Granny Flat or Investment Property

Hi,

My fiancé and I have been renting out our property for the past 6 months and plan to move into it once we get married.

Because of the tax perks of having renters we’re trying to determine what our next step should be, we have enough money saved to build a granny flat or invest in an investment property but conflicted about what direction to take.

happy to be paying someone for this service but not sure even which profession is the best to approach for this advice.

I’ve read mixed opinions on Granny Flats and also that it may mean we would be up for CGT if ever selling the PPOR (once we move in) but also I’ve wondered if it made more sense not grouping the investments on a single patch of land.

Apologies if I’m being vague or anything happy to clarify anything if required.

 

What would be the advantage of a GF here? I can't see many. It's cheaper I guess? But you might not even get that money back in value.

 

Hi there,

Glad to hear you are thinking ahead. You have a couple options to choose from but your decision will likely be determined by your goal.

A GF would be a good option for cash-flow as you could use the additional income to offset your mortgage repayments on your PPOR. However, if you purchase an IP you will have the opportunity for both cash flow and capital growth. In terms of weath creation, purchasing an IP will likely put you in a better position in the long run. That is because capital growth in most cases generates a greater return than the rental income of a property.

It would be worthwhile for you to get in contact with a good mortgage broker (plenty on this forum) who can help strategise a plan for you moving forward. You may then want to engage a buyers agent who can assist you in your purchase. I hope this helps.

 

The thought behind it is that eventually we will be in a position to purchase another property and then we would have this current property with 2 sources of cash flow.

That being said I don’t necessarily know if there are any advantages of doing it and trying to put it up here for some advice.

We’re not savvy in property but are driven and want to find a system that will be sustainable and smart.

Does that mean you would recommend an IP over a GF?

 

Thanks for sharing this, wasn’t sure which profession would be best to go to was thinking a financial advisor, but happy to reach out to a mortgage broker or two, would they just openly discuss the options or would I need to do a bit more research before heading to one?

Sorry for the silly questions just don’t want to waste anyone’s time.

Thanks in advance.

 

It would be best to be prepared when speaking with any of these professionals. A broker can help strategise how you will achieve a goal but you will need to have an idea of what you are trying to achieve in the first place.

 

Thanks for that I understand now.

 

Not sure if I understand you correctly but are you saying you never moved in this place? Then From tax point of view It's not a PPOR unless you move in within the first 6 month. You will have to pay cgt for the time you rented it out. Speak to a financial planner will help.

 

Had a feeling the way I wrote my question would potentially give that impression, I lived in it for the first 6 months for the CGT and first home buyer stamp duty discount.

This is where I get a little confused would a financial planner come before a mortgage broker in terms of strategising?

I know a lot of people ask what I want to achieve and to be honest I don’t have a clear picture only that I would love to be mortgage free on our PPOR acreage somewhere, have 1-2 investments that produce an income, however this could be naive and setting an unrealistic goal or potentially it’s too small of a goal, I guess that’s the part I’m stuck at, as the way my mind works is what I want should only be within the boundaries of what I’m able to realistically achieve (might be a little bit backwards but just an insight to better understand where I’m at)

 

I d say that having an overall goal helps. Maybe think about what lifestyle you want Are you into financial freedom? Or do you want to upgrade PPOR at some point? If you have the ability to choose. Which one of the above would you prioritize. And your plan maybe dynamic life changes

 

That’s a good way of putting it, I think it would be both so I would go to them with that in mind, its probably more fear of being laughed at which is a poor excuse.

I’m not too familiar with this site, is there someone that can point me in the right direction to find a list of financial planners I can begin reaching out to?

Really appreciate the feedback from all in this thread it’s much appreciated.

 

Over the mid to long run. [crosses my fingers]

 

To achieve you financial goals does your current investment portfolio need CG or high yield
If high yield I would lean to GF
If you need CG and you can get the loan for another IP that has better CG potential I would consider that
This is an over simplistic way of rationalising the situation - you may need to factor in other considerations of course eg tax consequences if selling which you’ve alluded to