PPOR: better rent it or sell it?

We are in a huge dilemma with our house

Last year we bought this beautiful 4-2-2 house in one of the best parts of a regional NSW town of Goulburn great neighbourhood, 1980s build brick house, 3 mins drive to mall/town centre, 1200m2 land. all nice houses and neighbourhood around, walking distance to local PVT Catholic school/Tafe for 520k: (mortgage paying $510/week). first home so we didn't pay stamp duty

We are planning to relocate to sydney due to job change of both of us.
weighing options between rent vs sell.

Incomings:
Rent $420-430/w

Outgoing: $650/w
-Includes (Real Estate fees + water+ council + bi-annual garden maintenance + landlord insurance mortgage)
- Maintenance cost: ??

Weekly shortfall: - $230/w (Can be $350/w when we change owner occupier loan to investment loan)
Current property value: $520 (after old bathroom reno and increase in local property price)
Purchase price: $520k

we are DINK, combined annual income approx 250K+, salaried professional (doctor and engineer), no other properties, we will be renting in Sydney when we move there

Aim:
-hoping to utilize negative gearing and reduce taxable income (I don't understand this part anyway)
-Is the above difference of - $230/w or -$350/w (+ maintenance cost) worth keeping and renting?
-Also factoring in there won't be much price increase/rent increase for say 5-10 years in a regional town and already bad market?
- would we be better off selling the property when we move out? and buying another IP hoping that it can be positively geared or less negatively geared?
-is it worth bearing the expenses for 15-20 years and then aim to KDR 3 townhouses here?

 

If it is costing you $230 pw would it be growing more than this $12,000 or so per year? If not then would there be any point?

 

Hi Terry thank for your response. I really don't understand this. just spoke to my accountant now. He said at this point keeping the property will be better to get our taxable income lower, as we dont have anything else to lower our tax. His advice is to rent it out at this point and sell it before we buy our house or buy another IP if any (preferably within 6 years)

 

Tax benefits are only part of the picture.

Can you see yourselves returning to Goulburn?
If you dud return, would you live this house?

Just be aware that few tenants will look after the property as well as you do. When you leave, the house is probably in the best condition for sale.

Do you see good future capital gain in Goulburn, really the only reason to hold on.
Marg

 

Your accountant is talking about negative gearing.

Eg.
You earn $100k.
Expenses - Rent = $200/wk LOSS or $10k.

Your taxable income is $100k - $10k = $90k.
So you paid less tax. Because you EARNT LESS.

Expenses you can claim

This is fine, if the property is going up in value more than the accumulated loss.

Say property looses $10k over 6 years. Your property needs to earn $60k, just to break even (about 15% of your $520k property in 6 years - not unreasonable).

Most investors use this premise assuming property doubles every 10 years.

The 6 years is because you get a 50% CGT exemption on profit as it can be claimed as your PPOR after not living in it. There will have to be a profit to tax deduct.

Treating a dwelling as your main residence after you move out

Again, it needs $60k, just to break even. Not make a profit.

Paying more tax means you are earning more money. I WISH I paid $1M in tax.

The question is. If you didn't have money invested in this property, what would be a better investment?



Re: KDR 3 townhouses. It needs to make sense now.

Eg. I purchased a place for $300k.
4 years later I could KDR a duplex for $500k.
Could sell for $1.3M.

Profit right?
Well.
4 years later that property as is was worth $700k.

So really $700k (not $300k) + $500k = $1.2M
Then you have GST and soft costs.
So minimal profit for a lot of risk (actually a loss - variations etc).

So your triplex would have to make sense using what it's worth then.

 

This is a silly reason. You could get similar savings by donating money.

You only want to temporarily lose money if there is potential for a profit at some point. And this profit is more than your lose

 

Don't sell property unless you really need to. And don't let tax considerations drive an investment decision.