Hi
Still trying to decide what to do. My goal is to start building an investment portfolio, but also at the moment trying to find somewhere to live.
I have a house which has been tenanted for the last 18 months when I moved in with my partner, but it will now be empty in 2 weeks. It was my PPOR 18 months ago and since my partner and I have now split I need somewhere to live. I can move back there but don’t want to. It was returning $420 per week rent but I’m about to do a bathroom reno and should get $450 per week. House is valued at about $400+ with reno hopefully $420+. I owe about $100k plus $62k on LOC. If I rent it out I will also need to find somewhere to live costing me $420 per week in rent. Is this just a no win situation?
Or I could live in it costing me about $250 per week, try to borrow money from the equity and buy a unit for about $225k returning $250 per week rent.
Or I could sell my house, invest in 2 units costing $225K each and returning $250 per week each in rent. But I still need to rent somewhere to live costing me $420 per week.
Or I could sell. Put equity in bank, rent somewhere to live and wait for housing prices to drop further and then invest?
What do you think is the best option given my goal of wanting to invest in property, and build some more equity for the future, and also taking into consideration I don’t have a regular income as I’m self employed?
ThanksHi Tiggie
you are in a pretty good position with this property. Start with the end in mind – so your goal is to invest in property and build equity right?You have quite a lot of equity in the home which affords you flexibility. Given you can buy a unit for $225k, what i would suggest is your first option.
Buy a new unit for $225k with some of the equity/savings as the deposit. Move into the unit and rent out the house, as the house is +ve geared so will be paying off your loan for you, while your mortgage on the $225k will be about $250 a week. I wouldn’t spend the money on the bathroom and rather put than into your deposit, as i think the money would be better used in buying the new unit.
Selling is the worst thing you could do with your goal in mind, i reckon the stamp duty implications of the sell/buy will be far more expensive than what property will drop.
Sure property has come off the boil but its not doom and gloom. There will be buying support with each increment it drops. Only approx 1/3 of homes are under a mortgage. 2/3 of the population are either renting or own their home outright so these people will simply do nothing, and the renters may start to become buyers if rates drop more.
I have already seen it – a relatively small real estate agent in my area was quiet as up until about May, and since have sold about 20-25 homes from may to now as the more affordable and less competitive market is bringing some buyers back out.
Please dont take this as financial advice, its just my opinion and what i would likely do in your situation.
From a financial point of new, there's no reason to rent out your current house, it will be positively geared.
You'll be better off living in it, paying down the mortgage and then using the equity to buy 1 fully geared $225k unit.
One question, do you have a marginal tax rate of 31.5% or greater? If you don't, then really, you'll be better off not buying anything until you have paid down all of your mortgage.
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