Fincaning an IP / future family home in Queensland

Hi All,

Happy New Year!

We currently live in South Australia in our family home and have been contemplating moving to Queensland.

We also own 2 x investment properties in Mount Druitt and Wagga Wagga. The details of the properties are below.

We have been contemplating selling our investment property in Mount Druitt and potentially buying an investment property in Queensland and potentially living there one day when we ready to move. I guess the issue with selling is that is triggers Capital Gains Tax?

The other option we have is refinancing one of our properties and buying a investment property / future home in Queensland.

At this stage, I’m not sure what the better option would be?

Also, if we did have an investment property in Queensland, would trips to our property in Queensland be considered as a tax deduction if the purpose of the trip was to view / check up on our property, minor renovations etc?

One of the main reasons behind our thinking is that we currently own a IP in Mount Druitt (which we have no intentions of ever living in), so why not invest in an area where we would one day like to live? This kind of goes against the way I have been investing previously, where we purely looked at the numbers and didn't consider the future use / benefit of owning the property (i.e. to live one day).

Look forward to hearing your thoughts?

Cheers,
Robbie

IP 1:
Mount Druitt (NSW) – 3 Bed, 1 bath
Purchase Price: $210k
Outstanding Amount: $250k
Estimated Market Value: $475k
Weekly Rental: $325

IP 2:
Wagga Wagga (NSW) – 3 Bed, 1 bath
Purchase Price: $100k
Outstanding Amount: $100k
Estimated Market Value: $140k
Weekly Rental: $195

PPOR
Flagstaff Hill (SA) – 4 bed, 2 bath (recently renovated)
Purchase Price: $365k
Outstanding Amount: $330k
Estimated Market Value: $475k
Weekly Rental: N/A

 

Have you had your borrowing capacity checked yet? That would be my first step, as it might make the sell/not sell decision very clear.

Most people will say investing is purely about numbers but in truth life isn't like that - I see no harm in buying something with a future plan to live in. Just make sure the any decisions you make on it are also wise investment decisions - for eg don't over capitalise on any improvements etc. And also don't buy too neg geared, as it still needs to work well as an investment in the event you never move in.

 

Yes selling would mean CGT would be payable. This could be minimised with some strategies though.

You don't have to sell now, you could wait unit you are moving into QLD. This way you will get a few more years of capital growth.
I would think selling now only makes sense if you cannot service for QLD purchase and/or you think Mount D will drop in value.

 

If you buy an IP in Qld you cannot expect to have a family holiday and claim any deductions. You may get away with a brief trip occasionally to view/inspect, maybe one night, but the sole purpose of the trip would have to be the IP. Add on anything else and deductibility rapidly declines. Unless you are a politician.......

And always look forward, not back. If you decide to sell an IP, sell the one with the poorest prospects of future gain. Keep the best one.

And, as said, get advice before you act.
Marg

 

As Jess said have your borrowing capacity assessed as the first step. Without funds you cant proceed. This would be a good time to make sure your other 3 loans are structured correctly in line with short, medium and longer term goals.

 

Thanks for the advice. Without the need to sell my existing properties, my current borrowing capacity is about $300k (easy) - $350k (really pushing it).

Innitially i was looking for a 3 bedroom house between Brisbane and the Gold Coast, but might need to settle on a 3 bedroom unit / townhouse.

What are the main disadvantages of units / townhouses?

 

From a numbers side - higher potential for supply issues which can temper price growth potential

From a personal side - less control due to strata rules, higher ongoing costs via strata, less privacy/land component.

But it's all horses for courses - you couldn't pay me to live in a unit or townhouse, whilst for others it's their dream type of property.

 

Thank Corey.. however, if you had a limited budget, would you prefer to live in a house in a less desirable suburb over a townhouse in a more desirable suburb?

 

I'd work on the factors that are needed to increase my budget and rent accordingly in the meantime.

I live on just over 2600sqm personally so living in an apartment/unit/townhouse wouldn't fit my lifestyle needs.

The question is - is this budget based on your personal affordability or is it on lender serviceability? If the latter I've assumed you've reviewed all options available to you.