PPOR or IP strategy? Which path to take

You could easily get a house on a triplex block in Hamilton Hill for that money.

Get one with a half decent house on it already so you can rent that out. Making sure you don't need to knock it down to sub divide.

That way you have the option of renovating or sub dividing and selling off if need be. Things go well, you could retain and build or demolish and build.

 

That's exactly what I said. Provided the asset goes up in value by more than the accumulated cash flow loss then you're in front. However, most people don't think or it this way or understand it. They invest purely to save tax, which is a fallacy.

- Andrew

 

Such as.......14 Dearle Street, Hamilton Hill, WA 6163

 

There are larger blocks out there to be honest, get as big as you can.

49 Owen Road, Hamilton Hill, WA 6163

 

My issue with PPR funding is just that. Funding the loan repayments, no assistance from tenants. Serviceability gets smashed also. Unless PPR in part of the leapfrog strategy from property to property avoiding CGT and not reducing loan (keeping funds in offset)

 

Stalk Strategy is what I am recommending to my clients atm.


I am fairy confident that if you stalk a few unit markets in Sydney with reno potential as close to the CBD or beachy areas as your budget allows ...stalk stalk...stalk....then when you see the deal..may be a rainy day few turn up to the auction ....or the agent was an OOA agent who was clueless. .or the vendor ( due to a million possible emotionally charged reasons) was simply happy to sell fast and below what you saw as value...or the market was having a quiet day etc etc .if you staaaaalk a market like that then SNAP when that great deal happens ( and it will I'm sure of it), you will be the proud owner of a great add value unit in Sydney and a solid asset which will perform well in time.

 

Liverpool apartments will almost break even on older walk ups. Lecamba will also just about be cash flow neutral.
Plenty of places in Sydney.

 

One strategy may be to buy in Perth, move in for 3 months or so and then move out and rent it out while absent. You could then keep ploughing your money into the offset account for the next property.

Could also eventually sell this main residence potentially tax free and use the proceeds for a more permanent place.

If you do plan to sell then paying the loan down might not be an issue, but I would not pay it down initially, just keep cash in the offset and then only pay it down if your need to - such as to qualify for another loan with serviceability being an issue.

But you could also do something similar in sydney - but when you live in Perth you couldn't get the main residence exemption.

So perhaps you have to consider will Perth grow faster than Sydney? If Sydney will be expexted to grow more will the post tax result be the same. i.e. Will a Sydney property sold with tax exceed a Perth property sold without tax?

And why are you expecting to sell? Is it because you want to use the proceeds to fund a new main residence? If so could you not buy that now and rent it out? This will avoid the need to sell

 

Thanks Terry, we wouldnt be selling necessarily. Our plan for now is to stay in Perth the next 2-3 then hopefully move to Sunshine Coast hinterland and buy acreage. If we buy a PPOR in Perth now and decide to move in a few years we could either a) sell PPOR b) retain PPOR as an IP or c) Retain and subdivide our PPOR ( as plan would be to buy something subdividable ) existing dwelling would become IP and rear lot we would likely sell.
OR we just stay renting here and buy a Sydney IP.
Another option we have been considering, if we are sure we will relocate to sunny coast, is to buy a dual occ there and rent it out for now which means we will have somewhere to live when we relocate while we search for the acreage property and this would then remain as an IP.
Lots of ideas not set on any yet.

 

What not buy the acreage now and rent it out?

 

Def not the worst idea Terry, would be NG for sure as acreage properties rarely rent for enough to cover repayments especially considering we wouldn't have 20%. I suppose a few things would need to be considered if we went with this option:
1. Typically harder to borrow for large acreage and we will be in a stronger position ( more deposit ) in 2-3 years from now
2. I think it would be wise to establish ourselves in the "town" first. Easier to make friends etc when you're in among it all not out in whoop whoop
3. We are not overly educated on the area and I feel its wise to get a feel for the region before deciding where to purchase our potentially "forever" property. Even things like the grass type needs to be considered as I believe there is land in that region where the "feed" is not suitable for horses

Buying a dual occ now will give us an instant roof over our head when we decide to relocate as well as an income, we can settle in make friends etc and start the property hunt then when we find "the one" we simply put tenants back inot the half we were inhabiting making it dual income once again.

On a separate note, a question for you popped into my head this morning.....if you buy an IP then move into it at a later date making it your PPOR when you sell this property are you therefore CGT exempt?

Thanks Terry for your continuing insight and help

 

Not exempt if you move into an IP but it could work out tax free or very low tax

 

Even though it is your PPOR when you sell?

 

This thread explains what happens with CGT if you move into an IP

 

Thanks Terry, no link?

 

bugger!
here it is
Tax Tip 86: Don’t be so fearful of generating income from the main residence Tax Tip 86: Don’t be so fearful of generating income from the main residence