We sold our home just before the boom and put a contract on another fixer upper in the area we wanted to live in. Right at that time my husband was transferred so we crashed the purchase. Needless to say, to buy in the area again will cost us twice as much. We have one small investment property with good equity (positively geared – we got that right at least)and a small amount of cash.
We are returning home in six months and as we are on one income it would be very difficult to afford a comfortable home where we want to live. Are we better off going for our own home and working (struggling) from there or would it be recommended to build a portfolio of positively geared properties to ultimately have the home we want?
Any thoughts would be appreciated.
I would go with the positively geared strategy.
Owner occupied homes are your biggest expense, NOT your greatest asset!
Robert Bou-Hamdan
Mortgage Adviser
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdOriginally posted by ksb7:
would it be recommended to build a portfolio of positively geared properties to ultimately have the home we want?yes, “delayed gratification” as Steve would put it.
That’s certainly the approach that I want to take with my own investing.
I think that is the way Steve did it, and many others too. Just bear in mind that your home is your only tax free asset, so long term it is best to acquire one!
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Hi ksb7
i’m inclined to build your investments and rent especially if rental costs will be well below the loan payments on a home.
However i’d also look out for an opportunity to buy something, keep and eye on the market and try to pick up a bargain, one that is below market value or one that you can improve, this maybe a cheaper entry into your own home, fix it up and sell it off in a year or two and as terry says you pay no capital gains tax.
regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
This is an interesting topic, one which I am generally confused about the advise. Until you own your own home outright you will never achieve financial independence. Why put this off?
Additionally if structured correctly you can pump all generated cash into your own home and maximise your IP portfolio tax deductions (through LOC’s) which brings you forward much faster. A cash flow analysis will show you this quite quickly.
Hi all,
As always this is a question of circumstances. But based on the information given I’d suggest the plan B approach of +ve geared portfolio followed by PPOR. I recommend this based on the “struggling” line in the purchase PPOR first approach. To me this means it would take ksb7 a long time to purchase and own outright their PPOR. In this case delayed gratification is warranted.
However, there is a lot of benefits to owning your own PPOR including:
No more rent, which can be a huge expense.
Tax free capital gain.
Borrowing power through equity.
etc.I have bought my PPOR and will own it in 2 years time. The interest on the loan is LESS THAN the rent I used to pay on my run-down unit. So for me the numbers were simple. Why should I pay rent for a crappy place to a landlord when I can pay less interest to a bank for a better place? And get all the benefits of owning the property and the CG that comes with it…
But my circumstances were different I suspect. I had a huge deposit and paid cash for the land. So, in a way this was my “delayed gratification”. I didn’t buy until I was in a financial position where it made sense to do so. I managed to save over $300K for the deposit, but did this without a single +ve geared property. I did it the hard way with a balanced portfolio and a single -ve geared unit. In the end I got there though, but it took a while.
I agree with Robert that your PPOR should be considered a liability (takes money out of your pocket) and not an asset (puts money in your pocket). However, it may not necessarily be your biggest expense, for me rent was bigger in the end.
Run the numbers, do the math and the answer should be obvious.
Cheers,
Michael.Another alternative would be to buy the property you want as a PPOR but rent it out and rent yourselves somewhere less expensive and hit the mortgage hard with any surplus funds and move in a few years later.
I currently own 2 investment propertys one is posivley geared the other is negativly geared, we are in the proccess of selling the negativly geared property.
My sugestion is first you need to find out where you want to head.
Read some books like CASH FLOW QUADRANGLES BY ROBERT KIYOSAKI
and FROM 0 TO 130 PROPERTIES IN 3.5 YEARS BY STEVE MCKNIGHT.
I look at these books in high regard, because they will give you a hole new look on your situation.
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