Hiya,I’m completely new to this post and to investment property i.e. I’m in the research/learning/for dummies stages of PI and need a good kickstart. We have created some goals around investment income and after some research, I’ve tried to formulate some plans because we may need to move to a bigger place as our family expands and we need some help to see if our plans are on the right track. I’ve read Steve’s book and a couple more on negative gearing property, spent hours online etc etc. These plans are just that – I have no intention of rushing in but also I’m a bit confused about WHEN to rush in! This is our situ which I believe creates 2 options :
1. We currently own a small 3 bedroom house valued at approx. 500k (owing 300k to the bank). The house requires some structural work i.e. floors are moving, walls-a-crackin, doors-a-jammin etc etc but overall is renovated and looks good. Rental in our suburb is OK (about 5%) so I thought we could turn this into a IP and then rent ourselves. We could then use the equity to borrow to invest for positive cashflow and then sell our current now rented property at a latter date before the 6 year no capital gains tax rule applies (because we have already lived in it). We could also carry out some repairs which are tax deductible. Due to my income, negative gearing also offers some tax advantages.
2. ….OR….we could sell our current house and use the cash to invest in positive cash-flow IP’s while we rent.
Hmmm, I know this is a number crunching job for the accountant but hopefully some clever tips can be suggested…
Anyway, I hope this makes sense and I thank you in advance for any advice!
Cheers
Dan
[lmao]
Hi Dan,
welcome to the forum. I had two initial reactions to your post:
– renovated but structural problems. Structural problems cost a lot of money but do not add much to the PERCEIVED value of a property.
– 5% yield is not great and definetly not cashflow positive.
Both points hint in the same direction for me. Sell now. Besides the property market has peaked and you will not get a lot of capital gain in the near future.
Look for greener pastures. You seem to be on the right track.
Good Luck
Originally posted by Bridgebuff:Hi Dan,
welcome to the forum. I had two initial reactions to your post:
– renovated but structural problems. Structural problems cost a lot of money but do not add much to the PERCEIVED value of a property.
– 5% yield is not great and definetly not cashflow positive.
Both points hint in the same direction for me. Sell now. Besides the property market has peaked and you will not get a lot of capital gain in the near future.
Look for greener pastures. You seem to be on the right track.
Good Luck
Thanks for taking the time to respond – much appreciated!
I was thinking of holding onto our property in Williamstown as the research I have done suggests Melbourne is ready to start rising in the next 3-4 years and Williamstown has been ticking along nicely while the rest of the city remains stagnant..
If we sold we could not buy back into the area – too expensive. Are you suggesting we sell and then rent while we invest?
Ta
Dan
I cannot tell you what to do. You have to figure that out for yourself.
But yes my opionion is that in the moment you are better off looking for cf+ deals or short term profits rather than long term capital gains.
I personally do not think that we will have any major growth in the near future.
Good Luck
I cannot see any immediate flaw with your ideal about renting yourself whilst offering your own property out for investment.
Access the equity in your property and then combine these funds to do a couple of cash flow renovations or wraps and a couple of long term buy and holds.
A nice mix and combination of Asset growth and cash flow positive investment will hold you in good stead over the next couple of years.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
I think option 1 sounds good. You can increase your tax deductions and sell at a different time when the market is higher.
Terryw
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Originally posted by Terryw:I think option 1 sounds good. You can increase your tax deductions and sell at a different time when the market is higher.
Terryw
Discover Home Loans
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Send an email to get my newsletter.I tend to favour this option as well. Thanks again for your advice!
Originally posted by narocroc:
……….so I thought we could turn this into a IP and then rent ourselves. We could then use the equity to borrow to invest for positive cashflow and then sell our current now rented property at a latter date before the 6 year no capital gains tax rule applies (because we have already lived in it). ……….
[lmao]Don’t you have to move back into the house to make use of the 6 year rule?
DavidC
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