PPOR or IP

Hi Everyone,

Only stubmled upon this site a few weeks ago and literally havent got off since! Some great info and people to look up to. Thought I would put my situation out there and see what some opinions are or any recommendation are from some of you.

I am 29, my partner 34 - no properties to our name. I earn 285k and she about 90k, by the end of the year we should have about 180k-200k saved up. We live in Sydney and forsee being here for at least the next 6-10 years. We will most likely try for kids towards the end of next year and we would like our PPOR to be in the Shire (few suburbs on the list for us). Here are three options we are considering, in order or preference in our minds:

1. Buy close to cronulla (approx 1 Mil which will most likely be a townhouse), rent it out as IP for 1-2 years which will be negative geared to assist with my large tax. Then, either rent something small in Cronulla (lifestyle) or move in with the in-laws (saving opportunity but not something either of us particularly want to do). Pay down as much as we can on the IP while renting and continue to save, that way once we move back in as our PPOR we could use some of the equity to then look for a IP interstate at a lower price level?

2. Buy further out from Cronulla (approx 1 Mil), rent it out as IP 1-2 years which will be negative geared to assist with my large tax. Difference between the above would be we could afford a house and land, so would look for something with a big block that we could then develop/subdivide down the track or as a minimum add value/extend.

3. Purchase a few IP's (over a 12 month period) in different states to spread risk, rent where we want to live.

I can appreciate that some of the reasons behind the above will largely revolve around lifestyle and if we are cumfortable renting and moving around etc. However, I would love any ideas/recommendations/previous experience anyone may have. Basically the above strategies revolve around trying to help with my tax a little, investing in areas I am confident in, and also looking into the future for what we will want. To be honest I think we would only want to rent for 2-3 years more max.

I am VERY green to it all so would just be good to know I am on the right path atleast or if I am completely lost haha.

Thanks for taking the time to read!
Cheers,

Stu

 

or

4. Buy dream property now. Live in it briefly to establish it as the main residence. Move out and rent it. Claim all associated costs as per normal. Every 12 months or so reassess. Then move in when appropriate. CGT exemption can be maintained if you are absent less than 6 years.

 

Hi Stu, a lot of this will depend really on what you and partner want and willing to endure, each couple will be different.

So it makes it hard to answer really, form em it would be buy an affordable home.

 

Hi Stu,

If tax strategy and lifestyle are key goals here than an investment property in the bracket you describe (around that 1 mil mark) would likely have some benefit to offsetting a little of your income. However, that is the kind of set and forget that I don't personally believe will have a great impact overall, it more or less just spins money and takes some from one place and puts it somewhere else.

A different approach (and speak to an accountant about this) might be to purchase a PPOR and smash down the loan using your good income. Then when you have decide to move later down the line (as you described) you can hold onto the property for 6 years, get the benefits of having an investment property (depreciation/rent/etc.) and sell it and pay no CGT. Essentially you will be buying equity that you can later capitalise on. The benefit of doing this is you can hang stuff on your walls and actually enjoy the property, add value to it and make a nice return with some tax advantages. Maybe you could increase you contributions to super at the same time and make a SMSF purchase later too!

Again speak to an accountant etc. because tax specifically isn't my line of expertise. Hope this helps, at the end of the day just get some skin in the game and you will learn as you go!

 

$285k and only 29?! Holy moly. Well done mate.

I'd love to know what it is that you do for a living. But it's cool if it's too personal and you don't feel like sharing.

Cheers