Hello everyone, My partner and I are now at the stage where we think we have a relative good foundation however are unsure of what to do next. Would be great to get some thoughts, opinions or even recommendations about who we could potentially engage to discuss our scenario and options further. Financials Overview: PPOR - $2m; Loan: $0 PPOR2* - $1.2m; Loan: $0 IP1 - $1.5m; Loan: $0.8m IP2 - $0.8m, Loan: $0.5m IP3 - $1.2m; Loan: $0.7m IP4 - $0.60; Loan: $0.45m Total Property Assets: $7.3m, Loans: $2.45m All properties are houses in Syd, except IP4 which is in Brisbane. *Lived in by one of our parents so is not really something we will play with, unless it is a no brainer and doesn't disrupt them too much. Also, worth noting we receive little to no rent however incur land tax. Cash/offset: $230k Shares: $300k Rent income: ~$114k pa. Salary: ~$220k pa + super + circa 20% bonus (wife is currently working 4 day weeks, so salary is lower than normal and will go up if returning to 5 days) No other debt aside from loans above Current Scenario and Short Term Objective We're in our mid to late 30's, have 2 children in daycare with the oldest due to start school next year. We generally live quite well within our means, consider ourselves frugal without being cheap eg. we own one 15-20k car debt free All loans except 1 are IO they are due to roll off one by one over the next few years (i.e. they won't all convert at once) In the next 5-7 years we will need to consider either rebuilding or upgrading to a larger property as our current house will not big enough for 2 adults + 2 teenagers To rebuild we will need to budget approx. $1m If we move, the options are endless I guess for eg. we could move to a cheaper area, similar or more expensive area, however.. Schooling is a major consideration, currently we're in the catchment and walking distance to a good public primary and secondary school Medium to Longer Term Objective By the time we reach say 50ish, we would like to: Be settled in our PPOR Have the flexibility to perhaps wind back work, think about a career change or whatever else it may be be able to reward ourselves (within reason) with family holiday's, nicer car etc BUT most importantly, want to do the above without jeopardising our retirement and our Children's inheritance Next steps And this is where we struggle and I think we get analysis/paralysis when thinking about what our options are We had originally thought that had finished the accumulation phase, and would now just reduce debt (which admittedly is quite challenging right now with 2 childcare aged children), however we obviously have a looming decision regarding our future PPOR We also don't want to look back in 10-15 years time and realise we should have done X or Y which would have been better from a strategic of tactical perspective, than just sit back and let the next 10 years play out on it's own. Keen to hear any thoughts or options on what we could possibly look into or consider further!
You've done very well up to this point If the priority is re-building/upgrading the PPOR, I would be doing whatever you need to do to make that happen in the next few years. It sounds like you are happy to stay where you are (walking distance to good schools is priceless), so I would make plans to re-build once the kids are both at school. In the meantime, keep increasing your share portfolio and/or offset funds, refinance investment loans to new IO terms (as required) to minimise PPOR debt required for construction.
Thanks Chris for taking the time to reply. Whilst it is definitely the priority, I am wondering whether there are optimal ways to leverage our position to make that happen but also to ensure we're set up for the long game. For example a few different options which have come up are, try to rebuild where we are whilst avoiding to sell any IPs (this might be a stretch) or perhaps sell a few IPs, take the CGT hit now but then upgrade to an even better PPOR which will then be CGT free down the line for when we downsize later in life. I guess the options are endless and the more we think about what we could do, the more we realise there really isn't an answer but keen to get other povs!
Yes net rental income No haven't considered commercial tbh. How do you think that would help at this stage?
Just more profit for the same size portfolio and there is no need to sell to realise/pull out profit (and pay the property switch cost [ CG, legal,stamp duty , real estate commission etc]) ...the profit appears month after month
Sorry missed this before Terry. Presumably to avoid land tax? I assume it's still triggers stamp duty
It could have these benefits - no land tax - CGT main residence exemption going forward - greater asset protection - ability to inherit back via a Testamentary Discretionary Trust with excellent tax benefits But this would come at a cost - duty - CGT In some instances it could be exempt from duty though, if you could argue you were trustee for them - speak to a lawyer.
I think what "the right next step" is depends on two things: 1) What does the composition of the current portfolio look like? (ie too many inner ring units? Too many outer ring houses etc) 2) What does your portfolio currently lack, and and then re-balance: ie do you have equity but not enough cash flow, or vice versa (you seem to have good equity). So I would be looking to re-balance per the two items above. I think you have two options: 1) If you are not happy with your PPOR, sort that out first - it will give you peace of mind. 2) If you decide to add another investment property, then commercial property seems like the best next step for you in my opinion.
