to buy family home or investment property

Hi,

I agree with Nigel. I too would rent if rent is cheap where you want to live and buy an investment where rent returns and capital growth are high.

This is a trend that is occurring now. More people are making their first property purchase an investment property rather than an owner occupied property.

Todd Burns
http://www.freepropertyhelp.com.au

Hi mate

I agree with the comments above….I am 24 and my wife and I bought our family home 3 yrs back as ‘it was the thing you did’ when you get married etc….However after spending the last 18months or so getting my head around the property thing, buying an investment place and really setting some goals and realistic ways to get there, we made the pretty big move to move out of our family home and start renting. We rented out the family home and are now in the process of trying to sell it, free up cash and fund developments. Our basic idea was that we had a $200k mortgage that was eating up a pretty big chunk of our pay, we couldn’t get any of the interest back through tax and we were therefore pretty limited with what we can do investment wise. Now our rent is half of what our mortgage used to be, therefore leaving more cash flow to buy IPs…Yeah you will get the old ‘rent money is dead money’ thing and if you only want to own your own family home then thats great, but in todays market to be able to afford to buy IPs it can be a little hard if you have a massive mortgage on your family home as well.

I guess my main point in my little story is if we had known a few years ago what we know now, we wouldnt have bought our own house, just rented from the start and bought IP’s.

Sorry bout the war and peace effort above.

Cheers

Tim

This is a really really tough one and involves so many factors it’s almost impossible to accurately pin it down. Opinions will prevail and cold hard facts will go straight out the window. There are a bunch of economic factors (alluded to above) and then there are a bunch of family / emotional / touchy feely ones. Chuck all them into the mix and it gets tad grey.

Our path way back, had us buying 2 IP’s in Perth (as we knew we’d gravitate back there eventually) and renting in Glenelg SA where we had jobs. Our 3rd prop. was our first PPoR in Perth and about half the value of any of our IP’s. I suppose it was an OK strategy looking back, but certainly not the fastest and hardest track of all. Social standing and pressures from female friends and female relatives were very heavily brought to bear. These are very real and should never be underestimated in your wealth building…..especially if the females are the type that “look rich but are dirt poor”.

There are usually enormous pressures imposed by external forces to purchase the biggest flashest PPoR you can possibly afford to attain the “lifestyle” element as quickly as possible. Try and go the other way to get ahead financially quickly, and all hell breaks loose…..from all quarters but mainly the female members of your circle of influence.

Thankfully my wife resisted those pressures and gritted her teeth and we screamed ahead of all of those detractors who were living in nicer houses in nicer suburbs. They looked down and derided us for 3 years. Nowadays, however, they shake their heads in disbelief at where we are living in a fully paid off PPoR and can’t understand how we can afford to live where we do. It is very very tempting to return their derision that they lumped on us 8 years ago. We just watch them still trying to look rich and in fact continue to be poor. None are prepared to go through the sacrifices we did, but all want to be where we live.

Going the other way is IMO definitely the way to go….get a cheap cheap cheap PPoR on it’s own block of land in some suburb that your friends and rellies fear driving into….and pay it off ASAP. Grit your teeth and go hard for a few years until you get some equity happening.

If you have strong female family members who demand the best in life…material possession wise….upfront before you have equity behind you….I’d simply just pack it all in and resign yourself to the fact you will appear wealthy and yet be poor for your entire life. I meet people like this every day.

Some people may take offence at the above, ‘cos it certainly goes against the common grain of modern society….but then 92% of people in modern society go nowhere economically anyway…..so I’m really directing my comments to the 8% of winners who hopefully frequent this site and are prepared to put in the hard yards…but hey – that’s been my experience…..it certainly isn’t all just economic factors.

Good luck in your choice and try and ignore all of the massive external forces that will be brought to bear.

You just snuck your reply in before me Daz.

I completely agree with what you said!!

How about if you didn’t own it..but you controlled it,…you pay CGT if you sell, but if you dont sell and acquire additional IP’s under this banner, renting from a Company controlled by yourselves.

I’ve heard of many ways of doing this..with Negatives and Positives on both sides

“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator

Hi Redwing,

Thanks for the encouragement!
Yes we still pay CGT on the back block, back it is discounted 50% after 12 months from purchase of INITIAL un-subdivided block, and CGT payable is calculated on proportional value of each block.
It took me a little while to get my head around that ATO rule.

Medium term plans are to keep the front house and rent out while we do the same thing again on another block. Thats the plan anyway.

Hello everyone,

I saw your question on the forum and thought I would throw in my five cents worth. It is funny we were just talking about this same topic today and thought we could shed some light on a strategy that has been very successful for us and will give you some food for thought as they say.

A way that we have found to help us not only pay for our mortagage, but gives us a small passive income on our own home; which we use for investing.

We have a property that is close to the city and near Curtin Uni and we rent out a couple of our rooms to overseas students for about of $150-200 per week (inc breakfast or/and dinner). So we receive about $300-400 per week in rent. This leaves us about gross $50-100 per week in our pocket once we have paid our mortgage and expenses etc.

We have an agency that pre-screens the students to suit our situation, like non smokers etc.

We generally have a student in the rooms for most of the year, but when it is almost time for them to leave or if it is during holiday time we simply advertise in the paper under short term accomodation or ring the agency.

We have found that the students are very well behaved and consciencious and great fun to be around. Since they are here to learn, you will find that they are on their best behaviour anyway.

(The beauty of this strategy is if you didn’t want to live in the home and wanted to rent a house you could still do that and you have your mortgage paid for by the students etc. But if you wanted to experience other cultures etc, it can be quite rewarding.

This strategy is great for helping you reach your goal quicker since someone else is paying your mortgage; the rent is a little more than normal; good accomodation in good locations is hard to find; gives students security being with a host family or couple. Plus you can keep an eye on your property by being there too).

We are in the process of upgrading our home for a bigger one and implimenting this same strategy. We have decided to live in this next home as we thoroughly enjoy the experience.

We have decided that as Steve had done with some of his previous properties, is to unlock the equity by selling and using that to get this bigger home. It will mean that we have a smaller mortgage to begin with and since their is no captial gains on it either.

We could have simply kept it and continued to rent ot students, but the properties where we live are getting more and more expensive and will be well over a million if we don’t do it now.

Our strategy is simple,” 4 green houses, one red hotel”. The key to winning in the game of Monoply is to have as many of these red hotels as possible, which increases your chances of receiving income (rent) everytime someone lands on your square.

Or we could have simply split the profit as many times as possible to buy multiple properties. We have decided against doing this as we want to maximise the capital growth in our area. This strategy helps us also receive cashflow too. So it is the best of both worlds.

Hope that this helps. Sorry for it being so long. I promise to make it shorter next time.

Thanks everyone.

( I really love reading the forum and Steve great website by the way! I read it everyday)

Edwardo

[party]

Any chance of you enlightening us asdf? [biggrin]

A PM would be awesome…. [thumbsupanim]