All Topics / Help Needed! / The old convert the PPOR trick..

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of waydo77waydo77
    Participant
    @waydo77
    Join Date: 2011
    Post Count: 155
    January 22, 2014 - 1:53 am

    Hi everyone,

    I know its not recommended to convert PPOR to investment purely because of emotional attachment but my reasons are a little more justified than that.

    I currently reside in my 4BR 2Bath place but have decided its no longer what I require and is a real drain on my cashflow.

    My partner has just purchased a smaller home elsewhere that will only cost me around 200 per week versus the 400 im paying now. The location my PPOR is in currently has 3 projects in the pipeline (mining and windfarms) so I do not want to sell until I know the outcome of these as I believe they will have an affect on increasing tenant demand and capital growth.

    The location is close to the beach and a reasonably popular tourist destination.

    I am 50/50 on the idea of renting long term 6-12 month lease vs holiday rental/short contracts for local workers in the area etc.

    The Holiday rental/short term would offer – higher yield 10-15% but with large vacancy periods (40-60%) higher management fees, due to cleaning and more inspections etc. would have to be furnished but would offer better depreciation.

    Whereas long term rental means – lower yield 5-7% (possibly 8% if furnished) , lower management fees and less hassle. 

    I am looking to build a reasonable portfolio over the coming years. Would the bank take into account the rent if it is vacant for so long as a holiday rental.

    Are there any other issues I should be considering?

    thanks heaps  for any input!!

    wade.

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510
    January 22, 2014 - 4:25 am

    I would take the long term rental with lower yield over the holiday rental. Going to be much easier for the banks to finance against that type of income vs transient Holiday rental unless you had a couple years of "total holiday income" under your belt ie You could show for 2 years that it earnt 20k in one year and 22 k in the next and they could take the average. Going to be quicker just going the long term lease. 

    Profile photo of mattstamattsta
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    @mattsta
    Join Date: 2011
    Post Count: 604
    January 25, 2014 - 3:42 am

    Personally, I'd go for a longer term rental. I'd rather have the consistency, and it will be much easier to get finance – and since it's less of a hassle, it could mean more time for you to focus on growing your portfolio.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    January 25, 2014 - 3:56 am
    waydo77 wrote:
    Hi everyone,

    I know its not recommended to convert PPOR to investment purely because of emotional attachment but my reasons are a little more justified than that.

    Hi Wade

    I don't think it's necessarily a bad idea.

    If the property stacks up as a good investment then why not keep it as an IP? Sure if you're emotionally attached to it then it's a different story – but if you're moving on to better things and you think the property can do well as an IP then I'd go for it. I've done this personally with a couple of properties – kept upgrading and converting them to IPs. 

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of waydo77waydo77
    Participant
    @waydo77
    Join Date: 2011
    Post Count: 155
    January 30, 2014 - 7:41 am

    thanks for the advice guys, now to work out furnished or unfurnished by having a chat to the agents

    Profile photo of carllarzcarllarz
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    @carllarz
    Join Date: 2014
    Post Count: 10
    January 31, 2014 - 1:42 am
    mattsta wrote:
    Personally, I'd go for a longer term rental. I'd rather have the consistency, and it will be much easier to get finance – and since it's less of a hassle, it could mean more time for you to focus on growing your portfolio.

    I agree.

    Holiday Rentals also have alot more risk involved in finding a tenant (construction work in the area is put on hold, winter comes etc. etc), if your decision is based on increasing your cash flow then the logical option is to go for the solution that will provide less vacancy.

    Carl L

    Profile photo of waydo77waydo77
    Participant
    @waydo77
    Join Date: 2011
    Post Count: 155
    February 8, 2014 - 10:46 pm

    thanks for the advice guys, am going with an unfurnished rental, expecting around 330-370 pw which will give me a yield of approximately 

    4.3% on conservative house value (395,000 valued) should be capital growth in coming years pending project approvals….

    or 

    5.9% based on loan amount of 290k 

    Profile photo of jatejate
    Participant
    @jate
    Join Date: 2013
    Post Count: 26
    February 10, 2014 - 5:12 am
    Jamie M wrote:
     I've done this personally with a couple of properties – kept upgrading and converting them to IPs. 

    How does one actually 'convert' it from PPOR to IP? Is it just a simple matter of putting in a tenant and from that date onwards all deducatable expenese are now eligible?

Viewing 8 posts - 1 through 8 (of 8 total)

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