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Agree with KiwiPropertyGuy. I believe you will NOT regret too.
If you have enough income to cover another 2% hike in interest, there's no reason to sell.
There's a small chance prices will drop after FHOG ends, but the way I see it, there's a bigger chance of them rising in the near future (my personal view is entry level prices will drop just a fraction and upgraders market (650k+) will rise disproportionately more in comparison – that's Sydney tho).
The current interest rate is an emergency setting. The market sentiment is that the rate will rise soon, and potentially quickly. At present some econmists are poised at 2% extra by the end of 2010.
If sleep-at-night factor is crucial to your decision (why gear all of them so much to start with I might ask – but that's another discussion), I'd do a detail cashflow analysis of your current situation, with interest rate being 2% higher than today's. If that outlook makes you sweat, I'd sell the one house that has the least potential of capital gains, or the cheapest one in the entry level market. I know people advocate "never sell", but if you're constantly worrying about day-to-day cashflow, it's not very healthy (especially if you're expecting a new member in the family). I'd rather invest less slowly (you still have 2 houses), and be able to enjoy my time with the people I love most in life. (unless both of you have immense appetite for risk which doesn't seem to be the case)
There's no free lunch. If you want something, you've got to pay for it. Sleep-at-night and miss out on potential hike in prices, or cut back on living expenses if you can and ride out the storm (which could be many years).
But I guess you already know all this.
p.s. I think FHOG only get scaled back at the end of Sept, it doesn't end there. The original FHOG will always be in place. I feel that you're over estimating the impact (of prices collapsing) of the imminent 30/9 scale-back event.
Just my personal view.
Get an LOC on 80% of your house, buy as many properties as you can with enough equity to break-even (interest expense + rent income = 0, factoring in 2% rate rise). With the equity and cash you probably can buy 3 houses if not more (30% deposit on each).
1. property selection is important – buy only investment grade property
2. if you're new to investing in property, this exercise will take time. dont rush. If I were you, I'll buy one property at a time, and adjust my selection strategy along the way.And then just wait comfortably until house prices go up enough, then formulate your next move.
I'm a risk taker. If I have what you have, I'll buy 5 properties and negative gear this year. But then that will carry much higher risk. But hey… to be honest, with that equity and spare cash, I'll quit my job and trade/invest full time in both share and properties. (unless I really love my job and it pays me very well)
I'm learning too. Anyone see any problem with my hypothesis? Or am I being naive? I'm half way towards this scenario myself…
It looks like you can do with some trustworthy advice from a professional / experienced investor. Too many unknowns / variables in your description and too much at stake here…
Good luck!
Assuming the situation is as simple, I'd get a job first, unless I pursue option 3. A steady income just help so much with future IPs. $30k is not a lot to live on after funding a property. (again assuming situation is as simple)
Agent Rep (RE?) job seems quite flexible timewise and is perfect for you to learn about real estate at the same time. Why did you turn it down?
(rhetorical question)Richard is spot on with LOC on PPOR. I'm financing a purchase entirely with the credit facility in LOC for deposit and costs. In other words, I use $0 of my own money to buy this house.
