NSW Single house in inner Sydney or multiple cashflows in outer suburbs

I struggle to work out which way of investment in Sydney is more profitable. If I have a budget within around $1m and like many suggest I may buy one single house in a inner suburb (Option 1). If lucky enough the value may grow to $2m or $3m in future (let's say decades later), and that's fine. Even better I may choose to live in the house myself so I'd never need to pay the CGT when selling it.

The only problem is, let's say 20 years later the value doubles while I live in the home with my family, but I can't get any actual money before selling it. An extreme (or typical not sure) case would be, I die without selling the home which is then passed to my son. By that time I may have enjoyed being a millionaire (in name), while the reality is I earn nothing from my home but actually live on my wage, namely my home effectively gives me nothing! Even worse I may have suffered the burden from mortgage, I kept paying mortgage while never enjoyed any return (given that I eventually died my residential home). It turns out to be that I'd better off sell out my self-occupied prior to my death.

Alternatively (Option 2) I may rent out that house and then live in somewhere else paying rents myself (though what I pay may be less than that I receive from my IP). The biggest downside of this strategy appears to be, the CGT I need to pay once I sell it out. Conclusion: better not sell my IP in this case, thus I enjoy the continuous rental yield while avoid the loss on CGT.

Okay, let's see Option 3, to buy 2 or even more houses in Mt Druitt. From day one I receive the rent income. The value would grow significantly too overtime.

Which way do you think brings me the largest profit?

 

Investing is an ongoing process, not a one off transaction. Think you buy some now, more in a few years, add some shares, and so on.

 

You mean I shouldn't hold one house throughout my life?

 

Think multiple properties and investment types. Ppor, some ips, shares, inside and outside super, accumulated over decades. Its common to only see significant gains in your second cycle.

 

Consider multiple properties with a lower land content eg townhouses or units - these will have a lower UCV for land tax.

 

Option 4: Wait 12-18 months to see where the market is headed and then revaluate. Inherentince taxes can be minimized greatly if structured property. Read up on @Terry_w tips or even better have a chat with him.

 

I got your point. However the houses with land package are said to appreciate more than townhouse/units. I guess you anyway think it's unwise to put all your money to a single home which probably most people are doing.

 

Looking back at my investment journey, where I acquired multiple IPs at the expense of an ideal forever home, I'd settle for less properties in quality/inner locations with one in the mix that can double as a PPOR.

 

thank you for the input, the current market really seems confusing. I haven't thought about inheritance tax though, since that's not my business (but my son's)

 

If you want to leave money to your children, something to learn.

Why do you think you have only one chance to do this?

 

Australia does not have inheritance tax. (Though properties/assets/cash held in super will be taxed to non-dependents or other IP's will be hit with a CGT event).

 

@Scott No Mates is right, Australia doesn't have inheritance tax as such but I was referring to tax minimization as a general thing when passed on. I believe they are called testamentary trusts, don't quote me on that though.

Yes, the market is confusing, all the more reason to monitor it closely and be ready to take action but NOT take it right away.

 

Investing all their wealth into a self-occupied house might be the only choice for many people living in Sydney who do not have extra money to invest for another. In that case they are paying the mortgage for decades without receiving any rental return.

 

Why does that stop you from doing differently? You sound young and you managed to save. Keep doing it and invest more.

 

I'm definitely open to new ideas which is why I'm here and I know tooooo many people just buying a home for home only. I consider buying a high-value home in Sydney a big gamble: you may not receive any return for long, but Sydney's market may appropriate much more than other cities, in the best scenario you end up selling that house and earn hundreds of thousands. The downside is you sooner or later have to sell it while multiple cash-flow IPs bring you constant (but not that much) benefit.

Really hard to decide

BTW, another question in my mind is, in case we do pursue cashflow IPs, compared to outer Sydney, is inter Brisbane appears a better choice? (considering high socio economic level, stable rental income)

 

Last comment, and if you dont get believe it, ill stop.

You can have the sydney house AND other investments if you plan and work at it. In the best case scenario, you end up with a couple of properties and shares worth millions and retire.