Hi everyone, I am new to this forum and can say I am a beginner in the investment property game however I’d like throw open a scenario which I have been thinking about for a while, to possibly obtain some feedback or thoughts on the matter so I’ll keep it simple at this stage.
My reasoning for this exercise is two fold:
1.to establish a medium to long-term investment strategy by thinking a little outside the square.
2. improve the cash flow situation (reduce outgoing increase incoming)Basically I am looking to sell my property in the Hills district of Sydney, which is my current place of residence. Sounds simple enough yes, but rather than buying another home/investment to live in, I am looking to do a few things differently.
(There is my wife, a one year old and myself, which comprise the family)When I sell my home, pay out the mortgage, and some other loans/debts I will end up with somewhere between 220 and 250K.
(The figure may vary based on what the home is sold for but 220 is a very safe bet)My thoughts at this time are that (first thing’s first) we find a suitable place to live after we sell and at present we are looking to move closer to the city. This will be easier for us to travel to and from work (as we are both city based). With respect to moving I am proposing that we rent not buy. During this time probably looking to spend about 400 a week in rent, which is less than our present interest repayments on the mortgage.
So, to review the scenario to date we have paid out all our debts, we have cash in the bank and our only major outgoings are 1.6K per month rental to live where suits our present lifestyle. Our total incomings per month are about 10K
From here, one of the first things, which I am going to consider will be an investment property, looking to spend up to 300K, and probably negatively gear it to provide some tax reduction for us. Once this is running I will look to move on a second property (perhaps commercial to diversify a little) for a similar sort of cost but maybe a set-up a positively geared one. Above and beyond the properties there would also be a managed fund or share portfolio ticking over as well, and of course cash left over in the bank to continue building for a deposit on our next investment, be it one we do or don’t live in.
I realise that there are many, many things to consider in this scenario, and I have already nutted out various pros and cons and spoken to my accountant but I’m looking for some feedback from people who may have successfully or unsuccessfully conducted a similar exercise or from those who may provide further pros and cons.
What’s life without a little risk…
cheers
MarkHi Mark,
Sounds like you’re at the ‘still planning and researching’ stage. I’d like to point you out to this link first
https://www.propertyinvesting.com/strategies/negativegearing.htmlAlso, I’m not sure about the rents close to the city, but my friends who have a baby and live close to the Sydney city (for the lifestyle as well as work) and are paying $700 pw rent, so is the figure of $400 rent p.week feasable with a 1 year old (they actually need more space as they grow [ohno] and get more active)?
Should one of you loose your job (hopefully this will not happen of course) and you are reduced to 5K per month, will this change things?
How much do you expect to achieve from the sale of your current abode? Do you have any equity in your current house?Good to see you’re forward thinking
Cheers
SooshieWhen a problem is created the solution is created simultaneously
Up your payments in terms of rental a bit.
Also perhaps it would be better going cashflow positive for your first one as you can afford to make a mistake, without it blowing your budget.
Definatly take in consideration Sooshie post too! There are many things you will have to weigh up… For example perhaps it would be better to take equity out of your property rather than selling it (as the property market is going soft @ the moment).
Rgds.
Lucifer_auThanks for the input. I can definitely say that I am still researching and considering my options at this point. It’s likely that we will be planning for another kid as well, so one of the salaries will disappear at some point for a period of up to 12 months, (bring on paid maternity leave) so this needs to be factored into the equation. My main reason for selling is that we want to move out of the area. I have a few ideas on where I’d like to be at the end of the day, but for starters we’ll get a little closer to our places of work and cut down on our travelling time.
I,d sell up, buy a few cheap +cf IP,s, do a bit of travelling before the baby has to start school and find yourself a nice cheap place to live where your children can grow up and actually enjoy life.
W.A sounds like a good place.
Russ[biggrin]So many +CF properties in Western Australia.Let me help you. And we can achieve a win win situation.Russ.0438 659 411
I like your style…[biggrin]
And now with the Polys up the anty on tax in NSW for IP’s, WA does sound like a good place..
