Hi All,
I am a newbie with a plan to get into property investing and buy my first investment property by 2014.
I am currently educating myself as much as I can through books, CDs, seminars, forums etc.
In the meanwhile, I want to save/increase equity and maximise my borrowing capacity by next year.
I was hoping y'all can help and provide me some feedback on my situation and what I should do.
- I currently have a mortgage on my 3 bedroom,2 bathroom, single garage unit which is my PPOR. I bought it established 3 years ago and it hasn't increased in value.
- My property was purchased for around $300k with $260k left to pay. My monthly repayment is about $1600.
- It is in Truganina, Victoria, Melbourne's western suburbs, located 25 kms from the CBD. There is PLENTY of land and new housing development around.
- My house is another "me too" with plenty like it for sale or for lease in the area. I would say the locals are of the lower socio-demographic.
I would probably make a small loss, break even at best, if I sold. I could expect to receive about $280-300 per week if I rented it out.
I make between $80-100k per annum, single income, one dependant. I can expect to save about $8k per year if I continue what I am doing.
Here are my options I know of to increase my saving until next year.
- SELL my PPOR and then rent a place to live for about $250 per week.
- RENT OUT my PPOR and then rent a place to live for $250 per week. (I was told theres tax breaks to this)
- Stay in my PPOR and continue saving/paying down my mortgage.
Thank you for your help and responses!
On a side note, could anyone recommend a consultant/advisor/planner I could talk to about my situation and plan in greater detail?
Hi Ryan,
Going on the basis of your options, a couple of things to consider.
If you SELL, you are subject to the conditions of the market and may find what little equity you do have is eroded if you have to accept a lower offer, and after sale costs (agents fees etc) You will then need to pay a new set of entry costs (stamp duty, legals and other govt charges) to re-enter the property market.
If you RENT OUT your PPoR and rent a cheaper property, this indeed can have taxation benefits and potentially assist your situation. Best situation is to rent a property lower than your current INTEREST obligations. You will also be able to claim the interest on your loan & associated costs of holding the property (council rates, maintenance etc).
If you STAY, you will want to reduce your interest obligations and use paid off earned equity to purchase another property.
In any case it sounds like you're currently paying PI payments (Principle & interest), which may not be the best structure to meet your future goals. Switching to IO and placing the extra funds into an offset account will achieve the same result, whilst giving you flexibility with your future plans and give more taxation benefits should you use your PPoR as an investment property in the future.
Which pathway you choose for the future comes down to your personal preference, however I will say that I don't generally believe that selling the only property you have currently is necessarily the best/fastest way to building an investment property portfolio.
Sit down and nut out what your future goals are and work your way back from there. This should give you a reasonable goal for the next 12-18 months and be able to establish a savings plan which can get you your first investment property. I would most likely take the chance at reval'ing your property too, particularly if you're with ANZ, as you may find that a valuation may come back favourably and allow access to equity from day 1.
Hope this helps,
Corey
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Excellent post ^…..
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thank you for taking the time to explain that. I will certainly be looking into what you said further.
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