Whats the best solution

Hi SBH,
I can’t make any comment on the Perth market as I live on the East side of Australia. However, it is good you are asking before “doing” as there are a number of things you should check out before you make your next move.

First off, there are Tax benefits in selling your first home before buying another (and it might mean you can offer cash for your next home, thus allowing bargaining of a lower price perhaps). On the flip side though, there are also Tax benefits in providing rental accommodation for others by keeping your current home as a rental and buying another. Your income appears to be sufficient to be able to buy a further property (and not sell your first home), depending on your current expenses of course. A Mortgage Broker could help you more on that though, as the lending climate has changed markedly since the Royal Commission into Financial Institutions.

Further to this are other thoughts – like, are property values in Perth likely to appreciate in the medium- to long-term? If so, would you want to hold two properties instead of one over that time, thus building up your Equity? The risk there is that values might stay low, and keep your finances locked into two assets that aren’t growing. Also, it could be your money might be better used elsewhere. Is your spare cashflow sufficient to cover all costs during that period? Then again, if you sell now and buy again soon, the Equity you have in your current home is then “all yours” with no Tax payable, allowing you to buy another in the same climate, thus not losing out on any growth that might occur in future markets. But if there is growth, holding two would be better than one, yes?

Whew !! Sounds like a circular argument, eh? ;)

Sorry SBH – it sounds like I am asking more questions than I am answering, but that is purely to start you thinking around the whole subject, rather than just concentrating on “do I sell this or not”? There are many good reasons why you should and/or shouldn’t. Becoming more aware of ALL your available options is a good option at this time.

Benny

Hi SBH,
Back to my earlier comment of mine:-

it sounds like I am asking more questions than I am answering, but that is purely to start you thinking around the whole subject, rather than just concentrating on “do I sell this or not”? There are many good reasons why you should and/or shouldn’t. Becoming more aware of ALL your available options is a good option at this time.

While responding to your most recent question, I thought more about one of your comments – this one:-

I think I was looking for a simple advise whether I should buy in where I want to live or not. rents probably cheaper like $500-600 for a standard house and owning a house costs a bit more for sure.

What came back to me today was a very early learning point for me – and that came out of a forum debate about “Do I hold my old PPOR as a rental, or do I sell it and buy a new one?”

Now, as I referred to earlier, there are a HOST of other questions/comments/learnings linked to that very simple question of yours. One MAJOR point was this one:-
Where one is thinking of retaining their old home as a rental, there is one point that should be fully explored before making a decision. It involves taxation deductions and the like. Goes something like this:-

1. If you are buying a new home, any loans you take out are not deductible. Even if you take a loan against the old home (which might have a heap of equity in it) that you are making into a rental, it doesn’t matter as the REASON for the loan is to shelter YOU, not the tenant.

2. Carrying on from 1 then, any NEW loans against your old home are only Tax deductible if the loan is for investment purposes (e.g. borrow against old home to buy ANOTHER investment property).

3. One problem with turning your old home into a rental is that, in many cases, any mortgages have been paid down over some years, thus the remaining mortgage might be quite small (e.g. a house worth $600k today might have just a $120k mortgage against it – so $120k is a Tax deductible amount once the property is rented).

4. That is fine if you are wanting to have the property highly positive geared (nothing wrong in that at all) but then, you MIGHT be better off to sell your old home outright, claim the full CGT exemption and keep ALL of the equity to put against the new place, THEN borrow against the new place for other investments if you want.

SBH, there is so much more to this too (you KNEW there would be, right?) that I can only suggest you find a great adviser who can run through all of your options with you. You will find some right here, but then, you might have someone over there who can answer specific question s and can guide your steps.

Do come back here with any other questions too – we all learn by reading and learning from others like Steve and Jason, and a host of professional people who frequent these boards (see their signatures). Not me – I come up with a few thoughts from time to time, but have no qualifications that make me a professional, as such, do check all I say with your own advisers.

I hope the above thought helps somewhat. In closing, this topic might have some good thoughts around your question:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697967

Benny