I’ve done something similar and it is a good strategy as it is cheaper to rent than paya mortgage on an equivalent property. Have you considered factoring in the 6 year rule for CGT expemtion? You can rent out your PPOR for up to 6 years without paying CGT when you sell. That means you may be able to keep your existing home and borrow against it, then sell it later on without paying CGT. Or sell your current home, move into a new one short term to establish it as your PPOR, then move out and rent it out – and still claim it as your PPOR..
Terryw
Discover Home Loans
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
Hills district hey? I have to live in the Hills District and would rather not be renting.[blush2] Not thinking of wrapping it are you? Selling cause the house is too small or just to get closer to Sydney?
Gramyre, house is a nice sized 35squares (two storey) and it exceeds our present and probably future sizing requirements. Moving closer to the city primarily for work. Not wanting to get out of the property market, I need to do something with the $$$ left over from a sale of my present home. I’ve read a little on wrapping but not too much, so I can’t say if I’m totally keen or wise for it. I think it may suit better if I have multiple wrapped properties. (i think)
Thanks for the reply, had to ask (now I won’t die wondering)
The prices in this area would make repayments in the 800-1k a week range which is a leeeeeeeeeeeetle out of my price bracket.
[wink]
Thats Ok.
Tommo.I,ve never been to the east coast so I dont really know what its like.But I always ask myself why? why? why?
Why would a person choose to live in such a highly populated,and possibly highly polluted place like Sydney.Please forgive my ignorance.But you pay soooo much for a house sooooo much for rent and probably shorten your life expectancy because of all the stress involved with what you have to do to maintain such a lifestyle.There seem to be a lot of better alternatives.
Russ.So many +CF properties in Western Australia.Let me help you. And we can achieve a win win situation.Russ.0438 659 411
I know it’s slightly off topic but I have to agree with Russ…. I am a country bumkin gal and hate even going to Adelaide which is quite a bit smaller than Sydney.
I can rent a place where I live at the moment….
4 bedroom home on bout an acre for about $280pwk and my heart flutters at the thought of paying that price for rent, I think I would drop dead right on the spot if someone said I had to pay 800 bucks a week in rent!!!!![skull]
I pay $90pwk for 2bdrm flat perfect for me and bf and it takes my 5min to get to work!Tommo…. good luck with you ventures tho!!![biggrin]
[cowboy]Blondie
You’ll never know if you don’t give it a go!
As flexible as my employer is (and it would be the most flexible employer I know (well apart from myself)) they have already knocked back a colleague moving to WA as the travel expenses to come back regularly to manage the team are beyond what they want to pay. Place on top of that a joint-parenting situation where my children spend alternate weeks with me and there you have the reason why I live in Sydney and in this particular area … we all have our reasons. I love WA. I drove there last year and did not want to come back from Pingaloo Reef. Wish it wasn’t so hot in summer though![biggrin]
Hands thread back to tommo and apologises for the hijacking.
Gramyre yes when children are involved you have to have access but If I was a young person or new family I would think what else does the world offer.I think maybe that some people are brought up in one area and accept it as the be all and end all.They dont know that there is a better way.
Maybe I should start a new thread.
Russ.So many +CF properties in Western Australia.Let me help you. And we can achieve a win win situation.Russ.0438 659 411
$800 per week rental, wow, geez, I pay $55 per week repayments on my house..
Thinking of purchasing a small caravan and paying $50 a week rent in a van park, geez, charge someone $130 a week here, profit, only my missus will not allow me to do it.
Mark,
I would keep the property you have. Loan against it to purchase a couple of investment properties. you could lend up to 80% val of your home and after you settle on you investment properties you can keep the cash left over. Sounds too good to sell. Remember to sell, 4-6 weeks on market then 30-60 days to settle. With a refinance you could have the cash in 2-4 weeks. Talk to your BM or broker. The deciscion is up to you. You are asking the right questions sounds like your head is screwed on right. You’ll do OK.
aluminati.
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