Sell PPOR or convert as IP

Discussion in 'Investment Strategy' started by San2018, 30th Aug, 2019.

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  1. San2018

    San2018 Well-Known Member

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    I need your suggestion/ inputs on whether to keep or sell my PPOR before moving to other suburbs within Sydney. I am just reaching 40 yrs and my long/ medium-term goal is FIRE.

    I bought PPOR in Quakers hill/NSW in 2013 for 455K and spent 20K on renovations. It’s 7 means walk to the station on Railway rd, ~550 SQM block. Near train tracks (road in between track and house). I am still living in the property and expect to move (buy next PPOR) to Northshore by the end of this year for better schools. Based on high-level valuation, I can sell my current PPORT for~650k. The outstanding mortgage is $ 300K. Rental estimation is $420 per week. It’s 100% on my name, and my tax threshold is @ 37%.

    I think I have two options unless you suggest more options if they make sense in my scenario.

    Option1: Keep the property and hold it as long term IP. Build a Granny flat and use it for CF. To avoid tax on rent, do spousal transfer onto my wife’s same (50%) and sell the remaining 50%. I think It will attract ~15K to sell. In 10 years, payoff all mortgage and enjoy the monthly income?

    I can't leave this property on my name because I have another IP in NSW and I end up paying Land tax.

    I think Quakers hill has long-term growth potential?

    Option 2: Sell and collect CGT free profit then buy one more IP with 100% loan. The downside of this approach is buying and selling expenses.

    If I need to sell, I think it’s a good time to sell right now.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    San2018 likes this.
  3. San2018

    San2018 Well-Known Member

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    Thanks Terry but i am confused what to chose between Hold and sell. Too many variables and too much info online. Just need experts/ seniors advise what they would if they are in my situation.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    what sort of loan do you have ?

    if a basic redraw and you have been salary crediting, that may cause tax issues once moved out

    ta

    rolf
     
  5. Gockie

    Gockie Life is good ☺️ Premium Member

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    North Shore... I'd assume it's a more expensive house?
    Curious as to where you are planning on getting the money for that from.
     
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  6. San2018

    San2018 Well-Known Member

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    Sorry Rolf, didn't understand the question. I have westpac loan with offset account. Salary credits to my offset.

    Gockie, with borrowing capacity and savings/ refinancing of my current PPOR, I can buy property up to 1.15- 2M. I am waiting from last 2 years to buy but it seems missed the boat during downturn
     
    Last edited: 1st Sep, 2019
  7. Gockie

    Gockie Life is good ☺️ Premium Member

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    Think how much you would be committing yourself to repay each month if you were to buy a 2 mill property... And it won't be tax deductible debt. If you want to FIRE, I think the 2 mill property would be a huge burden and will prevent you from achieving that goal.
     
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  8. San2018

    San2018 Well-Known Member

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    Apologies. It was typo. I mean to say that 1.15-1.2 M.
     
  9. Gockie

    Gockie Life is good ☺️ Premium Member

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    Thought it could be.... Carry on then :)
     
  10. San2018

    San2018 Well-Known Member

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    Back to the original topic

    Any suggestions on whether to keep or Sell current PPOR?
     
  11. Gockie

    Gockie Life is good ☺️ Premium Member

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    You can possibly decide to keep then sell later... You have 6 months to sell a former PPOR after buying another PPOR and you will incur no CGT if it's sold in that time.

    Just think, once it's sold, it's sold, you can't reverse that decision.

    I personally think keeping a property in Quakers Hill is not a decision to regret.
    It seems very popular with buyers.
     
  12. San2018

    San2018 Well-Known Member

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    That's what I am thinking. It's closer to station so always easy to rent. I can build Granny and rent both of them as song term investment. If I sell and buy one more IP worth of 500K, I'll be spending ~40K on buying and selling/ transaction costs
    .
     

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