- dangermouse99Participant@dangermouse99Join Date: 2004Post Count: 88
Im a fairly experienced property investor and have 5 IPs and im currently rent investing. A good friend of mine is in 2 minds about buying a PPOR and investing into the future, well I have made him that way anyway….lol.
Him and his wife have next to no debt, good-high incomes and a few years away from having kids.
They are living in double bay and are looking to buy a PPOR in that suburb, their budget is 1.2m and have $300K in cash to put towards a 20% deposit etc etc. THey have been looking for over 12 months and demand is getting the better of them. They want to buy and reduce debt ASAP and then draw equity to buy a IP in the near future.
I have suggested a better way to rent invest and buy 3-4 investment grade IPs and then eventually they could buy a PPOR @ double bay before the next property cycle in say 7-12 years time using equity from the 3-4 IPs, i believe this may be a better way for wealth creation comapred to what he is planning to do, what are peoples thoughts??? Any feedback or advice??
I dont proclaim to be a expert so I have suggested he talk to a finacial planner/property strategist, has anyone got a exceptional personal experience with a someone they can recommend? I was thinking someone like a Michael Yardney from Metropole or Damien Patterson from Integrity as examples, any suggestions would be greatly appreciated as word of mouth is my preference so my friend can make a unbiased decsion for the betterent of his future.
Your help would be greatly appreciated.
DMBennyModerator@bennyJoin Date: 2002Post Count: 1,416
Sounds like you are doing pretty good. And good on you for pointing your friend toward what could be a better direction for them. The possibilities re going for IP’s first always appealed to me (after crunching a bunch of numbers), but as I already owned a PPOR, we just went from where we were.
But, if these friends of yours have an option, why not look at it? Perhaps point them toward this post:-
Note that the answer provided to “Which is best – IP or PPOR first?” in this example is purely from a financial perspective. There is always “another side to the situation” that this post doesn’t go into. Still, I hope some of the points made in there get your friends thinking of their options !!
BennyCorey BattParticipant@cjaysaJoin Date: 2012Post Count: 1,010
There’s no one right answer and it’s a blend of financial choices vs emotional.
A couple years ago it was a no brainer with rentvesting allowing you to grow far quicker – however with the multiple ongoing changes to lending requirements it’s now becoming a very attractive proposition to buy a PPOR first. By doing so in many cases you can:
*grow your effective long term borrowing capacity further
*use debt recycling to allow you to build a more tax effective debt structure, increase your borrowing capacity and allow deposits to still be made available for purchases
*relatively fixed reducing cost of accommodation
In situations wherein there is sufficient deposit available, the modelling I consistently do on a daily basis now shows that those who buy PPOR’s have the strongest borrowing capacity in the longer term, as they can deleverage the largest ongoing expense compared to rent which will continue to rise with time.dangermouse99Participant@dangermouse99Join Date: 2004Post Count: 88