Buy Premium PPOR Strategy

Discussion in 'Investment Strategy' started by homeland, 21st Apr, 2020.

Join Australia's most dynamic and respected property investment community
  1. Gockie

    Gockie Life is good ☺️ Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    14,736
    Location:
    Sydney
    I would love my home to be 3 mill in the near future... don't think it would happen though.
    Where will the money come from to support these house prices?
     
  2. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    Thanks @Terry_w i'm good student, Learning quick from the MASTER:D

    pm regarding the Q
     
  3. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    Yeah, so when you say "retire, use the equity to invest" how is that gonna work, access the equity via a loan or are you going to sell the PPOR when you retire?
     
  4. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    You can take a personal loan for your living expenses, by todays retirement 100k pa for 4m assets or investment loan both against the equity, who knows what the banks will offer in the future, maybe bitcoins. by then debt free, basically you will live on the equity and use your PPOR as capital gain cash machine or have the option to sell as well if you wish.
     
    Last edited: 23rd Apr, 2020
  5. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    are you calling CoreLogic spruikers?
    Screen Shot 2020-04-23 at 11.12.07 am.png
     
  6. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    if you mean to unlock your available equity, you can use this calculator

    Equity Loan Calculator - How Much Equity Do I Have? | RAMS

    Math
    Property Bank Valuation x 80% then less loan amount left = Unlocked available Equity

    Property Bank Valuation: 3m x 80% = 2.4m
    Loan Remain: 1.4m
    Unlocked available Equity: 2.4m-1.4m = 1m

    if you need to unlock more then 80% LMI charges apply

    cheers
     
  7. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
    Ah when you explain it, the math sounds to simple! Just valuation less loan! So lenders will just always lend you the difference for whatever you want! The mortgage brokers always tell me no.......
     
    2FAST4U, Lindsay_W and Archaon like this.
  8. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    good question, depend the cashflow or what happen in between
     
  9. Ian87

    Ian87 Well-Known Member

    Joined:
    23rd Sep, 2016
    Posts:
    679
    Location:
    Melbourne
    That is the important part because it would be great if you got 8% but you may not so you could be stuck there until the value lifted and you need to know if you are happy with that etc. I would plan it on a numbe rof different growth scenarios and see what the outcome would be for each.
     
  10. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    You have a "5m PPOR with little debt and brokers tell you no" then you must have serviceability issue.
     
    Last edited: 23rd Apr, 2020
  11. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    Lol the problem with generic % increase based modelling is that it makes it sound like the best thing to do is throwing as much cash as you can at the most expensive property you can find.
     
    Lindsay_W and Archaon like this.
  12. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    i know, will try different scenarios thank you. i calculated and have 6 years of repayments with no income in between, this is my gamble, just need 1-2 good years for that period.
     
  13. Archaon

    Archaon Well-Known Member

    Joined:
    20th Mar, 2017
    Posts:
    1,896
    Location:
    Newcastle
    Are you asking for advise on your strategy or giving it?

    Sure, if you could bank on 8% growth you may have a chance.

    What are the upside markers that suggest we will boom after covid (or that it will go away in any capacity) apart from past indicators of boom after war time?

    The saying "past performance is not an indicator of future performance" springs to mind.
     
    Lindsay_W likes this.
  14. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,256
    Location:
    Australia
    So why shouldnt everyone just max out their borrowing capacity buying the most expensive property they can afford? CG free, 8% a year, cashout as required.
     
    Lindsay_W and Gockie like this.
  15. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    asking for advice and sharing my thoughts.

    no one knows, everyone need luck sometime its not pure science or facts, otherwise we will not need to be here if we knew.
     
  16. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    Everyone is different and has its own way that suits them, some like to invest in IP, Shares, PPOR Bitcoins..etc this is how we are. i was basing CG 8% in average doesn't mean it will perform 8% i came here to get an advice and seek to know the experience and results from those one who used that strategy. no one said its easy it took me a year to find the right property and when i saw it i know it was the one. what you see now is just the cream of years failing over and over again, but i was persistent and kept going.
     
  17. homeland

    homeland Active Member

    Joined:
    10th Mar, 2020
    Posts:
    39
    Location:
    Sydney
    This post is about Premium PPOR Strategy, everyone going on the 8% it was just indicative rate for illustration. i think for everyone we should focus on the actual strategy so we can know more about it from other members experience and result using this strategy.
    Thank you
     
    Lindsay_W likes this.
  18. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,791
    Location:
    Sydney NSW
    At the heart of it my view is the strategy is about maximising exposure. I think you need to consider marginal utility of the asset though.

    That is, is it the most efficient use of capital and servicing having a $3m OO compared to having the equivalent $3m in invested assets?

    Lots to consider; growth outlook, how much growth is delivered via value add, diversification, consider CGT implications in some of your ideas, etc
     
    homeland likes this.
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    To have an expensive main residence means you are tying up more capital, but this is capital that can be mortgaged for borrowings that are used for investment purposes. The main residence is virtually the only CGT free asset that a person can have (one that goes up in value that is).

    So slowly upgrading to bigger and more expensive houses can allow for a tax free windfall upon retirement when the house is sold tax free and you move into your investment property with the biggest capital gains - which are then wiped out upon your death.

    In the meantime you can borrow against the main residence, often at lower main residence rates, to fund investments in investment properties and shares - which both might be leveraged but unmortgaged.

    So I think it can be a great strategy but if you do it too big too soon you could be struggling to just keep up with the minimum repayments and might be unable to debt recycle as a result.
     
  20. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    Ok now you got me really confused
    So you take a personal loan to pay for living expenses and live on equity in retirement? :confused:
    Do you mean invest the equity from the PPOR into income generating assets along the way so you can generate $100K in passive income from said investments which you can then retire on? Or do an equity release, park the funds in an offset, pay off the loan in full via business income, then use the equity to live on once the debt has been cleared? Or somethin else entirely?

    No I didn't mention core logic at all, I said spruikers use a growth rate of 7% year on year in their sales pitch - ie. using 8% is a bit... optimistic, especially in the next 5 years but that's not what this post is about.
    Anyway good luck with it all, just tryin to get my head around it sorry to de-rail the thread.
     
    Last edited: 23rd Apr, 2020
    fritzsticker and The Y-man like this.