Hi,
I would really appreciate your guys’ valuable experience and opinion on whether I should sell my Investment Property in Canberra. I will try to explain the circumstances in detail to help you get a better idea of the situation. Of course, the ultimate decision is up to me, but I would really like some opinions on the matter.
Currently have:
– 1 PPOR with $235,000 left owing (both mine and my partners)
– 1 IP with $185,000 left owing and currently valued at about $300,000 (mine only)Return:
– IP has rental potential of $260-$290 per weekSituation:
– Partner and I both work fulltime. Current combined income (not including rental income) is $80,000
– Partner 25, myself 24
– We would like to have a baby in about 3-4 years time and would like to survive comfortably on one income (my partner’s) when we do.
– I was thinking of selling IP and using some of the money to complete renovations on PPOR and putting the rest of the money into PPOR loan, so that by the time we have a baby, the loan will be minimal and the repayments will be low.Any thoughts on the matter?
pasandbec
Given that you are earning $80k, are DoubleIncomeNoKids, and your IP is roughly paying its way, could you not in 3 to 4 years either:
1) Pay down a large portion of your PPOR loan
2) Pay for the renovations out of savings
3) Both the above?However, if you believe that your IP is currently over-valued, you might consider selling it to take profits from the recent boom.
Cheers, F.[cowboy2]
I should point out that when you say ‘mine only’, it’s probably not!Another option is selling half of your IP to your partner. She could borrow to do this and the funds released could be paid off your PPOR. This would save you a bit in real estate fees etc, and you would get to keep the IP while converting non deductible debt into deductible. There may even be stamp duty exemptions.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]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
foundation,
Thanks for your reply. When I say mine only” I mean “in my name only”. I am part of a partnership[ and I know what you’re suggesting, but I have no major concerns there. BUT, since you mention it, what have others here done about that subject?? Financial Agreements, Pre-nups, etc…
What are DINKs? I don’t know, it’s probably not but it sounds offensive LOL
1) how would we down down a large portion of our PPOR loan?
2) savings? we need to do the renovations NOW and at present we do not have enough savings to cover the costs of the renovations we want to do.thanks.
don’t worry – DINKS isn’t offensive. Simply means “Double Income No Kids” – a state to be enjoyed while it lasts!
All the best,
carlinThanks for the explanation, hehe.
Yeah, it’s certainly the best time, financially, when you’re DINKs. That’s why I want to set us up now, whilst we CAN, before we have kids.
Well, after punching numerous ‘hypothetical’ figures on a few different scenarios, I think I’ve worked out the best way to go with this. Could you all have a look and give me your opinion, please? Ta!
I believe the best course of action for us would be to:
sell IP in Canberra and put profits from it into our PPOR loan
then
buy a new (cheaper) IP and borrow extra money for renovations on top of it.This scenrio is the most tax effective and the one that will pay off our PPOR loan the quickest (about 4 years).
Any thoughts?
Cheers,
pasandbecWhats your PPOR worth? If you can see a market with a high cap gains potential or something off the plan in a good location with demand high, then if your PPOR is worth $500k and you owe $235k then you have $165k for deposits. So if you just get standard 80% loans this equates to a total investment portfolio of $835k
So get 7 x $100k investments that are neutral or positive cashflow plus costs just off your PPOR. With 7.5% return the banks will love you, then sell your dog of a first investment (negative little beast) and all of the profit goes off your PPOR as non deductible or bad debt component.
Do this and if you do it right in 2 years you have 7 x 60k profit from your small investments so sell 2 pay off your ppor bad debt then with 5 left use this as your base to grow. With increased rents 2 years later as well, these smaller IP’s will then be positive for you and things will be rosy in time for the kids.
Just an idea. I have them all the time.
DD
PS146 Certified Financial Planner
Don’t sweat the small stuff,and it’s all small stuff!!Originally posted by DD:Just an idea. I have them all the time.
Are they all this reckless and dangerous?
…So if you just get standard 80% loans this equates to a total investment portfolio of $835kSo get 7 x $100k investments that are neutral or positive cashflow plus costs just off your PPOR. With 7.5% return the banks will love you, then sell your dog of a first investment (negative little beast) and all of the profit goes off your PPOR as non deductible or bad debt component.
Ok, so now they have $955,000 in debt. I’m sure that will give pasandbec a great feeling of security.[blink]
That’s $3,000 per fortnight in repayments! What happens in the event of a vacancy? If interest rates ([whistle]) rise by 1%, where are they going to get the additional $390 per fortnight to keep their heads above water?Do this and if you do it right in 2 years you have 7 x 60k profit from your small investments so sell 2 pay off your ppor bad debt then with 5 left use this as your base to grow. With increased rents 2 years later as well, these smaller IP’s will then be positive for you and things will be rosy in time for the kids.In your perfect world maybe. In the real world $100k properties don’t appreciate by 27% year after year. In the real world you can’t sell two properties with $120k CG, pay selling costs, pay CGT and have enough left over to pay out the $235k PPOR loan.
In the real world, houses / units costing $100k now are far more likely to be worth $60,000 in 2 years time than $160,000.
In the real world there are thousands of Australians who have followed this kind of bad advice and are well placed to reap the ‘rewards’ of their ‘investments’… in the form of personal insolvency.PS146 Certified Financial Planner[blink]
Regards, F.[cowboy2]
Oh, pasandbec – I’m glad you have apparently come to a sensible decision, as opposed to this type of bad advice. There is nothing wrong with crystallising your gains by selling.
Originally posted by foundation:
That’s $3,000 per fortnight in repayments! What happens in the event of a vacancy? If interest raties rise by 1%, where are they going to get the additional $390 per fortnight to keep their heads above water?foundation, what are raties???
I know what rates are but what are raties???easymoney[biggrin]
FUNNY![biggrin]
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