All Topics / Help Needed! / Sell to invest? Reconcile the numbers…?

Viewing 3 posts - 1 through 3 (of 3 total)
  • Profile photo of MikeWMikeW
    Join Date: 2017
    Post Count: 1


    First time poster…..

    My wife and I are keen to start investing in property but are going round in circles in terms of freeing up initial capital to get started. We have owned and occupied a property for 3 years that has had significant capital gains, and the sale of this will provide us with a great pot of cash to get going.

    However to best use this we would likely look to rent and use our capital on investments. But a rental property would see us essentially at a net loss per month; i.e:

    Current Mortgage + Strata + Council: $3000 pm
    (Of this $1000) pays off our principal.

    Current rental property rates: ~$3400

    My question is that by renting I will be $400 per month worse off than I currently am ($1400 if principal repayments are included). Therefore to break even I would need to make this money ASAP through investments via positively geared property and principle payments.

    I’m interested in if other people have faced this situation and how other people have framed their thinking around this situation to assess options.

    Appreciate any guidance you can give….

    Profile photo of Nigel KibelNigel Kibel
    Join Date: 2005
    Post Count: 1,425

    I think it is always a hard decision.

    However it depends on what sort of income you are paying and what sort of tax you are paying.

    With an investment property consider the following

    You can negatively gear and claim all the deductions such as depreciation and interest payment ect. You cannot do this with an owner occupied property.

    When buying an investment the bank will allow around 80% of the rent when calculating what you can borrow so it is possible that you could buy a more expensive property in a better location than where you can afford to buy.

    It is important that if you buy a property with the highest growth. I would suggest that if you buy a property for investment when you sell you will be taxed on 50% of your capital gain.

    Buying your own home its your house so you can do what you like with it
    When you sell as your principle place of residence you do not pay capital gains tax.

    When you weigh up the options it does make more sense to rent and buy investments because it tax delectable and it may enable you to buy more properties. However not everything is about money.

    Nigel Kibel | Property Know How
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of hobartchichobartchic
    Join Date: 2015
    Post Count: 8

    You figures stack up to a loss. I would stay in my house, pay it off, save some money in super and cash and look to retire and save up for some trips/ time off in between. It’s fine to put your home on the line when you are well, and employed. What happens if you lose your job, or find yourself disabled, or unwell? What happens if you can not find tenants? Those questions are essential to planning. If you must invest in property then buy with cash after you home is paid off. Personally, I would be diversifying my money by putting it in 1) my principal place of residence; 2) super with a diversified portfolio 3) further education at TAFE 4) cash in the bank 5) holidays

Viewing 3 posts - 1 through 3 (of 3 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.