PPOR WA or IP QLD

Hi All,
Thoughts on best strategy.....my partner and I have around 60k ready to go. Plan was to buy an IP townhouse in logan using 30k deposit then start looking at a PPOR here in Perth once the IP is well established ( 12 months or so I suppose )
Perth market seems to be gaining traction, wondering if its best we focus on the PPOR for now, hope for it to build some equity over the next 3 or so years and then use that equity plus savings to look at an IP perhaps in Sydney/Newcastle.
Currently pay $350pw rent between us.
PPOR would be somewhere <5kms from coast and <20kms from cbd
Just looking for peoples thoughts and maybe things I haven't thought of or factored in!
Luckily being in WA means that if we do buy IP first we are still exempt on stamp duty for our PPOR up to 430k

 

Why the IP in logan? What's the strategy?

 

Low budget (325k ) cf neutral thanks to help of the depreciation ( new build ) something low maintenance due to us being on the other side of the country, area with lots of govt $$ being pumped in.
Concerns are of course over supply, fact it is a townhouse not freestanding and uncertainty re future of qld market

Hence why I am now thinking of focusing on the PPOR for now with hopes of being able to get into Sydney market in a few yrs (IP) as personally I feel Sydney will always be stronger than QLD in a long term strategy which is what it would be in Syd. If we do buy IP in logan/Qld not sure if I would hold long term, would be tempted to sell if I saw decent gains within the first 5 years.....IF

 

I haven't look into it in detail admittedly, but a new townhouse build in Logan, and wanting decent gains within the first 5 years seem likely to be at cross purposes. Maybe some locals can advise.

Maybe you should stick to where you have better knowledge of the market if you're aiming for short and medium term growth.

 

Extracting equity is not what it used to be. Topping up to more than 80% LVR is hard.

 

The most important thing you left out - your incomes. If you were both on high incomes for example, I would not be looking at Logan. Regardless, I would think twice and do more DD before pulling the trigger on a townhouse in Logan.

 

Apologies, incomes sitting at around 150k joint

 

A couple of things - Investor finance wise, you'll be very limited in what you can get using a tiny deposit for the IP. Ideally you'll need at least a 12% deposit plus stamps, although you might get through with about an 8% deposit with a couple of lenders.

Bear in mind, you'll be paying P&I which will affect cashflow, so make sure you're doing your sums with the correct loan structure or you might be a bit disappointed.

I'd also get your borrowing capacity checked to see if it's possible to do both - just to be sure it's not an either/or scenario. You don't want to find out too late you can't get finance for your PPOR at the level you'll need.

 

Thanks for your comments. Broker has managed to source 95% IO loan for IP, it will be IO not P&I. Have also been advised it shouldnt affect borrowing cap for the PPOR but "shouldn't" and "wont' two very diff things......

 

If your goals are to have the best chance for CG, I would be going for a free standing home closer to the CBD, Basically as close as your budget can get you. An older block on a good size land that has scope to renovate later on, in a good OO area. That has much more of a chance to outperform the Logan TH imo. All comes down to your goals. Have a look at Chermside.

 

Which lender please? 95% plus LMI? Or including?

Lots to consider with these loans - the LMI is significant so you won't be moving lenders anytime soon so want to think carefully about whether it's a good thing long term - ie, for equity releases.

 

From someone who had a townhouse in Logan and lives 20k from city, 10 min drive to the beach I'd buy your PPOR. Let's say the IP goes up $50,000 in 5 yrs. Take stamp duty out, CGT, selling costs, if you sold the gain is minimal. Buy in WA, add some value and the gains will be tax free if you upgrade in 5 yrs.

 

Love this advice, totally forgot about no CGT on PPOR

 

Apologies for my ignorance but how does LMI affect moving lenders in say 3 years time?

 

Its ok, did a quick google search and now fully understand the consequence. Thank you for raising the point

 

If you've paid $5k for eg in LMI and your property doesn't grow significantly, you'll be paying LMI all over again at the new lender.

It makes it very expensive, which defeats the purpose of moving lenders. It's also very difficult to get cash out over 80% with many lenders, so if that's your plan you want to be sure that it's going to be possible.

 

Thanks for clarifying!

 

Or you could always buy your ppor now in Perth and rent it out for a while before moving in. It's a great time to buy in Perth. It's at the bottom. Then later down the track move into it.

 

It's not just the CGT you need to consider.

On a tax basis, be very careful about buying an IP with a plan to leverage into a PPoR later if that is your plan. Broadly, it is far better to buy a PPoR then leverage into an IP to maximise ongoing tax advantages given it's the purpose of the loan and not what secures it that determines whether it's tax deductible. If you're unsure about this, consult an accountant before making any decisions (you should be doing this anyway).

 

Plan wasn't to leverage the IP into a PPOR, we would have enough deposit still remaining for the PPOR however I will consult an accountant to gain their perspective on the strategies. Thank you