Hi,
I am a new member to the forum and after some general advice.
I am in the process of trying to find someone such as a financial advisor to give me some advice also.Nearly 2 years ago we moved from our home town to a new area and leased out our PPOR. We have a $135k mortgage and it has been valued at $270k. It is currently returning $240 per week although could be getting more we have really good tenants who don't want to leave. So it is paying the mortgage but not really making us money.
We want to purchase some land in our new town and build but I believe we will have to sell our rental to do this. The new house and land will cost around $380k and if we sell and use the profit from our rental it should leave us with a $260k mortgage which we know we will be able to afford to make repayments on.
(NB- DH employer is paying $300 in rent for us at the moment which is like a salary sacrifice but it doesn't show up on his group certificate. DH's employer has offered to do the same for us if we were to buy or build)We have fixed interest rates of 7.19% which will return to variable in September. My big dilemma is- should we hold onto the rental and keep reducing the mortgage (we currently are paying $80 per week extra off the mortgage so it is nice to see the mortgage getting lower) and forget about our dream to be in our own house again for the time being or do we get in and buy some land before land prices go up again?
I know I must sound niave and like I have no idea which is probably pretty true! lol!
Who do I need to talk to to give me some advice on what is a good idea in todays market?
Thanks for reading
MichelleHi Shellb78,
Don't forget when you sell the investment property you will pay capital gains tax (you'll have the 50% discount though since you've owned it longer than 12 months). It might be more effective to use the equity in the home to help purchase your new one or at least provide the funds for a down payment.
I wouldn't be worried about land prices jumping in value in the near future. There's still plenty of recovery to be had.
Cheers
freelance wrote:Hi Shellb78,Don't forget when you sell the investment property you will pay capital gains tax (you'll have the 50% discount though since you've owned it longer than 12 months).
Really?? I had no idea we would have to pay Capital Gains Tax. We have had the property for 7 years! I thought you only pay CGT on a property that you have owned short term?
Any idea how much we will have to pay?You never pay capital gains tax when you sell your PPOR. But since it is now an IP, you will need to pay CGT on sale. If the property is owned as an IP for longer than 12 months you will be entitled to a 50% CGT discount.
I suppose the capital gains will be calculated from the exact date it was converted to an IP to the day you actually sell it – not exactly sure though
It looks as though you are renting at the moment? Is this correct?
If so, you wouldn't pay any CGT if you sold at the moment, as your house would still qualify under the 6 year rule. Basically, you can be away from your main residence for up to 6 years and it is still exempt from CGT, as long as you do not have another PPOR.
Dan42 wrote:It looks as though you are renting at the moment? Is this correct?
If so, you wouldn't pay any CGT if you sold at the moment, as your house would still qualify under the 6 year rule. Basically, you can be away from your main residence for up to 6 years and it is still exempt from CGT, as long as you do not have another PPOR.
Thats right- we are renting at the moment.
So I guess the real question is to everyone- if you were in our situation ie- having someone offer to pay $300 week in rent or off your mortgage- what would you do? Bearing in mind that if we brought we would probably need to sell the rental to buy what we wanted and we would also go back to making minimum repayments off a mortgage rather than paying extra and seeing it get lower. Hmmmm- big decisions.
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