Hi All,
First time post in here, so apologies if my post is bit long. Thanks to the members of this wonderful forum who have posted/reposted, shared so much valuable information for us to learn and use it to the best of our abilities in property investing. A bit about me, in my late 20’s, just managed to build first PPOR, and now trying to learn about how best to use property investing as a means to be better off in future like most of us in here. My timeline :
First home: Current Value : $565k (Actual cost : $520k)
Existing Mortgage Amount: $352k(Me and my wife had simple basic principle, pay down as much as you can for the first home. That’s what we did )
So I have a bit of equity as you see and would like to know if I am on right track or at least the foundation is good to invest further. Or I am thinking it differently ! Our plan is to own at least 1 property in the short term using the equity. The problem I am having now is what is the best financial strategy I should devise going ahead. I have few ideas with me but not sure if they are the right one!
1. As my mortage amount is on the low side considering the value of the home (Should I turn this property into a neutrally geared one by paying 50k lumpsum to bring the mortgage amount to around 300k (Rent I expect is around 460/week) (Currently have savings of around 80k). Ultimate aim is to make this house a positive cash flow property. Am I thinking it weirdly ?
Look I have recently started on this journey and this forum has been very helpful so far and I continue to read how others are doing it. I hope we can get some answers regarding whether I have done ok as far as holding a stable base from where I can start. Any suggestions on how to move forward with our existing situation would be welcome.
Thank you all for reading my long post.
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This topic was modified 8 years, 2 months ago by
maxim.
Hi Kuna,
It is awesome to read of one so young who is already as far ahead as you are. Have you done well? Absolutely – that is a great start. Where do you go from here?Ah, now that is where YOU come in. In short, it is your call. You have set yourself up to be able to advance in several possible directions. What direction do you WANT to head in?
See, some might move from PPOR to PPOR without ever owning an investment property. Each PPOR is a step up, and they are all saleable without the need to pay CGT. I have read of some who move 6 or 7 times – the 7th time, ending up with a $2m house on Sydney harbour (probably now worth $4m). They never owned an IP.
Others might buy and hold; or buy/reno/hold; or buy/reno/sell/buyagain; or subdivide/build/sell; or subdivide/build/hold……
But they all start out with the first step. You have taken a big first step – but now the occasion needs to define “Where do you want to go next?” and then start talking with a Mortgage Broker to find out just hOW to make that happen (or to reset your sights if it is too big a step financially).
Re paying off the current PPOR, sure !! I wouldn’t be racing to pay off an IP, but a PPOR’s debt is non-deductible, so why not pay it off/down. OR, you can set up an Offset account against the mortgage, allowing you to turn the PPOR into an IP down-the-track without losing the deductibility of the mortgage.
There is a lot to think about and talk about before your next move, Kuna. But you are in a strong position to contemplate your next move.
Benny
PS Take some time to check out this thread – some great info in there, and stories re how others have approached the IP situation.
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/Congrats on where you are at! Good starting point for sure. You need a big picutre goal, one you really believe in, then you need a good strategy. Each property should fit into that and be purchased in the right order so your equity and cash flow position are as strong as possible. Some might involve value adding like renos, or development/building such as you have done or just buy and hold. Along the way I would get some some good accounting and loan advice before choosing the structure and debt levels on the new IP. Talk to a good broker at least, like some of the regulars on this forum who are great, or if you have one a good property accountant. Paying down the wrong loans and properties in the wrong order will impact your tax badly and slow you down.
BuyersAgent | Precium
http://www.precium.com.au
Email Me | Phone MeSouth Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au
Hi Kuna, It is awesome to read of one so young who is already as far ahead as you are. Have you done well? Absolutely – that is a great start. Where do you go from here?
Ah, now that is where YOU come in. In short, it is your call. You have set yourself up to be able to advance in several possible directions. What direction do you WANT to head in?
See, some might move from PPOR to PPOR without ever owning an investment property. Each PPOR is a step up, and they are all saleable without the need to pay CGT. I have read of some who move 6 or 7 times – the 7th time, ending up with a $2m house on Sydney harbour (probably now worth $4m). They never owned an IP.
Others might buy and hold; or buy/reno/hold; or buy/reno/sell/buyagain; or subdivide/build/sell; or subdivide/build/hold……
But they all start out with the first step. You have taken a big first step – but now the occasion needs to define “Where do you want to go next?” and then start talking with a Mortgage Broker to find out just hOW to make that happen (or to reset your sights if it is too big a step financially).
Re paying off the current PPOR, sure !! I wouldn’t be racing to pay off an IP, but a PPOR’s debt is non-deductible, so why not pay it off/down. OR, you can set up an Offset account against the mortgage, allowing you to turn the PPOR into an IP down-the-track without losing the deductibility of the mortgage.
There is a lot to think about and talk about before your next move, Kuna. But you are in a strong position to contemplate your next move.
Benny
PS Take some time to check out this thread – some great info in there, and stories re how others have approached the IP situation.https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/Hello Benny,
Thanks for the kind words. Where do I start ? Shall I consult a good broker and then an accountant to put the structure good to make the foundation fine !
My current PPOR has got offset account and I have put all my savings in there. Do you think I should not turn this property into an IP as it will be a neutrally geared property in the current market situation and when rents pick up in few years’s time, it will be a positive cash flow (calculated around $150 a month). I have patience and I can hold this for a while.
I am from Perth and hence looking at investing in Perth (Perth market is on the down hill as you know post the resources boom fall and hence I am hoping price correction will continue which I believe is a good time to invest? What do you think about that ?
One more thing, what would be the ideal loan structure considering my circumstances if I do intend on converting this PPOR to IP later. When you said we can move from PPOR to PPOR, I did not really get that? Can you please explain if you can ? Sorry if I am sounding bit of a dumbcat.
Thanks
Congrats on where you are at! Good starting point for sure. You need a big picutre goal, one you really believe in, then you need a good strategy. Each property should fit into that and be purchased in the right order so your equity and cash flow position are as strong as possible. Some might involve value adding like renos, or development/building such as you have done or just buy and hold. Along the way I would get some some good accounting and loan advice before choosing the structure and debt levels on the new IP. Talk to a good broker at least, like some of the regulars on this forum who are great, or if you have one a good property accountant. Paying down the wrong loans and properties in the wrong order will impact your tax badly and slow you down.
Thanks knightm for your reply. Exactly my thinking of getting the proper structure in place before committing on making the next move. It’s all been coming thick and fast. I build this PPOR last year in Nov and moved in. Now I am thinking of going ahead and getting an IP which will not put some in financial harm’s way. I am going to try ever so hard to achieve these goals. Strategy is a must. I am just bit hesitant on whom to talk to to get the ball rolling. Hence this post.
Thanks again
KunaHi @kuna
Welcome !
Too many people get a bit ahead of themselves and rush out and set up family trusts only to realize they are not eligible to borrow enough to buy an IP through that structure.
There are many brokers out there – the key is to get an investment savvy broker on board and get an understanding of your borrowing capacity as a first port of call.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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This topic was modified 8 years, 2 months ago by
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