Spending more in Outer Melbourne or less in Geelong?

Discussion in 'Investment Strategy' started by SingT, 18th Apr, 2018.

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  1. SingT

    SingT New Member

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    Hi all

    My wife and I are looking for some advice on purchasing our next property and hope to gleam some wisdom from this community :)

    We currently own one IP in Melbourne (Worth 550k, 300k loan remaining). Due to the nature of my job I have to move every 2-3 year and hence we are renting. We currently have enough capital and serviceability to get a 600k property.

    We're trying to decide between buying a PPOR near our current location (15km from the city), which would come in at around 600k, and make use of the first home owner benefits (exemption from stamp duty). We would stay there for around 1.5 years before moving out again (When I'm due for my regular work rotation), upon which we would then rent it out.

    Alternatively we could stretch ourselves less and get a property for about 400-500k in a regional city (Geelong) with good growth prospects, and rent it out from the get go. With a smaller loan we would be in a better position to purchase another property down the road (less debt).

    What do you guys think?

    Thanks heaps!

    regards
    Sing
     
  2. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Hi @SingT

    Where will you eventually live? Will this $600k purchase be somewhere you will move back to down the track? What growth prospects does this area have?

    If this won't be your long term home, do you intend on buying another owner occupier property? If so - when?

    Need to consider the end game with your owner occupier property vs buying IP (and benefiting from the prospect of growth in that area) - especially in the current lending environment as there will be high entry and exit costs, should you then decide to get an owner occupier property.

    Smaller loan may assist with next IP purchase, as you will have two lots of rents. But difficult to say without the data.
     
  3. Brendon

    Brendon Well-Known Member

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    It's important to remember that if you buy a PPOR you would pay no stamp duty and then once you move out you can sell within 6 years and sell with no CGT.... in a lot of ways I'd think of this as a bit of a free hit (assuming there is reasonable prospects of the area you're living in)
     
  4. kaibo

    kaibo Well-Known Member

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    Don't really see how you and your wife can qualify for "first home" buyer stamp duty benefits or is there something I am missing here. Is the IP a commercial property?
     
  5. Jjjjj

    Jjjjj Active Member

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    Nothing sinister, if one has not bought a ppor and had not claimed fhog, then one is still eligible regardless of investment property being residential
     
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  6. SingT

    SingT New Member

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    Thanks for that. For the next 4-6 years we will still be moving around due to work commitments, but will likely eventually settle somewhere else. I suspect this area (Heidelberg West) has pretty good growth prospects - close to the Melbourne CBD (13-15kms), lots of old houses that can have value added through renos, and the immediate surrounding suburbs have had a huge boom in prices. Rental yields have not yet caught up but would likely grow as there are works underway to gentrify the area.

    Our end game is to purchase 2-3 more IPs to set us in a good position for retirement at 65 by leveraging on capital growth (as we are only in our mid 30s).
     
  7. SingT

    SingT New Member

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    As Jjjj mentioned, we bought an apartment some years ago but have not bought PPOR yet.
     
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  8. melbournian

    melbournian Well-Known Member

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    Depends where in Heidelberg west - some parts are super rough like off ramu pde. and also it has boomed quite a bit like from the 400kish to the high 800kish to 900kish.
     
  9. Adelaide

    Adelaide Well-Known Member

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    I bought a house in east geelong for $280000 in 2008. Now worth around $500000.
    10 years and $200k growth.
    Rent 315 pw.

    Hope thar helps.
     
  10. Joynz

    Joynz Well-Known Member

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    Stamp duty is payable on both a PPOR and an IP. Just costs a bit less for a PPOR.
     
  11. Brendon

    Brendon Well-Known Member

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    Not if you're using the FHOG
     
  12. hieund85

    hieund85 Well-Known Member

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    You pay no stamp duty for PPOR up to $600k and a reduced duty between $600k to $800k in VIC. But you need to pay full stamp duty on IP. FHOG is only for new build.