Property & Shares Headache! (Please help experts)

I would love to know what to do next, this has been causing me a headache for the last few months and I still don't understand how to play my cards right.

More opinions the better.

About Us
Mid 20s. Salary Combined 170k a year. Melbourne. Can borrow 700k-1m. NO PPOR.
Happy to keep renting apartment near the city (great lifestyle and near both our jobs).

Next 5-10 years
We will need to buy a family home/ townhouse/ unit I think? Although it might be the best option long term, it also feels silly to have a longer commute to our jobs and then come back to a 3 or 4 bedroom house where we pay 700 IO or 1k P&I a week instead of $400 rent. But what if prices double/ sky rocket after the next cool down? We'd be forever kicking ourselves for not doing this. Life style quality would not be as good, more petrol and time in the car. Very safe option but would not build much wealth. We'd almost have to start again and save our way to wealth whilst paying down a big mortgage for a house we currently don't need.

The Future
We say we want to 'F.I.R.E' but both know deep down we'll keep working indefinitely, would take a few months off here and there to recharge and travel, maybe eventually work part time etc. 1M invested would probably result in part time hours.

2 IPs in Regional Vic (2019 & 2020)

IP 1 - Interest Only
Bought 350k. Owe 300k. Worth 550k. Rent 400p/w
(Could increase rent to 450p/w over the next 2 years, pulled 25k equity out for shares 18 months ago)

IP2 - Principal & Interest
Bought 340k. Owe 290k. Worth 500-550k. Rent 400p/w
(Rent could be increased to 420 p/w)

Share Portfolio
VAS 30k (All from IP 1, tax deductiable interest)
VGS 35K
VDHG 25K (Bought lump sum for first ever purchase during April 2020 will stick with VAS/ VGS from now on).

Option 1 (Our 'back up' plan)
Sell one IP. Hope Melbourne market cools down. Buy a home, max out borrowing capacity. Deposit will be from IP sale and savings.

Option 2 (What I'm leaning towards)
Pull around 100k from each property in equity and invest in VAS/ VGS maybe IVV. Keep renting. I love this option BUT Borrowing power could be in some trouble with 800k debt? Maybe eventually sell some shares AND/ OR IPs to fund a 'nice' PPOR in Melbourne. $1-1.5M (Assuming we have cleared IP debt).

Option 3 (Compound interest calculator is screaming DO THIS) lol
Sell both IPs in seperate financial years for tax purposes and put everything into shares. This would bring our portfolio to about 500k after expenses plus what we already have invested. (This is very, very appealing however we have made most of our wealth through leverage, so we'd have to 'save' our way to wealth, no more using other peoples money (no experience with margin loans). We would also need to buy a PPOR which would eat 150-250k of this up).

Option 4 (Safe, almost too safe)
Don't pull out equity. Sell all VDHG and VGS to purchase PPOR and max out borrowing power. (Slowly pay down PPOR and slowly build up the shares again).

Option 5 (This or YOUR opinion)
Do nothing. Just wait it out for a couple of years.

Thanks in advance ladies and gentlemen!

 

How will your priorities change (eg you still going to want to rent an apartment?) when/if you have kids?

your question seems to be more which investment will have the best returns. But no one knows that.

 

Thanks for your reply Trainee. I'm not too sure, don't have an issue with renting. However we both know that at some point we'll need to buy a place so we aren't renting as we get older.

 

I vote do nothing, except to start buying regular parcels of VAS/VGS for the next few years and re-asses. You clearly like rent-vesting and unless your circumstances change (kids etc), why change your lifestyle. Don’t sell your IPs as it seems like they cost nothing to hold. With lending tightening up again you may not be able to buy back in, or even get more equity. I would also start to salary sacrifice into super, if you aren’t already doing this.

By the way, congratulations. What an excellent position to be in at such a young age.

 

What do you expect your incomes to reach in 5-10 years?

 

Something a little different. Make both investment loans io and take both to 80% take all you can and buy vas / vgs at maybe 1 to 4 ratio as vgs already covers part of vas. Use a seperate company to keep lent money from your personal money so maybe loan stuff via CommSec and private via selfwealth or similar. Easier for tax purposes.
Yes you have a big io debt but you have every cent working for you.

 

This!

Are you wanting to have kids, pets? I'd be looking at purchasing something that you'd want to live in, in the future. If that means that you rent it out for the time being, while you continue to rent in the City, that's fine.

Don't sell your IP's. They aren't costing you anything, and will continue to grow your wealth.

 

No one can suggest you buy shares or don't buy shares as these are financial products and they would need to be licensed.

Not having a main residence means you won't have a tax free asset - CGT and land tax, while having investment properties will mean you will be paying land tax in VIC with more than one probably (or will be soon) and these are subject to CGT.

Imagine if you had one investment property and one main residence and you sold the main residence CGT free, perhaps in 10 years time, and moved into the IP.