Just a bit of advice as i’m torn between two ideas here.
My wife and I bought a unit in Sydney to live in.
The unit is coming up to 5 years old and we’ve had it for 3 years.
We’re young (26 now) and as most young people do, we changed our minds after a year and
headed over to the UK where we’re currently living. Our unit is being rented
at $255/wk,Purchase price was $320000 and there is the mortgage at $275000 fixed
for the next 18 months at %6.9. As we aren’t working in Oz at the moment we get
nothing back from the tax man. Originally our plan was to live in it and
pay it off asap but then we left so now it’s negatively geared, in our case, quite heavily.
The overall aim with PI for us was to have a continuous stream of income but we’re pocketing over £60000/yr after tax and negative gearing isn’t hurting. My father is the accountant and just did my tax and said i was losing a lot of cash in the form of interest. I can’t put any extra cash against the loan as i have a fixed loan P & I and put the maximum yearly amount against it already.To break the loan would cost $5000 in fees and revert to the current variable rate which is
similar to the fixed anyway.Here’s the problem. We now have saved £20000 and are coming home to buy another property as we
can support the loss of income and figure it turns positive anyway, but my accountant/father is saying take that money and put it against the current loan. We will be here for at least 5 years longer so it’s important for us to make the right decision. What would you savvy investors do in our situation.Any advice would be appreciated,
Thanks in advance,
Hi,
Young + high income = buy more.
What about buying in the UK?
Good luck.
hrm
Be careful about getting so negative geared that you cannot sustain it when back on your normal Australian income.
I personally would be considering more purchases however don’t see this as advice as I don’t know your situation and I am not qualified or licensed to advise!
All the best,
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
The problem with buying in the UK is that maintenance can often be high as most buildings in areas we can afford are over 100 years old. Plus, as security, if we were to buy here and then have to go home we’d be paying a mortgage in pounds.
Would the consideration of more purchases be based on the reasoning that the long term capital growth would out way the short term losses due to negative gearing?
Originally posted by ptdee:As we aren’t working in Oz at the moment we get
nothing back from the tax man.Hiya,
This isn’t advice either, just a suggestion ;
Ask your father take a real close look at exactly what he is doing with your return w.r.t. your IP. If you are a non-resident for ATO purposes, you may be able to carry forward that loss every year.
When you do eventually go back to Oz and start earning taxable income, you may find that the losses carried forward for all those years can be offset. Your first or second year back here (depending on the size of your income) will effectively be tax free….so it’s not all that grim.
Ask your father to check it out…I’m sure he’s right on top of this anyway.
I think you have a jolly nice problem there (you’re in the general arena of nice choices). Well done for putting in the hard yards and making the right choices in the past to get into that position.
For what it’s worth, I’d be looking to purchase again, not pay down your IP – preferably something that is low hassle and high cashflow…hell…aren’t we all looking for those ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks Dazzling, my father is doing exactly that but i suppose i can only see the interest racking up and loss in sterling value and am starting to panic a little.
Also, like another poster on the forum, i bought in the south of Sydney, Sutherland Shire and the yield is on average %3 – %5. Sydney is in my opinion currently over priced and as such if i buy now i risk the value going down in the short term. That’s why i thought to pay off the IP but general consensus tells me that isn’t the smartest thing.
I figure you guys have been there done that so i’d rather listen to this advice than from people who haven’t done it and speculate.
Thanks for your input every body.
leaving the dog of a first investment alone means you are still carrying debt. What cap gains could you get by selling it? Would you not be better having several “entry level properties for say $100-115k each earning between 6.8-8% return.
Add the UK cash worth about $58k after exchange and you have a yummy 4-5 cheapies to give you the right rent return. Maybe neutral now with rents rising this is short term before you have cash coming back out.
Dazzling is right, tax credits can carry forward for 4 years under Australian tax law(well this week anyway). So go earn good pounds and have a happy pay down of your loans when you eventually return to the land of Oz.
I have one investor in London making a killing on what he is earning there so make hay while the sun shines.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!If there is a good opportunity of capital gains (remembering that an investment property should be held for a minimum of 7 – 10 years) and the capital gains is well outweighing the interest payment, then i would suggest buy another. But that said I would buy a holiday letting unit in a great spot where your rental period is at least 80% of the year. This could also be an option for your Sydney unit.
Property Acquisitions for developers and investor from; Kevin
The capital gains so far on the property has been minimal as we’ve only owned it for 2 1/2 years. It wouldn’t be worth selling i don’t think. But having said that, i read a rule somewhere which says if your property was your PPOR and you moved out, you can rent it for up to 6 years and if you sold it in this time you pay no capital gains.
That aside, i want to stick to the south of Sydney but there is no such thing as a property for 100 – 150k. A 1 bedder would still be 290k with rent of 200 – 250p/w.
It seems the best idea is to go on the cheap and buy small 1 – 2 bedders and wait.
It’s also not the easiest to search for a property when you’re in the UK and it’s in Sydney.
Also i might add the reason we don’t want to sell is in the 18 months we have been renting the place out it has been vacant for only 3 days so we can’t help but feel that later on it would return a solid steady cash flow.
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