Hi guys just wondering about a PPOR in relation to investing.
A lot of people talk about positive cash flow, their low LVR's, however what I am keen to find out is:
1) Do these people rent while they invest and get a PPOR at the end?
Or
2) Do these people maintain a PPOR and pay that off from the income on their investments?
Reason I ask is our friend Steve McKnight rented while he invested. Not sure if that's the way to go. My goal is to invest however I also don't want to leverage debt to the max so that I get stung like lots of other people did. Steve McKnight says that beginning investors should not leverage more than 65-80% relevant to market conditions. I am wondering how that is even possible as I guess to achieve that I would need to pay down my mortgage for years or do a quick risky reno to make profit to pay down mortgage?
Anyways quite a few quetsions here.
Thanks all.
Regarding LVR's, it depends on your risk tolerance and strategy.
My strategy involves high LVR's and not paying down principal on loans, letting inflation do all the work for me.
The rate at which the world's fiat currencies are being expanded is mind boggling…
If you already have a PPOR perhaps you Could rent that property and purchase a less desirable property (ugly) and renovate that and have that as your PPOR for a year.
But long term if you can rent for 200-300 a week in a suburb you want to live in. Then you'll find that your investing will happen quicker, because the banks would consider your Princical and interest payments on your PPOR to be taking away a large percentage of your income per month. Reducing your borrowing capacity faster. You can still get the PPOR exemption on a property provided you lived in it first for up to 6 years.
It's different strokes for different folks.
Some of my clients rent and invest whilst others have a PPOR and invest. I'd guess there's probably more of the latter.
It's not just a financial decision but a personal one as well. Personally, I've always preferred home ownership over renting. I like being able to knock down a wall or rip up the carpet when I feel like I it
Others like to rent in areas where they can't afford to buy into.
Some like to minimise their living expenses and opt to rent and use their higher disposable income to invest.
It all comes down to the individual.
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]
Too many variables- as mentioned.
It really depends on your individual situation. Some people prefer to own a PPOR first. You can pay down some then borrow to buy an IP. If you have the opportunity to get cheap rent (with parents etc) take that.
If you have an opportunity to buy an IP but cannot afford to buy in the area you want to live, then rent. It may actually be cheaper to rent than buy in the suburb where you want to live. My daughter bought a 2 bed unit but was working 2 jobs to pay the mortgage. She moved into a 1 bedroom unit and rented the 2 bedroom and quit one job. The tax incentives made it worth her while. Or you could rent out a room.
So there's no right or wrong as to which one to buy first. Lots of people have high LVR's when they start. Just make sure you have enough buffer to carry you through bad times. They do come and I've seen people lose everything due to poor cashflow. If you run out of money you need to sell and sometimes it's not the right time to sell. Know your limit. With a big mortgage even a 1% interest rate rise can hurt (let alone 2-3% rise which is not so far fetched these days).
thanks for all the feedback and answers all. really appreciate it. helps a lot
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