All Topics / Help Needed! / Buy Investment Properties & Rent The House You Live In

Viewing 5 posts - 1 through 5 (of 5 total)
  • Profile photo of StrikerStriker
    Participant
    @jamescameron
    Join Date: 2003
    Post Count: 33
    February 18, 2015 - 8:27 pm

    Strategy: 4 year strategy to rent a house larger than the one I live in and own outright.

    Reason: We are overdue to move into a larger home. Depending on where my children get accepted for high school in 4 years time, we will buy a house in that area.

    Our Situation:
    * My wife & I are both PAYG earners
    * Our home loan is paid off
    * we have 1 investment property with a loan against it
    * our current annual savings after all expenses is approx $45K p/yr
    * if our home is rented we would get $700 p/wk
    * we would like to rent a home for $1000 p/wk

    The Problem: If we rent our home out and rent a bigger place then my net savings goes from $45,000 p/yr to $20,000 p/yr, and a further $8,000 tax (because I am earning rent on my home with no debt to offset it), so ultimately my savings drops to $12,000 p/yr.

    My Question: How can I minimise the ($45K – $12K) $33,000 p/yr I will be losing from my savings? Should I take out a new loan to buy say $300K of shares and hope the growth + dividends p/yr will minimise my $33,000 loss each year?

    Striker
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    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539
    February 19, 2015 - 1:20 am

    Hi James

    Can’t say the hoping strategy is a favourite of mine, so if it were me I wouldn’t be borrowing money to buy shares in the “hope” they grow in value.

    Just out of interest, here are my questions:

    Have you cut the numbers on your position if you sold your home to fund purchasing a bigger home?

    Also, do you have a depreciation schedule against the investment property?

    What age is your home? Just wondering what the depreciation schedule would look like for it if you converted it to an investment property.

    Have you cut the numbers on doing an extension on your home so that you can stay at the same residence but have more space?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    February 20, 2015 - 1:31 pm

    Away from Jacqui’s excellent comments there is another alternative.

    What State is the property in ?

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of StrikerStriker
    Participant
    @jamescameron
    Join Date: 2003
    Post Count: 33
    February 23, 2015 - 9:30 pm

    Richard hi, my properties are in Melbourne.

    Striker
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    Profile photo of StrikerStriker
    Participant
    @jamescameron
    Join Date: 2003
    Post Count: 33
    February 23, 2015 - 9:38 pm

    Hi Jacqui,

    My home is about 25 years old but I did an upstairs extension and added more rooms about 5 years ago. I don’t have a depreciation schedule for it and would get one if I was to rent it out. Even with the extension it is only a townhouse and still restrictive in space with very little land. It is in top spot close to schools and trams and should rent out easily.

    I agree with your comment about buying a house now which makes good sense but because I won’t know which school the kids will go to for 4 years I was hoping to get something done now, and then in say 4 years make the purchase once and for all.

    James

    Striker
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