Overseas-based Australian, and investment property/PPOR purchase strategy

Discussion in 'Investment Strategy' started by ebayhtl, 10th Aug, 2020.

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  1. ebayhtl

    ebayhtl Member

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    20th Sep, 2015
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    Location:
    Sydney / HK
    Hi all, was hoping to get some advice here.

    I've been based overseas for a fair few years now. I intend on returning to Sydney eventually, though that's still 3-5 years away at least. Nevertheless, given all the COVID-19 chaos (and seems like the market is gradually stagnating?), I'm starting to think about how to (either/both):
    1. Buy investment properties - with a capital gain focus rather than cash flow focus (though both would be ideal!), but otherwise doesn't matter where I buy
    2. Buy a place that I can live in when I return - I'd have a lot more criteria for that one, mostly for personal/family reasons (family members live in Pyrmont so I'd want to be close to there). I'm open to a house, terrace or something unique (e.g. warehouse conversion townhouse/apartment), location is probably more important than the actual property type (though house clearly would be nice).
    I currently have a property in Sydney that is mostly paid off, and am currently re-financing - will have ~AUD600-700K in unlocked equity once that is complete. I will mostly rely on that amount to start the above (I have some overseas liquid assets that I can use to top-up that amount if necessary). I'm on a reasonable income and, for now, can handle a negative cash flow. If I can use the unlocked equity to buy more than one place, all the better (depending on what I find for #2).

    A couple of questions:
    • If anyone has gone through this process as an overseas-based Australian and has any advice/knowledge to share, that'd be great - including anything that I should look out for, practical advice re: #2, and whether #1 even makes sense if I'm overseas and have no negative gearing advantage.
    • I would prefer to buy a house, but anything I should look out for in terms of paying a lot for the "something unique" I referenced above? E.g. most warehouse conversions seem to be apartments/townhouses rather than houses, but I'm guessing there should still be some CG potential if it is in a small block and/or unique?
    Appreciate any thoughts, thanks.

    (Related note, I'm working with a mortgage broker to do the re-financing and will be speaking with a couple of buyers' agents shortly, but open to any suggestions re: advisers or people I should look up.)
     
    Last edited: 10th Aug, 2020
  2. ebayhtl

    ebayhtl Member

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    (Also open to any thoughts re: not being the right time to be doing either #1 or #2!)
     
  3. ebayhtl

    ebayhtl Member

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    Bump, in case anyone has thoughts on this... thanks.
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Remember too that CGT exemption will only comence when you reside in it and then it will only ever be prorata. The days prior to arrival back to AU will not even access a cgt discount .and that can throw up unusual issues later to be described as unfair (but its not its the law). eg You buy for $1m. Value rises to $1.5m after 4 years. You move in when its worth $1.5m. You sell 4 years later at $1.6 You will pay full income tax on $500K. If you had waited to buy until 4 years time, tax would be $0 on a $100K gain.

    FIRB & Land tax and stamp duty surcharges ? Are you a citizen?

    Finance could be some roadblocks. Will your non-AU income be considered for servicing ?

    On a positive..... Tax losses could accumulate so on return you have a tax loss to use. But this may be based on losing money. ie net cashflow out. Will that exceed the tax on the gain in value ?
     
    ebayhtl likes this.
  5. ebayhtl

    ebayhtl Member

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    Location:
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    Thanks @Paul@PFI - appreciate it. I'm an Australian citizen; think I'll wait it out for a few months and see how the market goes before buying a potential future PPOR.
     
  6. FredBear

    FredBear Well-Known Member

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    I'm based overseas too and have just sold our former PPOR in Sydney. Although the long term plan is to buy again in Sydney I've come to the conclusion that it's just not worth holding property in Australia while being an expat anymore. As Paul highlights for non-citizens the situation is even worse.
    Not being able to access the CGT discount while non-resident was bad enough, the recent changes that apply to those selling while non-resident were the last straw. NSW land tax went up and up to be 60% of the rent income. Any income from rent is taxed at 32.5% from the first dollar. A purchase of a future PPOR would mean that it will always be subject to CGT.
    Add to this the current travel restrictions - as you are in HK then you would be subject to 2 weeks quarantine here and then 2 weeks back in HK just to make a round trip to inspect a property.
    So I'd do the sums very carefully before buying anything...
     
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  7. ebayhtl

    ebayhtl Member

    Joined:
    20th Sep, 2015
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    Location:
    Sydney / HK
    Thanks @FredBear , all legit points. If I'm buying an investment property I would just buy remotely I suspect, without flying in. I have to look at the tax ramifications in more detail. Part of investing in Australia is really to unlock the AUD equity and make it work without bringing it back overseas - as I'm sure you know, the AUD is not particularly strong at the moment...
     
  8. mcdill

    mcdill Well-Known Member

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    @ebayhtl I have gone through this, you can message me for more details. If tax is a big consideration, suggest you wait until closer to the time you return to buy the PPOR.
     
    Aaron T likes this.
  9. Monopoly Man in Top Hat

    Monopoly Man in Top Hat Well-Known Member

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    I'm in a similar position.
    CGT is annoying but my main rationale for considering is to have an AUD asset in the market with enough cash flow to pay off the loan by itself in case I do return at some stage.

    Otherwise I might look at the UK...
     

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