Hi all
I need some help, my situation is
Primary Home 346k Owing – worth 460k
1 IP 210k owing – Worth 300k currently rented at $350p/w.
Using Equity to purchase 2 IPfor 177k can rent for $230p/w.
Should I sell 1 IP this financial year to offset some capital gains tax with 2 IP if purchasing goes ahead.
Or keep both and have another loan to my name? more cash repayments per month
Sorry topic should be "Keep 1IP or Sell ?"
Thanks
DannyNot sure I understand your question.
But if you sell your first IP you will great a Capital Gains tax event, for want of a better word.
That is assuming you bought the IP for less then what you will sell it for.
And looks like the 2 IPs will be close to CF+
If you sell IP 1 you may end up with $80k before CGT. This could be put off your home loan saving you non-deductible interest – but if your plan is to buy another property again you will have stamp duty and buying costs etc. I think selling can be good if you can reduce private debt in some cases.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Danny
Obviously it's hard for anyone to give you specific advice when it comes to your exact circumstances. I guess that's why financial planners get you to give them all that information before they start mapping out your whole financial life!
As for my two cents, the only time I would sell an investment property is if I was planning on retiring. If you don't believe in property growing in the long term, then why the hell are you buying another one? If you do believe in property growing long term, then why the hell would you sell the first one? If you only want one investment property to keep your debt exposure down, then I'd probably just be keeping the first one, and not buying another one.
I know, this is oversimplified, and there could be lots of reasons for what you're suggesting – but with little info I've got, that's all I can really see as suitable options.
Lots of beginners want to get in and buy and sell houses all over the place so that something is happening with their portfolio. Patience grasshopper. Property is a long term thing. If you want exciting, buy a racecar!
If I was in your situation and decided that I just didn't want to service that much debt, I'd probably sell one of them using vendor finance to help out with my cash flow. However, I must warn you that using vendor finance in one way or another is pretty much my stock answer for everything!
Andrew
Hey Danny
I am actually doing exactly what you are asking. Selling my IP to get my PPoR loan down. My reason for doing this is further reducing my exposure to interest rate rises when they eventually come. I will suffer a bit of Capital Gains, but Im still making money. Interest repayments on my PPoR are not tax deductible, so I see it as worthwhile reducing them.
The increased equity in my house will then be used for deposits on further investments.It completely depends on what your long term goal is. Mine is to get my mortgage down. If it means buying and selling places and paying capital gains then so be it.
Figure out what you want to do and talk to an accountant and/or financial planner.
ps. Where is your IP? thats a reasonable rental return!
Wow thanks for they input much appreciate a second thought.
IP2 is long term investment. On the South Coast , eventually going to use as family holiday house.
Prices have plummeted and I came a cross a good buy I think gamble at 177K 4min walk to the beach 2bed is not to bad.Selling IP1 think it time, I only bought this property by accident I was going to move into it, but Houses went down so bought a house as well. it located in ACT Belconnen area, looking HOT at the moment.
Offset the gain against my house loan. Instrest rates will rise prob 2% in 12 months, it a deciding factor.
I rather have the cash now. I pay super anyway, no point waiting till I am 65 leaches appon leaches god know what value you will end up with by that stage.I'm a big fan of buy & never sell. Selling triggers CGT and REA commissions. Buying costs stamp duty etc also. Very often you can suck cash out of a good IP which has had CG.
But I understand the sentiment of you are paying down PPOR non-deductible debt.
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