Hi there,
It's been a while since I was active on this forum.
Since I was last here, I got divorced and paid out my ex-husband a far-too-large amount of money for him to go away. That was several years ago.
Fast forward to today and I'm about to get married to the absolute love of my life (the guy I fell in love with back in my early 20s before I even met the ex) and we're in a predicament.
You see, I own several properties that I purchased back in the 1990s before I even met my ex-husband. None of them have any hope of capital growth in the foreseeable future (yay Adelaide, right?), but they're all positive cash flow (yes I've been careful over the decades to set up finance to suit my owner-occupied property first). My partner has also paid out his ex a huge amount of money to his ex a couple years ago to get rid of her.
My question is simple: Do I hang onto three properties that are now considered old, tired and past-it – even though they're positively-geared and rent out my current principle-place-of-residence? Does my other-half sell his monster-overpriced-home for the same reasons? If we sell everything, we're freehold in our PPoR and able to borrow plenty for new investments. However, why start again with new properties when we already have multiple between us that were purchased a couple decades ago?
Or do I sell them all in favour of buying an owner-occupied property with no debt and start over with my new husband with a new PPoR and a new investment portfolio?
I am so confused. Such conflicting information from accountants/family/financial advisors. I'm so stuck.
Please help
Hi Lea
Congrats on the new start to life
I'll have a crack at this – and it's only my opinion, not advice.
Work out which one of the properties you'd like to live in – whether it's yours or your new husbands. This will be just as much of a lifestyle choice a monetary one – as I'm sure you know, it's not always about money.
Following that, work out where you want to be financially in the next 5, 10, 20 years.
The common end goal is to be able to retire with $x amount per week to live off.
Property is the vehicle that you've chosen to get you from today to your end goal – now you need to look at the properties you own and decide whether they fit in with your plan.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Since the properties are cashflow positive and not costing you anything to hold – then hold them and sell them only if and when another/better opportunity arises.
A lot of people start flipping their portfolios gradually as they come across really good deals.
TheFinanceShop | Elite Property Finance
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I'd hold the cash-positives for now and reevaluate once you've tied the knot and everything has settled down again. Congratulations!
I would suggest it all depends – if you sold those properties could you make more money elsewhere?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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You've mentioned the current IP's are tired and old, where are they located? Do they have development potential, perhaps you can turn the old properties into new (depreciable) properties.
I'm inclined to hold properties as switching costs in South Australia are quite high (stamp duty etc). When you multiply this over several properties and you find that you lose quite a sum of money to the govt.
I suggest looking at where you want to be, where you currently are and draw a line between this. See how you can achieve your goals (perhaps to generate a strong income for retirement/freehold PPOR etc) and then see which strategy can take you there as quickly, effectively and low risk as possible.
Corey Batt | Precision Funding
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Hi Lea,
Quote:However, why start again with new properties when we already have multiple between us that were purchased a couple decades ago?Don't lose sight of the fact that buying and selling any property costs you extra $$. So, like many of the others, I'd say "take it easy" with selling them off right now – with the IP's being cashflow +ve there really is no rush.
And, if you aren't already aware, do check out Offset accounts which can be useful in helping you to pay off a PPOR, and/or allow further investment when the time is right.
Benny
Thank you all so much for your replies. We have discussed our situation at length, read through your opinions here, and discussed options with our accountant. I'm personally reluctant to pay out so much money to the govt and real estate agents in fees/charges. So here's what we came up with in the end:
1) move into the hubby's monster-overpriced home and focus on reducing debt (with help from +ve cashflow properties into the offset account, of course)
2) rent out my current PPoR in nice beachside suburb for the next 5 years minimum (cashflow positive from day one, plus plenty of capital growth to be had, but considering taking advantage of the 6-year rule for Capital Gains Tax)
3) renovate the oldest property to modernize it a bit, plus raise rent a little more (zero chance of re-development – it's an apartment in a block of 15)
4) sell the next oldest property – there is no hope of further capital growth since the Housing Commission moved into the area. Also, no point in redeveloping, as costs would outweigh gains in that area. Put up with the capital gains tax on this one and use the proceeds of sale to reduce debt on hubby's PPoR substantially.
5) renovate the next in line and hang onto it for a few more years. Still hope for this one long term (and great long-term tenant in there paying +ve cashflow rental)…
6) build a new investment property jointly to start our new 'joint' portfolio rolling in the right direction. Hopefully, this one will be in a better location to replace the one we intend to sell. Decided to build because it's still possible to create some equity in some suburbs in Adelaide by being careful with construction costs, plus cheaper stamp duty, plus rental demand is still strong, plus nice depreciation.
Thank you all once again for your input and opinions. You've helped us enormously with our decisions.
Cheers,
Lea
If in Victoria a property can be transferred between spouses at full market rates without stamp duty. So you could possibly sell your former PPOR to your husband who could borrow 100% to buy it. Funds released could be used to pay down the non deductible debt. This could greatly improve your tax position for minimal outlay.
But seek legal advice before doing this.
Also with a property that has no hope of growth, there is generally no point in keeping if you could sell, pay down the no deductible debt and then borrow to buy a better performing property.
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
Thanks for your response, Terry. The properties are all in or around Adelaide. I'm not sure that same law applies in terms of stamp duty in South Australia, unless it's been court ordered, so I think he would need to pay stamp duty on the full purchase price.
lea wrote:Thanks for your response, Terry. The properties are all in or around Adelaide. I'm not sure that same law applies in terms of stamp duty in South Australia, unless it's been court ordered, so I think he would need to pay stamp duty on the full purchase price.In that case then I don't think there are any concessions in SA, but am not totally sure.
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
Do not think about setting up a SMSF until you have received Professional Advice from a Licensed individual.
We see many a client who has received inappropriate advice from a Broker who is not licensed.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Lea,
First of congratulations for finding the hidden gem in your life.
Take one step at a time. Settle in life with no property hassles. As properties are positively geared and you do not need money now.
Be on look out for better options in property such as positively gears and positive capital gain but have your tax also. Think of buying properties in SMSF and get ready for less tax regime may be option. Have detailed consultation with Financial planner.
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