Hi all, this will be my first post here so please excuse my ignorance. However I have been long stalking the forums for a while now.
The issue is I am currently looking to move from my current house, worth 800k with a mortgage of 250k withstanding and I am looking to move into a 550k house further from the city.
Would it be better at this point to refinance my current home and rent it out? (estimated rental return is 550-600pw)
or better to sell, pay off the mortgage then refinance to invest in another property?
If i didnt sell I think I would have a 700k loan on my hands and not be able to make repayments?
Looking for some advice.
Thanks in advance.
Charles.
If you're going to rent an 800k property it has to stack up economically. It would need to pull around 55 – 60k/yr (gross yield) for it to even be worth considering.
If you can't make it work then the choice is obvious.
Prior to leaping into a new property I would consider my future investing options before buying. If you intend to acquire more property and put your capital to work then I suggest you lock onto one of the very able brokers here to get yourself set up correctly in advance.
You have to treat this transaction like a business and do the numbers.
Ok so lets look at the second option first. If you sell your current property, factor in all the costs associated with selling your current property and buying another property and then look at the net operating cost.
Now weigh this up against your current (which is your first option) property which you can rent out for $600 p/w and has a mortgage of $250k. When doing this dont forget to factor in ALL the operating costs.
From there, the numbers will tell you which is the better option.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
There is the tax concern also.
If you are borrowing 550k for your new house and you have 550k equity in the investment property, then you may not be getting the best tax advantage.
There have been numerous threads on this topic also, so recommend you do a search on that topic.
Increasing existing loan to buy the new house won't mean increased deductions as it is private borrowings.
Is the house located in VIC? If so you could possibly sell to your spouse or sell your share to your spouse who could borrow to purchase. Cash released goes into the new home and interest on the loan is deductible. No Stamp duty in VIC and possibly no CGT if it was the former main residence.
You need to do the calculations, get legal advice and tax advice and redo the loans. Would be relatively cheap.
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
As Terry mentioned a spousal sale could be an option depending on the location of the property and might prove financial viable especially at a higher marginal Tax rate.
If you are single you would to work out the numbers to see what the break even point is.
Get some quality advice before rushing in and make a decision.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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