Increase Property portfolio

Hi Yew,

Sounds like you are doing well – good for you. Certainly, it sounds like there is a tonne of “lazy Equity” in your PPOR. And yes, it certainly is worth looking at “How best to proceed moving forward”.

The major question in MY mind for you, is “What IS the way forward FOR YOU?” Like, are you looking to consolidate now or are you still accumulating properties? Are you looking to replace an Income that has disappeared? Or do you want to work just 3 days a week instead of 5, so you need more Income and less Tax relief? Is your plan to change your investing slant (e.g. from property to shares)? Has something CHANGED in your life to have you looking at this option?

The title mentions “Increase Property portfolio” – so using the PPOR equity as Deposit/Costs for more IP’s, if that is the way you are wanting to go, makes sense too.

Summarised, what you propose CAN make sense, but only if it is appropriate in bringing you closer to your goals. This is such a big move – I would suggest you spend some time discussing/thinking/projecting the best way forward for YOU before embarking on that journey.

Benny

• This reply was modified 7 years, 4 months ago by  Benny.

No, it is probably not a good idea to sell a main residence to pay down investment loans. You will be giving up your only tax free investment and you will be paying tax on the increased income. Plus you will need to find somewhere to live and if you are paying renting you will have to pay that with post tax income.

A PPOR can be subject to CGT – it will depend on the circumstances.
You may have a job, but can you get finance is the important question. Serviceability has tightened up conisderably and this will get worse in the near future I believe.

Sounds like a risky investment to me.

Hi Yew,

No – I do not need to change my life style for the moment as I still have a full time job. and drawing good pay.

OK, cool !! Then, since Terry has warned about some “gotchas” re selling a PPOR to pay down debt on IP’s, that is an area where you should talk seriously with a Broker around the financing issues. Maybe Terry himself !!

Other options (if wanting to increase your portfolio) might be to BORROW against your PPOR to provide Deposits/Costs for more IPs – but maybe look for POSITIVE geared investments such that your Income is supplemented from the extra rents and your OVERALL portfolio becomes LESS negative geared. The borrowings against the PPOR should be Tax deductible, even as you increase your income via the new IP(s).

Of course, this will all come down to your serviceability – can you borrow more? As Terry mentioned, lending is tighter right now – will you be able to “move on”? These are all good questions to put to a finance broker.

With some of my original questions behind us, maybe look to answering the other questions – or simply turn your thoughts toward them, and even expand on them, so that you proceed in the way that is most beneficial for YOU.

Good luck with your Mortgage Broker/financier and your next steps,

Benny