hi everyone,
we are a couple whose bodies are reaching 50 years of age and are really tired from working hard, we need some advice from seasoned investors as to what would be a good idea, we have an IP valued at $340k with a mortgage of 132k we are currently raising this to 180k to tap into an extra 48k for a new ip but still trying to keep it cash positive, also our ppor is valued around 550k with a mortgage of 19k we are wondering wether to sell and access 500k to invest in ip’s and rent along with the 48k remortgaged or remortgage and borrow up to 400k from our home for new ip’s and stay where we are?Prob not a good idea to sell a main residence only buy further property. You would lose the only CGT exempt asset and would have to pay rent on the new home with after tax dollars.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I think the answer lies in “other things” not yet mentioned. Like these :-
Are you still working and what date do you have set for retirement?
Do you enjoy living in the PPOR you currently have?
Is your plan to buy Growth properties, or Income? Or a mix of both? In the end, the “numbers” will have a lot to say!!
Expanding on Terry’s answer, any borrowings against the PPOR can be Tax deductable if you still draw a wage (i.e. pay Tax).
If selling the PPOR, what is your requirement for the $500k+ that is released? Does it need to provide you with an Income? And how much?
If current IP has an LVR that low (180/340 = 53%) and it needs to be to give a +ve return, would you buy another one (negative geared), or shop for a better return?The good news is that you have a truckload of Equity – and that can be a real blessing, and a catapult if you go about things the right way. Well done. Now, don’t be in a hurry to make your next move. Spend some time reading, posting more (asking more questions), learning more, and pull the trigger only AFTER you have a very clear, meaningful, and successful path mapped out.
Benny
Yes, i am currently working but wish to give it up to do investing and renovations full time. Yes we enjoy living in the PPOR but its an old house that eventually will need further up keep and is on almost 2 acres which takes up a lot of spare time and will take more of our time as we age ( and i hate gardening although my wife likes it). We are thinking that if we sold our ppor and used the 500k plus to buy as many cash positive ip’s as we were allowed would renting for say $400 per week be a viable option or staying in our ppor and accessing 400k to buy as many cash positive ip’s as we were allowed, we still have no idea how the banks would react to us asking for mortgages even if we are able to put down say 20% deposits, i am the sole earner and am a casual worker on $60 per year.we really don’t have any plans to buy negative geared homes our plans are to just buy low, renovate/improve and hold.Many thanks for the replies so far. sheridan & trish.
sheridan & trish, this sounds like a risky strategy to me. Also doesn’t really make financial sense as your loan payments now would be very low whereas if you are renting at $400 pw you would need to earn much more money to be able to afford to pay this. Plus you lose the main residence CGT exemption.
Why not just borrow against the equity? Or if you want to change have you considered selling this and buying a new place and then acccessing the equity in this to invest.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi again,
Good point from Terry – having a CGT exemption is a real asset when it comes time to sell your PPOR. So, if selling, do consider buying another, rather than renting, then borrow against the new PPOR for IP’s. Of course, it would make sense to buy low and reno any new PPOR too – cost less to buy, then add Equity to borrow against!!Given the extra info (wanting to buy/reno/hold IP’s) is the PPOR a suitable location for keeping the various gear you will need if doing handyman things (e.g. storage of timbers, tools, various goods, etc) or is it better to be more centrally located – sell PPOR and buy another.
If wanting to buy more positive geared IP’s maybe the current IP is worth selling, or turning it around in some way so that it becomes +ve geared – can that be done easily? Do you want to share more data re that one? (e.g. location, value, rent, potential, etc).
For the reno’s of new IP’s, are you planning to “stay local”, or to set yourself up so you can drive a mobile home/workshop to “wherever” and spend some weeks fixing up a new buy?
I’m interested in what you decide.
Benny
Many thanks Terry and Benny for your input, re our ip it is a 4 bed brick and tile in coffs harbour 5 mins from the beach and bush that has already been renovated throughout, we have great long term tenants paying $340 per week so we are looking to hold onto this as i said we have a 132k mortgage but are about to refinance to $180k and make it interest only variable enabling us to use a further 48k along with our savings to buy another cash positive ip. I am thinking if we sell this large ppor house and downsize we could also free up maybe another 200k for cash positive ip’s and still own a new poor outright costing around 350k?? this would enable us to have less stress about going into fast turnaround reno’s, this might be a way to look into s.e qld and beyond if i can give up work for a while and do remote renos??
Could you move into coffs IP? You would be paying abou $127 pw instead of $400 pw rent. You could sell the other house, pay off the $132k loan and then pay no non deductible interest. Then borrow up to 80% LVR on coffs to use for investing together with your cash.
Keep in mind if you are not working you won’t qualify for a loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Love reading all the comments. Thanks for sharing. Something a lot of us can learn from.
Adrian Cahill | AdrianCahill.com Personal Development Expert
http://adriancahill.com/from-investor-to-coach/
Email Me | Phone MeHere since 2002, however things have evolved over the years.
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