Hello all,
Im new here and very thankful that such a place exists
Ive recently received some advice from a broker and a real estate agent and i was hoping that i could share my options here and get your thoughts.I purchased my first PPOR 3yrs ago (peak) for 450k with a down payment of 120k. (1 x Townhouse of 9 lots) I have an offset account to a PI loan and my loan is currently at 300 with 50K in the offset. The PPOR has just been appraised at circa 480k and has a few cosmetic issues on common areas and strata will need to increase their sinking fund + special levies to fix these issues amongst other things.
Im now in a position that i can afford a new PPOR for circa 650k-700k (a free standing home)
I went to the broker and real estate agent to get advice on 2 options, keep the current place as an IP and buy a new PPOR or simply sell the current place and get a new one.
Broker: keep current place, refinance as IO and split the loan and get another 90k to use towards the deposit (+ my 50k in the current offset) of new PPOR which should also be a IO loan with offset.
Real estate agent: because of the not so good rental returns $450pw and other starta issues, probably best to sell up and take my losses. Start again with a new (bigger) 650k PPOR on an IO Loan and start a IP plan from there on buying properties that will have a better rental return on investment etc..with the backing of a larger PPOR loan.
2 different view points and more food for thought…i’d really appreciate it yo could share your advice and thoughts on my situation and options.
Thank you very much
You need to work out what's best for you.
Is the townhouse in an area that could achieve capital growth in the future? Will that growth make up for the short to medium term holding costs?
Your brokers structure sounds fine.
I'm not surprised the real estate agent provided that advice – he/she wants to sell your property.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie is correct in this instance- you need to think about what’s in it for him- for both the broker and the Real Estate Agent. My first thought on the real estate agent was “why are you taking advice from a real estate agent”… they dont give advice. Not forgetting that I was a real estate agent too. Not many of them know how to spell investing let alone understand it……….
And there is something in it for your broker as well- he gets the re finance trails.
As Jamie says – you need to think what YOU want to do.
Then go to an accountant – see what he says.
The hardest thing in changing the PPOR to an IP is around taxes and changing a loan- I am not sure how that works but I have heard others – not my experience but from others- that there are implications in changing the loan from PPOR to IP. From a tax point of view – you can move out and make it your IP – done that myself – but I am not sure about the loan.
Get an accountant who KNOWS property. That will also be hard to find. If you need one I can suggest a couple.
After that – your broker’s advice is important.
Listen to your real estate agent only as far as appraisals go. Get another agent to suggest a rental return – ask a property manager if you should sell it and see what they say. I bet the answer will be NOOOOOO!Oh Not all real estate agents dont understand investing- ask Kirsten who posts here – she seems to understand:
Kristin Simondson
E: [email protected]| P: 0410 202 393 | Office: 98 Rathdowne Street, Carlton 3053
A refreshingly honest approach to real estate http://www.peterbarnes.com.auWhich state are you in?
Thanks for the mention WomeninPropMelb
Agree with Jamie, it's about what suits you and what your plans are. Do you want to have an investment property? Does it suit your financial position? Or would you prefer to focus on upgrading the property you live in?
The real estate agent is no doubt a sales consultant – yes they want to sell your property and most likely have one you'd look at buying. If you want an honest rental appraisal seek out property managers and arrange appraisals. PMs are the only ones who truly know the rental market – sales consultants have an idea but I wouldn't hang my hat on their figures.
Do a little more research before making a move… first step is to look at the potential rental amount and whether the proposed special levies can be justified. Remember that if there are cosmetic upgrades to the block it can make the property more appealing to potential buyers/tenants. If you see good potential for long term CG, decent rental return and a healthy rental market then the strata levies may well be justified.
Kristen, its good to see some people who post here who have a depth of understanding of investing – you are one of those people.
I was once a real estate agent. There are many in real estate who do a really good job. Real estate agents get a battering here.
All investors would do well to make their real estate agent their best friend.
I know a property coach who espouses this.
I stand by my comment that real estate agents don’t understand investing though- but they sell houses – or manage them – they are not “investment advisors”…. That should not be confused. When I was selling houses, if you talked about “tax benefits” or “depreciation schedule” – agents but also buyers would glaze over.I hope that you keep making your worthwhile comments here so investors can see that real estate agents can be your best friend.
WomeninPropMelb wrote:.
The hardest thing in changing the PPOR to an IP is around taxes and changing a loan- I am not sure how that works but I have heard others – not my experience but from others- that there are implications in changing the loan from PPOR to IP.It depends on the lender – it could be a form or could it be a whole new application.
It’s worth while getting a valuation done on the property as well – for future CGT purposes. You’ll need to know what it was worth when it became an IP, so if you ever sell, you’ll know how much gain you made.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie is right- get a valuation or appraisal done – yes they are free and I have heard them used before – its more than most people do at the time. A valuation can cost up to $1000 – that is up to but not necessarily.
I am not sure if its about the lender in changing the loan from PPOR to IP – its more about tax implications and how you are structured in the first place. ATO likes to know what your intended purpose was in the first place.Thank you for your responses.
Im in NSW and the current PPOR is in north parramatta.
Yesterday i hand another appraisal done on the property and it was valued between $470-$490. I personally don’t think there’s going to be much CG on this placeMy first aim is to live in a free standing house with no starta to deal with or sharing walls etc.. then yes i would like start with one or 2 investment properties.
I have spoken to my accountant (which has a very large bricks and mortar investment portfolio) and he will provide the correct advice when I’m ready to pul the trigger.
i keep hearing that once you buy a place you should never sell it
i don’t know…Thanks again everyone.
Awsome Juve… you are doing all the right things then.
I dont know if you should hang on to a property forever. Some say that and some say you should do a calculation on opportunity value- that is what else can your money be doing?
Property is a longer term investment – if you listen to everyone you will get analysis paralysis…………I think thats the problem, i may have analysis paralysis
Its about tax benefits as well i guess.
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