due to the boom, my +ve IP in the mining towns that i have purchased have gone up significantly in value. Now the question i would like some help in is – do i sell the IP take the profit and pay of my PPoR (non dectible debt) and start reinvesting, or leave it as it is use the equity and continue investing? Im aware of CGT etc and cost of selling. So which is more important to reduce all non deductible debt, or to accumalate more IPs? A little advise would be appreciated [biggrin] – happy investing to everyone in the new year
You really need to examine how much is the PPOR interest on the non-deductible mortgage is costing you. What sort of capital gain you might achieve on the PPOR in the future if sold as this would be CGT exempt where as investment property would incur CGT. Also what strategy you are using like are you employing a negative gearing high growth strategy that may not be as effective at this stage of the market or are you employing a positive geared investment strategy that could use the released equity to position your next investment to be positive from day one. Remember also that $130 is needed to pay $100 off PPOR interest costs. = interest / tax rate ie $100/0.30 for 30% tax rate. = $133.33
Another thing to think about is how long will the mining boom last ?
Will the value drop if the current mining boom stops.
You might want to think about diversifying you property portfolio so that all your eggs are not in the one basket , ie it is not all in mining towns and becomes less corelated to the well being of the mining industry.Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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