My situation
1 Bed Apartment in Perth’s inner north (under 3.5km to city).
Purchased $298,000
Loan amount $275,000
Approx value $330,000 – $340,000Weekly rental income should be approx $350 a week.
I am in a situation where I have somewhere to live for a few years with very low rent, so I thought I could…
Rent out property, load up my offset account whilst paying down the loan for the next few years and turn it cashflow positive as soon as possible.
or…..
Keep IP, leave it as negative geared and still load up offset account but use that money to fund a development if the opportunity rises. With the plan of evetually making IP cashflow positive (I am not a fan of negative gearing but I just thought this could reduce my holding costs)
or…..
Sell, take some profit and use that profit to fund property developments (I have experience and contacts in the building industry)
Any opinions would be appreciated.
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This topic was modified 10 years, 4 months ago by
FLW.
Hi FLW,
Welcome aboard !! Wow, no replies in a week? I can only think it got missed by most. Let me start by saying “I don’t KNOW Perth”, so my thoughts are more general. In the end, you will know more than I do, but maybe my thoughts might help focus you on the right choice for you.Re the three choices you mentioned :-
1. “Rent out property, load up Offset etc…..”
This has some possibilities – it sounds like this is currently your PPOR – is it? If YES, then you have a CGT exemption for up to 6 years if you don’t take on another PPOR meantime (i.e. you live in another property that is NOT your own home). So this can be a major benefit when you do sell this place. Also, I hear from others on here that “Perth is a buyers market right now” – thus, perhps not a great time to sell?2. “Keep IP, leave it as negative geared and still load up offset account…”
Though different words are used, the first part sounds like 1. to me. Am I missing something? Maybe it is simply that you are adding “the possibility of taking money in Offset to develop”. In both 1. and 2. just by loading up your Offset with any spare cash, this could turn the apartment into positive geared quite quickly – so both 1 and 2 sound good that way.3. “Sell, take some profit and use that profit to fund property developments” That is one for you to answer – if this takes you closer to your goal, then by all means consider it. With Perth possibly a “buyers market”, do you think it is likely to grow in value in the short term? Or are you able to use the released funds in a more efficient way by developing? Again, that depends if you are “ready to rock’n’roll” with developments.
Hopefully others from Perth may be able to add some value to those thoughts of mine. DO come back with more info – we may be able to add some extra thoughts as your proposed action becomes more clear to you,
Benny
I suppose the difference between option 1 & 2 is that one would keep the property negatively geared for a longer period of time while the other would turn in cf+ quicker.
I did the sums with my accountant and the apartment is almost cf neutral and I will be in a better position tax wise to keep it. He did inform me of the 6 year window free from cgt, which helped me make my decision to rent out the property.
The money I save from the cheap rent will go in my offset account and will go towards doing some developments. I am ready for development as I work for a building company and its something I do for others everyday, it’s just having the funds to do it for myself.
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This reply was modified 10 years, 4 months ago by FLW.
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This topic was modified 10 years, 4 months ago by
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