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So you sell an ip & make some money .. Then what?

Discussion in 'General Property Chat' started by D'Mo, 2nd Oct, 2015.

  1. D'Mo

    D'Mo Well-Known Member

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    Just curious how people here have used their 'profits' after selling their investment property?

    My idea is that I will sell our IP (approx 200k owing) for around 370k .. Then I'd pay down the remainder of that loan THEN use the remainder to pay down our Brisbane IP loan..

    Is this logical, or even allowed, or will I pay a massive penalty from the bank for 'paying down my loan to early' ???

    Interested to hear what you guys have done in this situation any savvy ideas ?

    My resonating for paying down loan is less repayments / therefore less worry every month
     
  2. hobo

    hobo Well-Known Member

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    More to the point - why are you selling?

    i.e. Are you selling just to achieve a "profit"? Or are you selling because you can't afford to hold this particular property any more? Or for some other reason....?
     
  3. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    If you sell, dont put the funds into your other IP to pay it down but instead put it in an offset account linked to a property. This way its easy to use the pull out the funds when you do your next IP or home purchase, and your full loan will still be tax deductible, and you'll have lower repayments too in the meantime while that money is parked there.

    You may think you won't expand the portfolio in the future but you never know, your circumstances may change in the future and you want to keep it as flexible as possible. In fact, I think there's a good chance you will change your mind....

    eg. Oh. I just came across a perfect IP to buy....

    Note you will incur CGT on your property sale (unless you can claim it as your PPOR which you later decided to rent out within the 6 years) so just keep in mind that all the profits may not be yours to keep.

    Note I am not an Accountant and this is just my personal opinion.
     
    Last edited: 2nd Oct, 2015
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Arr you paying down the Brisbane loan or parking $ in the offset?

    Have you thought about your cgt liability if you're putting all funds back into the other loan?
     
  5. D'Mo

    D'Mo Well-Known Member

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    Selling to take advantage of the Sydney market at the moment, I guess

    In case it drops again & I miss the boat
     
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  6. D'Mo

    D'Mo Well-Known Member

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    Would I set up an offset account before selling? Is that an easy process?

    The advantage to having an offset is primarily to purchase another when the time comes?

    That's the main advantage?
     
  7. D'Mo

    D'Mo Well-Known Member

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    i was hoping to be exempt from the CGT from the Brisbane property as I'd plan to move there in the next few months to offset that

    Side note: I think I'm exempt from paying CGT on the Sydney property I want to sell, as I've lived there 3 years ago
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    But have you claimed somewhere else as your ppor?
     
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  9. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Yep.
    Dont pay down the Brisbane property. (Ps. I've edited my post further up if you want to read that)
     
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  10. D'Mo

    D'Mo Well-Known Member

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    Nope I haven't, I'm currently renting .. But I didn't live in the apartment that I want to sell for 3 years. Moved out 3 years ago.
     
  11. D'Mo

    D'Mo Well-Known Member

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    Very useful information, I didn't think of the offset account but if it also makes repayments lower whilst I've got it there PLUS it gives me options in case I do decide to buy again, it sounds like a really good idea
     
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  12. D'Mo

    D'Mo Well-Known Member

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    If I've got 200k on the loan .. And I sell it for 370k, how much would I be looking at making?
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Profit would be
    $370k less
    selling costs
    purchasing costs and
    purchase price.

    Possibly CGT exempt in your situation.
     
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  14. D'Mo

    D'Mo Well-Known Member

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    Purchasing costs and purchase price usually a fair chunk?
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    allow 5% for purchase costs and about 3% for sale costs.
     
  16. HUGH72

    HUGH72 Well-Known Member

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    My question would be why are you selling? Is your personal cashflow tight or your financial situation about to change? Looking at the size of the existing loan I would assume your holding costs are low. The question is what are you planning to do with the cash, if you are looking for a ppor it makes sense.
    I can see you are fairly young, unless cashflow is tight I would be looking to grow your asset base not decrease it as transaction costs will eat into some of your gain. Putting funds into an offset will lower your holding costs. Is your 200k IO? OrP&I?
    I personally would find it hard to sell an asset which has done well only to buy elsewhere.
    The temptation with plenty of cash sitting around is to spend some of it on cars, boats etc.
    The other thing to consider is where the cash will sit in offset, is the property in your name, joint names or your partner's name and are you both working fulltime. You don't want a lot of extra income being accrued by the person on the higher marginal tax rate.
     
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  17. skater

    skater Capitalist Premium Member

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    With the changes in APRA, I think you will see this more & more. Where previously, you might refinance to access equity to fund the next purchase, I think more will resort to selling in order to get that equity (less costs, of course) so they can buy the next IP, especially those timing (or trying to time) the market.

    For instance, everyone who invested into Sydney several years ago are now sitting on a nice equity position. Suppose you can't refinance to get the equity, and you want to buy into QLD. Well, selling a Sydney property could possibly free you up enough to buy a couple in QLD, especially if the aim is to buy now, sit on it/them for a couple of years to sell and invest back into Sydney at a lower price point than now.
     
    Last edited: 3rd Oct, 2015
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  18. Perthguy

    Perthguy Well-Known Member

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    I am selling Melbourne to put the money into a development in Perth. I can potentially build two townhouses on an existing property. One if I keep Melbourne and two if I sell Melbourne. Note I am not putting the cash into the property. I will just use it as security while I build.

    There are lots of reasons to sell and none of them are because the market has gone up. The property in Melbourne is not a long term keeper. It is a low return development site. The house is very much past it's use by date, so has lots of maintenance issues. Rent of about $280 per week, and a lot of trouble finding tenants. We just can't keep holding a negatively geared property indefinitely. It is a develop or sell kind of situation and we have decided against developing this time.

    I have no problems with selling up, but you need to be clear (to yourself) about why and how selling will help you achieve your own personal goals.
     
  19. MsAli

    MsAli Well-Known Member Premium Member

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    Talk to @Be Developer ...will have clients wanting to build
     
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  20. See Change

    See Change Timing Lord Premium Member

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    We're looking at selling properties in Sydney . Very nice capital gain but still quite cash flow negative . There is potential to improve the properties but a couple of the other owners are f....wits and one had taken to accusing any one who disagrees with her of bullying . Very unpleasant dynamic and where it's got to the point where I just want to oppose anything she suggests to p....ss her off .

    She had so far driven one other owner to sell her units and the previous strata manager was having major disputes with her and was giving up just to make her go away .

    I could walk away from BC committee but I don't trust the remaining people to run the place efficiently .

    Has been a significant cause of stress for over a year and the reality is I don't need it . Want to enjoy life

    We were thinking of keeping them as a potential downsizer , but have now bought that and moved in.

    I don't see a significant gain over next 7-10 years .

    Solution . Close to 100 % gain in last six years . Sell . Pay CGT . Pay off some residual private debt ( We will be paying down LOC which we can redraw for investment purposes ) which is paid post tax and we have some money to either pay off investment debt , use as deposit for another IP , or we might reward our selves with some treaties , or a combination .


    Cliff
     
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