yearly income is $180K (however kids are on the plan in the next few years, so that income would pretty much be halved). I am thinking of selling properties 1, 2 and 3. This would pretty much cover my current home mortgage and we would be mortgage free at 29. It would also free a lot of cash which I could then use to source further properties.
Before anyone suggests it, renting is not an option as we have just finished renovating and my wife would kill me.
Personally it’s a difficult decision for me as the investment properties pretty much cost nothing to hold. I would be interested to hear what others would do and why.
Cheers.
Whether it be sell or hold, figures won’t give you the answer.
it depends on your goal in life and your strategies to get there. Do you want to offset Tax or purchase for long-term growth or want to retire in two years???
regards,
geo.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
I would sell a few properties to pay off the PPOR or reduce it to a comfortable level especially with kids on the horizon.
Then i would buy an investment property to replace what you have. That way you have tax deductible debt that can be offset against your income.
Would you consider moving out of your PPOR with the huge debt, making it an IP and moving into one of the other places with a much lower debt?
Thanks,
LuckyoneNo, the ivestments are in areas that I don’t want to live due to lifestyle and work. They are also not the standard conventional property.
Interesting question. Agree with both Geo and Yack. Really depends on what you want though. I assume you are putting all your profits into paying off your own mortgage, which will reduce it much quicker. If you can afford it though, have you considered keeping these going for as long as you can. Unless you feel the values may drop, it seems a waste to sell good property unless you can find equally good for better value, particularly if you are not struggling. You say kids are a few years away, so you still have time to look around and by waiting a little, you may find better value.
Well, if you were to sell just the property that has a $90K debt that’s worth $450K, that would reduce your mortgage to approximately $140,000 (I’m not sure of what CGT you would have to pay on this property). Even if with CGT it did end up at $200,000 mortgage, it would seem to me that on your high salaries you could easily get this down substantially over the next few years and then when it’s time for the kids to come, you can just use your line of credit to live off or speak to your bank about reducing your payments during that perios.
Thanks,
LuckyoneThanks for your responses. As stated it’s a difficult question as there a a lot of variables. If I sell the one with the most equity I lose income but gain savings on my PPOR (reduced mortage). If I hold there should be CG in the future (but who knows). If I sell all three I can be mortgage free and start again, but the properties I currently hold are good properities.
The whole question came around due to the PPOR interest, it’s a huge waste and I know I should be renting it out and renting myself, but as most would agree it’s a good feeling owning your own “home”.It was interesting to get other opinions on what others would do.
Cheers.
Hi Steamtrain,
You may be underestimating your investments,
Estimated repayments on your investment loans should be approx. $1.080 per week,
Rental return per week $1510 less repayments @ $1.080 per week, (excluding associated costs) = $430.00 per week towards ppr loan.Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Ph:1800 820 500
VICTORIAPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Hi steamtrain
Once you have a family, owning your own home will be even more of a good feeling because who wants to have to move around with kids at the whim of a landlord? That may be a good strategy for some, but if you can invest successfully, as you are obviously doing now, and maintain the relative security of your own home, go for it!!
Wake
Hi
Yes it is confusing trying to decide what to do. Steven makes a good point that if you hang on to your IPs you can use the extra income to help pay off your home loan. But you will also lose some in tax.
If you sell, you may pay thousands in CGT. This could be minimised by selling one per financial year.
But, if you sell a property, you will have to buy a new property to replace it, so that may be another $20,000 in stamp duty and costs. And then there is the agent’s fees on the sale, and other selling costs.
Another option is to form a trust, and sell to your trust. or maybe your wife. She could buy your property or your share, borrow to do so, and you put the proceeds of your sale into your home loan. This will still result in all the above costs, but you can save on agent’s fees and still ‘keep’ the property. ie you will know that you are buying a good property.
If they are performing well, it may be better to keep, or to sell to your trust.
Terryw
Discover Home Loans
Mortgage Broker
[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
Terryw,
I hadn’t thought of selling to my wife, that’s not a bad idea, as 4 of the properties are in my name and the tax benefits are shrinking.Could you explain in a little more detail how a trust may be of benefit in this situation?
Steven, the rent figures I gave were gross dollars so the net is not as attractive.
Setting up a trust would allow you to sell your PPOR to the trust and then rent back the property from the trust at market value for your own use. Therefore you gain the advantage of getting all the benefits of having an investment property, but you get to actually be the tenant and the landlord.
Drawback is that you will have to pay CGT when you sell to the trust, and the trust will need to pay stamp duty on the new purchase price.
Thanks,
LuckyoneWhy not just draw down on each of the IP mortgages (especially the positive one) and place those funds into you PPR loan? No CGT, No Agents but you reduce your non deductable interest at the same time as keeping the assets.
JJ
JJ
You would not be able to claim the interest on drawing down funds on an investment property to pay down your PPOR loan. The ATO looks at the purpose of funds, not the security.
Terryw
Discover Home Loans
Mortgage Broker
[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
Steamtrain
Having a trust would benefit in many ways:
– Allowing you to sell your property and yet still keep it, (like selling to the wife)
-Asset protection
-Tax minimisationI wasn’t suggesting your sell your PPOR to the trust, but that is another option too. I mean’t sell one or more of your rental properties to the trust, put the proceeds off your homeloan and borrow big for the purchase, converting non-deductible debt into deductible debt.
Terryw
Discover Home Loans
Mortgage Broker
[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
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