Hi all,
As you can see I am newly registered on the site although I have been reading intently for a while now. I live in an inner suburb in Melbourne and bought a house a year ago. I think i got a good price and as a result put 20% of my own money into it whilst leaving me some to renovate. The renovations are going well and I am thinking of what to do next.
As I have 20% of my money in the property I am thinking I may need to sell it to get the cash out and then look to buy IP(‘s).
Ball park figures here are I reckon it could sell for $500K (bought for $415K), owe around $300K.
So my thinking is that if I sell I will be sat with $150K (ish) after fees etc to go and buy another place to live in but this time with the ability to go and buy IPs as well.
Or if I keep it and then rent it out, how do I get to the equity to be able to buy other places without re-mortgaging? The place wouldnt be CF+ if I rent it out and re-mortgaging will make that a def no.
What would you guys and girls do if you had approx $150K in a place and wanted to get into PI?
Your thoughts would be welcomed.
DisprinForte
Cos if you dont know what you’re doing, all this could give you a headache.
There have been a lot of similar posts recently with people wanting to sell to access equity.
I cannot see the point in selling one property to buy another? Why not just keep and increase the loan to 90% or even 95% and then use this money as deposits on the next ones.
By selling you are incurring fees and then fees again on the purchase again. Can’t see the point unless the property is a dud??
Terryw
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The property isnt a dud and is in a good area I reckon. I am not sure of rental returns exactly but increasing the loan will cause the gap between the rent and the loan to widen substantially I reckon.
I know this can be offset against tax (although a bit of a noob when it comes to it so not sure of the exact pros and cons).
This is why i am trying to find the right way to go for this situation.
I want to move from where I am regardless and find another as my PPOR.
Cos not knowing what you’re doing, could become a headache.
Hi, I can see your rationale for wanting to sell to access the equity + profit as this qualifies you for CGT exemption selling PPOR.
The rest of it depends on:
1) selling costs – how much will it leave you & will you be able to buy IPs with better yield than the current house
2) what rental you can achieve if you don’t sellI’m curious enough to look at some numbers.
a) rent : @$450 pw = <$24000 p.a.
outgoings = $5000 approx + $1000 contingency for maintenance
Net income = $18000 p.a.
Interest on $300000 = $21000 p.a.
Conclusion: your house is almost neutral gearing
b) Sell @ $500000 and access $150000 cash to buy a $350000 property
Loan = $220000
Int p.a.= $15500 [assuming around 7% int]
Rent @4% = $14000 Outgoings = $4000 approx Net $10000Looks bad, change the rent to $350 pw = $18200 gross
First run estimates suggest that there’s no advantage in selling to buy another one UNLESS
Let’s see what 80% LVR does for you.
Loan @ 80%LVR = $280000
rent @$350 pw = $18200 gross Outgoings = $4500 approx
Interest = $20000 approx [7%+]
Loss = $5000 approx + depreciation = $8000 {just a wild guess}
Tax offset = $4000 approx assuming 40% tax bracketHow interesting. You’re still effectively neutral gearing if the parameters I describe are more or less correct.
With the sale + 80% LVR, you do get about $60-70 thousand cash in hand.
This is FUN! Tell your headache to go away & play elsewhere.
Good luck,
Kum YinWell that makes………not much sense. Being new to the PI area I am still trying to get my head round what a lot of stuff means, the terms that go with it and the decisions to take.
I can see that I am going to have to do a lot more research before I can realistically think about taking that first step.
Cos not knowing what you’re doing, could become a headache.
Hi Disprinforte,
You must be in a good growth area or done extensive renovations if you bought you house for $415k and think you can sell it for $500k?? That a 20% increase in 1 YEAR!!! Why would you want to sell your house?? Seems very strange to me
Have you actually had it re-evaluated or where are you getting these figures from?
Cheers
I havent had it revalued as yet but I am going on what other properties in the area have gone for. I got it for a good price as the house never made it to market.
I sneaked in the back door before it did and as a result the seller was happy as he never had to pay any RA fees for it. He had it tenanted from day one and it was a bit run down but nothing major. Just a spruce up here and there, little bit of external work and internal work which hasnt cost me to much.
It hasnt made a possible 20% due to its location just the fact I got it for a steal by pure luck.
Cos not knowing what you’re doing, could become a headache.
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