Sell one of your three IP's to fund PPOR

Hello forum,

It is a well asked question but in today's hot market climate I would really like your opinions on my situation.

My partner and I are selling our ppor and purchasing in a high performing public secondary college zone in Eastern suburbs (Vermont/Doncaster). Our budget is about 1.4 -1.5M for the new purchase.
My partner wants a bigger block, and for that we need more funds.

He wants to sell our IP in Croydon ($480k)
to net about $270k after cgt and selling costs, loan payout.

So our budget would rise to 1.7-ish.

My concern is having only 2 IP's remaining, will that be enough to retire on?

My gut says do not sell any IP unless we are in extreme financial hardship.

Looking to retire in next 15-20yrs.

Super balance
Me: $80k
Partner: $120k

Income:
Me: $35k
Partner: $200k


Our IPs:

Croydon VIC: 2br unit ($310pw rent)
Value $480k

Griffin QLD: 4br house ($420pw rent)
Value $500k

Thornlands QLD: 4br house ($490pw)
Value $600k

All loans P/I presently. Hope to have them all paid off in 10-15 years.


My partner and I need the simplest strategy for retiring comfortably on $100kpa so if you have any suggestions please feel free to comment. No judgement, everyone sees things differently and we are open to your thoughts.

Hjd

 

Selling an IP to upgrade the PPOR is a common thing many ppl do. I am contemplating doing this myself.

In saying that yes your retirement plans could be affected if you were going to rely on this 3 property portfolio for cashflow and retirement. Depending on how much rental your remaining 2 get it "may" be enough to retire on especially if you have fully paid of PPOR.

Why is your partners Super so low compared to his income? Has he only been making $200k for a short period of time?

 

Yes we explored the renting option. It's actually more expensive to rent in the area ($750-$1000+pw) than to buy and pay mortgage. I would rather appreciating asset plus mortgage than just renting.

 

I was paying down mortgage debt instead of ploughing it into super, my bad. Yes only a few years.

 

We have decided to sell, Auction is in 2 weeks time. If we were to rent it out it might be 400pw perhaps.

 

Edsc or Vsc zones we are mainly looking.

 

This was my partner's pick! We loved the pool, however it's really dated and showing its age. Not my cup of tea. We live in a 50+yo brick veneer and it's old and tired. If I'm spending upwards of 1.4M I'd like a newer build.

 

The key issue to the question is what the debt and cashflow issues will be like with or without selling the IP to access equity. And also the expected growth from that property (tax free) should exceed that of the apartment.

Property is one element of retirement wealth. Also consider super.

 

Yes we can afford to keep the 3 IP's and afford further repayments for the new ppor loan. I'm glad you reminded me about the rents flowing in - I had forgotten about that!

 

If you are confident that getting a more expensive house is going to make you happier, then definitely. You still have plenty of time to increase your super, buy more investment properties, etc but you don't want to spend $1.5m on a home that doesn't meet your needs.

You might also find that it pays off for you in the long term, as you will be getting CGT free gains on a more valuable home. i.e. If you downsize in 20-25 years, the $1.7m home on a bigger block could easily be worth $500k more than the $1.5m home.

 

You are correct. It was a big shock for my partner to inspect a 200sqm townhouse and the first thing he said after it was "claustrophobic "! I tend to agree, but we all must make sacrifices if that is our goal to give our kids an opportunity we feel is best for their future. Thems the breaks

 

Excellent point! This is definitely our time to grab an upgrade which will fulfil our family needs and may not be our "forever home" but be a more modern and dare I say luxurious home for us to enjoy for the next decade or so. Gosh this may mean I can reconsider selling an IP to upgrade

 

I was having a chat to our broker about this very issue today.
Rough calculations using conservative growth estimates would leave us with equity to live off after 15 years of
$1,635,000 (3 x IP)
Or $1,160,000 (2 x IP)
But I still don't know how to "live of" this equity + super in 15 years time, or will it last until we die? Do I invest it into a managed fund? Annuity? Us a LOC somehow? Or a few other ways I have no idea what to do with it. Does it just sit in the bank? See how clueless I am?