Investments or PPR?

Discussion in 'Investment Strategy' started by Loving learning, 6th Feb, 2020.

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  1. Loving learning

    Loving learning Member

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    Hi
    Given the headaches and high costs of owning investment properties, especially land tax, I am starting to think I would be better off selling my investment properties and PPR, and pouring that money into a higher end PPR. At least the capital gains will be tax free.
    Any thoughts?
     
  2. Terry_w

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

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    no income generated.

    but you could debt recycle into other assets

    Ideally you would have one other property to retire into when you sell the main residence tax free
     
  3. Loving learning

    Loving learning Member

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    No debt currently.
    Absence of rental income not a concern.
    Just can't help thinking the tax free capital gains on a substantial PPR, with the hope of it doubling in app 10 years, would be a much easier road than putting up with tenants and the ever rising costs of ownership. Costs which I can only see increasing over time, given our government's endless penchant for taxes.
     
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  4. Phar Lap

    Phar Lap Well-Known Member

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    Already completed the first bit and currently improving PPOR in order to sell much higher, in order to buy right on the beach with nothing to do except enjoy. Its a great idea!
     
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  5. Terry_w

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

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    Then you will need a place to move into. if you had the dream place now you could move into it later and then leave it to the kids with any CGT wiped out
     
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  6. Loving learning

    Loving learning Member

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    My motives here are solely economic, rather than wanting a dream home necessarily.
    So if I bought the more substantial place and moved in later, as per your suggestion, I am still a landlord in the interim. That's what I am questioning; whether it's worth my while being a landlord and all the ******** that goes with it, or am I just better off, mentally and financially, sitting on a substantial PPR, let it double in 10 years, sell it and then use app 30% of the sale proceeds to purchase something smaller and use the remaining 70% to fund my last 20 years or so.

    As per wiping out CGT; if I purchase a place, rent it out for 5 years, then use it as my PPR, isn't CGT (for those 5 years as a rental) payable at some stage down the track?
     
  7. Terry_w

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

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    See my tax tips I have written on this. Will link later if you can't find.

    If a property doesn't cost you much to hold is it really a burden?
     
  8. MWI

    MWI Well-Known Member

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    Many ways to invest into RE. Some people just do that, but those that renovate and add value and repeat the process would be ahead of those just living in it and paying it off.
    You see investing as a pain I see it as a gain. I try not to concentrate on all the 'details' but rather concentrate on the 'bigger' general picture ahead.
    You also forget land tax, interest, repairs, any costs associated with owning an investment are also tax deductible whereas for your PPOR they are not (after tax $ is required).
     
  9. thatbum

    thatbum Well-Known Member

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    I'm all in with multiple IPs and no PPOR.

    My experience has been that desirable PPORs (especially those in higher price brackets) make terrible IPs, and good IPs make terrible PPORs.

    So I keep my personal indulgences and my investing 100% separate.
     
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  10. MWI

    MWI Well-Known Member

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    Many ways to invest into RE.
    You are not Chris Gray, are you? He does just that!
     
  11. thatbum

    thatbum Well-Known Member

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    I don't know who Chris Gray is actually. One of those spruikers?

    Eh I just think its hard enough to sift through listings to find the best IPs out there - you're just handicapping yourself if you add "needs to be something I'd live in as a PPOR" to the criteria.

    Plus just anecdotally, I find that lots of people who argue for their own PPOR being a good investment are just trying to justify their purchase to themselves and others.
     
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  12. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    This can be removed with the stroke of a politician's pen.

    If you recall the last Federal election, the then leader of the Opposition, Bill someone, was going to fiddle with CGT (not on your PPOR.......this time......but given their penchant for spending all of the kitty and borrowing to spend more, I'd say there's a fair chance it may not be there when you are relying on it in the future.)

    Overall my advice would be DO NOT rely on a current tax position as a basis for a future wealth creation strategy.
     
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  13. Loving learning

    Loving learning Member

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    On this one I'm pretty confident it won't happen in my lifetime. Even if it does, I'm sure there will be grandfathering provisions. Currently there's an inquiry into retirement income, and both parties won't even consider making the PPOR part of the asset test for pensions. PPOR's are an untouchable in this country.
     
  14. Loving learning

    Loving learning Member

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    It's the bigger picture I'm looking at too, and that for me is: Which strategy leaves me with the most wealth in 10-15 years time?
    I have no debt (and don't intend to take any on) and I am not interested in buying any more properties. All I am trying to ascertain is whether I'm better off cashing in and buying a substantial PPOR, or just sit on my current IP's and relatively modest PPOR.
    If I assume my IP's will grow at a similar rate to my PPOR, won't it make more sense (given my aims) to go all in on the CGT-free option?
     
  15. mikey7

    mikey7 Well-Known Member

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    Devils advocate here..

    What if your PPOR doesn't grow in price at all? What if it declines in value over the 10 years?
    What if everywhere other than where your PPOR is grows in value and the PPOR doesn't?

    Diversification is something I'm interested in.
     
  16. Loving learning

    Loving learning Member

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    Good point and I have considered this; I am pretty confident that where I would buy (one of the elite Melb suburbs) will not fare worse than where my IP's are. If it does then yes, I have stuffed up.
    So far the only downsides I can see are:
    1) I like where I live now and I'm not sure living in a more exclusive area will necessarily suit me and my family.
    2) Expenses to hold the more expensive PPOR will be higher, but apart from my council rates probably doubling, I cannot think of any other substantial costs v my current PPR.
    3) Liquidity. If I need some cash quickly, much easier to sell one IP than have the majority of my wealth tied up in a PPOR.
     
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  17. The Y-man

    The Y-man Moderator Staff Member

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    Make sure to think 1 step further - so you get to the point where PPOR is worth a mint, sell it and.... then I assume buy a cheaper place and then what? The bills don't stop, cash doesn't last forever....

    The Y-man