Some advice on my next step please.......

Hi Experts,

I am after some advice on where to go and how to get ahead.

Purchased my first IP 1 year ago in Kallangur. Generating $350 PW. Currently setup I/O and negatively geared by about $25-$50 per week after all expenses.

PPOR (Western Sydney) valued at $750k owing $175k with $175k in offset account. Paying P/I.

There is the possibility of building a granny flat on my PPOR which would rent for approx $350 PW. I could then look at renting out the main house for approx $450 PW. This would hopefully generate $800 rent from my PPOR.

I am then hoping this would increase my serviceability and enable me to purchase a bigger better PPOR.

I just don't know if this is the right direction to head and how i go about this plan. Any advice would be much appreciated.

Thanks in advance!

 

Some considerations you need to think about.

- If you build a Gf and rent it out, a % of your home capital growth over time will be taxable rather than Capital gains tax free
- If you rent both GF and house, a % of the time you rented it will incur capital gains tax
- If your house only owes 175k, you can only claim the interest against a that value of the property. If you get a loan for another PPOR, the loan on that will be large with no tax benefits.
- If you rent out the home / GF, the new serviceability calculators will only accept 50-70% of this income.

I think the bigger question though is - what's your next step in life? Do you need a larger home? Are you happy to stay where you are.
Maybe just try to withdraw equity from your home and get another basic IP like you have done

 

Doing exactly what you said is in no way a good financial move, but if thats what you want then its your life.

The granny flat idea is golden if you can get DA approval and it creates another income stream.

 

Am I missing something... your only debt is 175k? If that's the case your serviceability should still be good I would assume...

Like @House asked, What's your actual goal...to move to a bigger and better PPOR or to continue to expand your investment portfolio?

With regards to the GF strategy, generally I am not a fan. We have a couple of properties that have GF ability but choose to invest the capital it would take to build the GF into other assets while knowing that when it comes time to sell the homes, they will likely command a premium from many people who are all 'gaga' over GF potential homes.

 

What is your serviceability like now?

Is it necessary to move out just to improve serviceability?

Consider pi loan for your investment property.

Building a gf could be a good idea.

 

Thanks everyone for the replies.

Serviceability isn't that great. Single income and have another IP.

Don't "need" a bigger or better PPOR but I guess it would be nice to have a McMansion.

I can see that by only owning such a small amount on my current PPOR that turning it into an IP isn't very effective. Unless I am going to rent

Guess a few home renos would keep the wife happy