I currently own a house under construction, which will become my PPOR in about 2 months. Mortgage is $410k and similar houses in the area are selling for about $530-550k.
I also own a studio apartment in Melbourne CBD purchased off the plan in August 2007 (when I knew much less about investing) and settled in December of last year. My mortgage on it is $176k and similar properties in the building have been selling for $260-280k.
At the moment, the studio apartment is slightly negatively geared and I am considering selling it. I feel like the boom in the last couple of years has increased the price, but as it is such a small property it won't be going up much more any time soon.I envision I will walk away with about $75,000 in my pocket after selling costs and CGT and I think this money can be put to better use elsewhere. This would be a comfortable amount for a deposit, but if nothing else the $75,000 will shave almost $6000 of repayments off my PPOR mortgage per year.
What are peoples thoughts? Does my logic make sense?
This house you're having built… you mentioned the mortgage is $410k, but what was the total cost of purchase? Are you lanning to sell or keep it? If you are planning to sell, maybe consider moving into it for a few days so it can be declared your PPOR and thus be CGT free. Not convinced it's worth selling the house, as you'd be close to a break-even I would have thought.
Can't comment much on whether it'd be wise to sell the studio apartment or not – others will no doubt ask for more details on it (the suburb, the rental return etc).
Another option is to consider refinancing the studio, plunging into more debt, but pulling funds out to dump on your PPOR. That way you reduce your PPOR debt, and increase the IP debt. The logic in this is that you can negative gear the IP debt.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I think you have misread what I wrote.
I'm not considering selling the house, I'm considering selling the apartment.
Refinancing the apartment and putting the extra funds on my PPOR mortgage would be counterintuitive as I could not deduct the interest on those funds as my PPOR is my PPOR, not an IP.
Hi again – yes wasn't sure if you were planning to sell the house.
However with the apartment, what is the purpose of having a bunch of money sitting on that, while you pay non-deductible interest on the house? I was suggesting looking into whether you can refinance the apartment to rectify this.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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