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Is (was) this a foolish strategy?

Discussion in 'General Property Chat' started by Bran, 20th Jun, 2015.

  1. Bran

    Bran Well-Known Member

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    Having joined somersoft only this year, I've learnt a bucketload on the things I didn't know I didn't know. This hasn't inspired me so much as left me questioning my actions thus far, and whether I'm really on the wrong path.

    I've bought a series of PPOR's, which I then simply move out of and keep. I've tried to buy in the same areas that other up-and-comers would be trying to get in to, and bought with the hope of CG rather than cash-flow - Cairns, LMR in MT G, and now 5kms from Bris CBD.

    There is a lot of talk about strategy, but property investing for me has been a long-term backup to give me wealth, mainly to pass on to my kids. My income is very good (but only recently), and well surpasses any CG that I will foreseeably ever make, and is not reasonably replaceable with a passive income (at least not with property).

    My parents were my influence (not successful), and watching them sell amazing properties for peanuts, just before each successive boom - most of our humble childhood homes would all be 1m+ now (Land in central Canberra, Glenhaven, Sydney, sub dividable acreage in Greenbank, QLD etc).

    So, is this a foolish strategy? That is, buying PPORs, then upgrading when it suits? I plan to supplement this with pure IP's when I can, as there is no need to upgrade the latest one for quite some time.

    THoughts? Is this a more Michael Yardney way of thinking (I think so..., but unintentionally), who has been criticised only this morning?
     
  2. bob shovel

    bob shovel Well-Known Member

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    it sounds like a good plan to live in, renovate then move on. just dont sell or over capitalise. and as long as the fam is happy to keep moving renovating.
    keep reading and learning about strategies and planning. but i would think your onto something
     
  3. The Falcon

    The Falcon Well-Known Member

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    A variation of what you are doing is bit of a favourite of a builder I know, where he can run his trades on his home and book them on other jobs ;) Then move on to bigger and better homes every 3-4 years or so. Very low cost renos done to a high standard, and then CGT free disposal (rather than hold like you are doing) I seen this work very well, from humble home to $4m waterfront ( cap growth helped too) in a bit over 15 years or so. Obviously needs the right circumstances and a certain level of "cheekiness", a good way to have your cake and eat it too, not that I am advising that :)
     
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  4. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    If you are on a cracking income you don't need to hit a home run every single time, but there's no harm trying. Given a strong income and some assets already, my gut tells me you may be in a position to be buying IPs stand-alone right now.

    Does your broker help with strategy and planning for your portfolio or just organise cash when it's time to buy? I might guess it's the latter..

    Reason I ask is that's the best way to gain some insights into what you can do.
     
  5. bob shovel

    bob shovel Well-Known Member

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    steven raised a good point, you should do that along with your current plan .
    renovating your ppors will produce cg while living there, combined with market increases there would be good gains made.
    a broker could help refine your current ideas
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes this is a good strategy because of the 6 year rule - s118-145 ITAA97
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    point your builder mate to
    TD 92/135

    Income tax: capital gains: is the main residence exemption relevant when the proceeds of sale of a dwelling are treated as income under ordinary concepts?
     
  8. The Falcon

    The Falcon Well-Known Member

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    I don't think he's interested Tez. Nor many other builders ;) it's up to ATO to catch em.
     
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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    So true!
     
  10. Art Vandelay

    Art Vandelay Well-Known Member

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    Have you been paying P&I on the loans as you've gone? If so it may be wise to go IO with offset on your current and future PPORs
     
  11. See Change

    See Change Timing Lord Premium Member

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    If you can't afford to keep a PPOR when you want to move , ther s no problems with selling the old one .

    Big advantage with PPOR's is there's no CGT .

    We' ve generally done well with PPOR's except the first one which we bought at the peak for the market in 1988 ..

    Cliff
     
  12. Cadbury99

    Cadbury99 Well-Known Member

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    I don't think it's necasarily a foolish strategy but maybe limiting in that one may not live or have lived in the best areas to meet the investment goals.
    I think people sometimes hang on to old PPOR's for emotional reasons and miss out on buying IP's in better investment locations.

    Having said that having investments is a much better stragegy than not having any. So well done for investing for the future.

    In terms of your income well surpasing any CG you are ever likely to get -
    My suggestion is to increase your goals - I strongly believe it is possible to replace one's income, with passive income with enough time and good investments. In some ways it is easier if the income is high.
     
  13. Bran

    Bran Well-Known Member

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  14. Bran

    Bran Well-Known Member

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    Thanks guys

    Renos have been limited to blinds and repaints, and the odd wall.

    All have been managed knowing they aren't our forever home, and keeping them rentable.

    All have been within our means at the time, with a purchase when possible.

    Steven - Cash has been arranged without strategy. Only one is P+I at the moment, it just reverted. I'm letting it run until I get to the bank (and it will be the next one refinanced anyway, so will be looking for equity rather than cash).

    Should be ready to buy a pure IP later in the year, but will have to rethink the search strategy.
     
  15. Foxy Moron

    Foxy Moron Well-Known Member

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    Umm....Isn't that how Jan Somers started her property journey.....keeping her first 4 PPORs in first 4 years of married life, with some value add along the way ? (Its been a while since I read her first book)......But not a bad role model to follow IMHO.
    Comments made by others in this thread quite valid as well.
     
  16. Bran

    Bran Well-Known Member

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    Thanks Foxy - I wasn't aware of that - I might read her book after all, I've read many others.
     
  17. Azazel

    Azazel Well-Known Member

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    Yeah, that rings a bell. She's got some good info in her books
     
  18. Bran

    Bran Well-Known Member

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    An agent asked me today if he can get me $100K over current market value, would I sell (I still said I'm not sure).
    Let's see if he comes back :)
    CGT free... tempting.
    Furthermore, 90% is in my wife's name who earns nothing, thus no depreciation/gearing benefits.