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Rent out or sell?

Discussion in 'General Property Chat' started by dmb1978, 6th Jan, 2016.

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  1. dmb1978

    dmb1978 Well-Known Member

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    Hi all, I am after some advice in relation to whether we should sell or rent out our current PPOR given the following scenario:

    Move to another country for 3 years with all costs covered minus personal expenses.

    We currently have 2 IP’s that have equity loans from PPOR attached so if we sold, these would be paid down making both properties slightly positively geared. We would then only have about $90,000 left from sale plus savings. IP’s would then be at around 77% LVR.

    If we rent the PPOR, income would be about $900/month greater than loan repayments.

    PPOR has a pool which we can include servicing.

    If we sold PPOR I would prefer to buy another IP to replace it but as I won’t be working and currently on mat leave I’m concerned about serviceability requirements of bank.

    All properties are in Canberra. PPOR is not forever house but would prefer to hold a bit longer if financially more viable. Also all loans are fixed until December with move to be July 2016.

    Rent or sell?
     
  2. hathro

    hathro Member

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    Why would you sell an income generating asset? You've also mentioned you'd sell it and replace it with another IP. Would the new IP be a better investment and generate better returns than your PPOR and it is worth all the hassle with loan restructuring and you being away etc?
     
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  3. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    And the 6 year rule on CG.
     
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  4. dmb1978

    dmb1978 Well-Known Member

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    The PPOR is on a large non-dividable block with huge gardens and a large below ground pool. Partner want's to sell thinking it will be a liability.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You wouldn't want to pay down investment loans and costly to break a fixed now, probably. Why sell?
     
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  6. D.T.

    D.T. Adelaide Property Manager Business Member

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    Rent the ppor. Canberra market is starting to do well and you'll benefit from the growth and the income.

    If you change your mind you might be able to sell CGT free (double check rules on moving OS)
     
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  7. dmb1978

    dmb1978 Well-Known Member

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    Okay so circumstances have changed and the PPOR just isn't a good rental and we have decided that selling is the option due to the high level of costly maintenance that would be required to keep the house. The question is now, would it be best to save the money over the next 3 years and purchase a new PPOR or buy another investment property in the mean time but use the cash from the sale as the deposit. So is it best to invest the cash now or wait until return and use the equity of the new PPOR to buy an investment property. Does that make sense?
     
  8. wylie

    wylie Moderator Staff Member

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    Before making the decision to sell, add up the cost of agent fees on sale ($20k guessing here), stamp duty to buy a new IP ($20k another guess), and I reckon you are still far ahead by paying for maintenance for three years. Guess $100 per month for pool ($3.6k) and fix the gardens when you get back. I'd rethink it.

    Plus, if you can use the six year rule, then when the house value increases, you will likely pay no capital gains tax (dependent on all the normal rules of course).
     
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  9. dmb1978

    dmb1978 Well-Known Member

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    Thanks wylie. ACT Stamp duty can be claimed in full in Canberra so not so bad and we probably wouldn't return to this house to live in so not sure it would make a good long term rental either. I am just not sure if it would be worth waiting to buy with equity when we get back or use the cash to buy to benefit from the extra 3 years growth.
     
  10. Nemo30

    Nemo30 Well-Known Member

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    Canberra market is doing well at the moment...is anyone's guess if this will continue. I think artificially high due to fluffy buyers and seasonal changes.

    Azazel linked an article in the canberra thread today indicating the market might do alright over the next two years.
     
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  11. Nemo30

    Nemo30 Well-Known Member

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    In terms of Canberra agents...I'm currently selling through Luton - have found them fantastic. Highly recommend.

    Chalk and cheese with previous experience through LJ hooker.
     
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