Which Option will better my future financial position?

Hi all,

Long time stalker, 1st time poster.

Looking for some advice on my current position and what the forum believes will be best for my next property purchase/s

I am 25 years old, living at home (Sydney), and have 4 investment properties.

• IP1 Loan $560,400 with rent of $900p/w (dual occupancy). Value of property approx. $900k
• IP2 Loan $280,200 with rent of $500p/w. Value of property approx. $600k
• IP3 Loan $342,802 with rent of $390p/w. Value of property approx. $400k
• IP4 Loan $265,449 with rent of $320p/w. Value of property approx. $320k

Income is approximately 200 to 220k per year. Current savings are around $250,000

Ideally I would like to move out within the next year or two and in close proximity to the Sydney CBD.

Considering I work in the CBD and always will, a place of residence close by is important to myself with the amount of hours I work.

CBA are willing to give me a loan for $792k on an 88% LVR, so I am currently deciding between buying a 2:2:1 unit as an IP to become a future PPOR within the next year or two, or whether to continue to purchase another 2 or 3 IPS in Adelaide and Brisbane.

I am currently leaning towards buying an IP worth $1,000,000 (to move into in 2 years) due to the fact that if i purchase another 2/3 IP's my borrowing power may be hindered and I will not be serviceable for a loan of such an amount with 5km proximity to the city.

Having my largest asset as a soon to be PPOR, will allow me to then start a debt recycling strategy and use the positive cashflow from the IP's to reduce my non deductible debt and then withdraw equity, which will be converted to tax deductible debt, to continue to purchase further IP's.

Does anyone have any thoughts on the strategy aforementioned? Or would there be an opposing argument to purchase the 3 IP's and potentially risk lower serviceability in the years ahead?

 

You're in an amazing position, well done.

The question is, do you need to buy a PPOR, or can you rent long term?

That is the key to everything. Also, have you had your servicing checked by a broker yet? How are you loans currently structured? Best to get that sorted before maxing yourself out one way or the other.

 

I am unsure how to do this. Can you please assist?

 

@Terry_w can assist with structure on this. Pick any of the brokers they can assist you with future loans.

 

My servicing has been checked by a broker. I have been working with him for several years now. I have a pre-approval in place for the $792k. All loans are current I/O. He believes an IP with the intention of moving into down the track is a smart decision with my current position, however, I wanted to hear other peoples thoughts. My broker has many opposing arguments to the whole 'rentvesting' scenario. I have however considered the '6 year rule' as a potential option also.

 

No idea.
But many consider capitals to be shouting.
Marg

 

Understood. Hopefully others can see this as a mistake of a first time poster and provide some feedback. Will post thread titles in lower case only moving forward.

 

Much appreciated. Thank you!

 

It's great you've got a good relationship with your broker. Are your loans cross collateralised? If you're not sure, ask him.

If he says yes, ask him to uncross them before you do anything else. Once you're maxed out servicing wise it will be difficult to uncross them so if it needs doing best to sort it before committing to more loans.

 

Always hard to work out which was to proceed more IP or PPOR - it's very hard because one is a financial decision and the other is an investment decision.

I would continue to invest the best you possibly can until you need to make another decision.

 

The loans are not cross collateralised. I have made sure of this.

My main concerns are the following. At this present time I can purchase a $1m property. This would be ideal for livability in the near future, due to proximity to CBD, and the fact that at some point or another i would like the stability of having a PPOR. Sure I can buy another 3 IP's this year and have 7 to my name at 25, but should I wish to purchase a PPOR at 27/28 and potentially start a family, is there a chance I am going to struggle to get a loan and therefore be stuck renting because my serviceability only allows me to live in a $500k home as I am maxed out servicing wise?

 

Thank you for the advice mate. Much appreciated. It is indeed quite a tough decision and one I keep procrastinating on.

I suppose for myself, the investing is the easy part. I can continue to attain several other IP's this year and fund with cash if I need to, but my concerns lie with the uncertainty of attaining a large amount of borrowings in the near future to secure a nice PPOR to live in.

 

I was in similar situation, I lived at home until I was 28. Only moved into a new PPOR as I did a development and it was about time were I wanted to move out.
My family wouldn't of had any issues me staying there longer, got along really well with them both. Helped with dinners, wasn't a mess, old man always liked a drinking partner.

My partners also moved into my PPOR, if she wasn't around I would either have mates move in with me or rent elsewhere with them.

Worse comes to worse could you live in any of the existing properties?
Or if you had to rentvest? Would that be a problem if you have a nice 6-9 property portfolio worth ~$3-4M?

 

Yes there definitely is the possibility of this - in fact I would say it's a definite, especially once kids come along. You may have a boost if/when you have a partner who works (assuming you're not including that already), but kids will trash your servicing - and your house, but that's another story

In that regard, buy the PPOR now.

 

Sound to me like the servicing now depends on it being an IP, but that does not stop you from deciding to move in. Then with that income it won't be long before you can go buy more IPs, converting your PPOR loan to deductible IP loans bit by bit.