NEED HELP! - Property Investment Dilemma

Hi Everyone,

Hope you're all making strides in your property investment journeys!

I find myself in a Pickle and would greatly appreciate your insights. Here's the scenario: In 2015, I purchased a PPOR in Sydney's South West - a 4-bedroom, 2-bathroom, 2-car garage property on nice 700 SQM corner lot for $800k. After residing there for three years, my family and I decided to relocate closer to the city due to our dissatisfaction with the area. Consequently, we rented out our PPOR and have been living in a rental property since.

Now, as the 6-year PPOR rule approaches, we're uncertain about our future plans regarding the Sydney property. Additionally, we have an investment property in Brisbane that has performed reasonably well. Here are the two options we're considering:

1. Build a granny flat on the Sydney property to generate extra cash flow to aid in loan servicing & aim get to our passive Income Journey.
2. Sell the Sydney property and use the proceeds to purchase another PPOR in a location we prefer. However, given the current pricing in our desired area, finding a suitable property might prove challenging.

I'm torn between these options and would love to hear your thoughts. What would you do in my situation? Any feedback or advice would be immensely appreciated.

Looking forward to your insights!

 

Usually, Selling and buying in the same market is not advisable. However, it may be a good option for you given the cgt free sale.
If you definitely plan to get a new ppor, I would focus on doing that now rather than later. Granny flats do not add a lot of value to the property price.

 

Thanks for your feedback Mumbai, I understand the potential benefits of taking advantage of the CGT-free sale. I might have to sell my Brisbane property too in order to buy in our desired location. would you still advise me to pursue PPOR?

 

That's a personal decision. But, I would not sell in Brisbane and try to reach out to a mortgage broker to assess my options whether you can get enough loan to buy the new ppor without selling the brissy one.

 

Is Sydney you home? Will you be there for the foreseeable future?

 

Appreciate your input

 

Yes Hammer, Sydney is my hometown. No plans of moving in the future

 

You could move back into the former PPOR and trigger the 6 year rule again. Sacrifice 6 months for the long term gain. Although risk and costs with renting has to be considered.
Or don’t rush the decision and wear some CGT. Are you growing your net worth on an annual basis now while renting and if so by how much. And what’s the difference bw that and the tax costs.

 

hi Reni99 thanks for your response , yes that is an option but with my son’s school and everything in between will be challenging.
The second part of the question is tough one, As I mentioned earlier I have these 2 properties that are doing well and I can build a GF or buy another property inter state. So overall the trajectory is positive but this Ppor is putting spanner in works which will make my investment journey go backwards. Not sure which path to take, that’s the confusion

 

whats your goal? if goal is having ppor - then def buy it, regardless of what u need to sell. if you dont mind renting then keep buying investments. regardless, the decision shouldnt be dominated by a tax benefit (i.e. cgt discount). this is minor in grand scale of things. (eventhough it is in 100s of thousands probably, but still not much compared to your presumed 2M property value.

@Mumbai why is that? i thought its not advised in rising market since u likely to "miss" the boat between selling and buying. but balanced market is no problem. or u mean in same geographical market?

 

The goal is having a Ppor and 100k passive income in today’s $$’s. If I buy Ppor then investment journey will stop as I will not having borrowing capacity left. The situation I am grappling with is what will happen in 10 years time if I continue to rent, will I be better situation to buy Ppor considering if I buy another investment property and wait 10 years. Will it get any easier or I will be stuck in the same situation where Ppor will get further out of reach

 

Possibly unless you have a PPOR not in your perfect location or maybe the perfect PPOR.
Perhaps your salary does not support your goals. What’s the average salary of those that have similar PPORs to what you desire?
To get ahead we have to earn more than we spend and often make sacrifices.
Could you get a PPOR and rent out a few rooms or take on additional work?
What opportunities do you have to increase your income. Or decrease expenses.
Can you get a cheaper PPOR?

 

Hi Ather,

From my understanding, in the event that you decide to sell your property, you can get a retrospective valuation report to increase your cost base and limit your capital gains tax. This is because you should not be liable to pay capital gains tax for the time period that it was your PPOR. However, it is best to double check with an accountant or financial advisor to see what the best course of action is.

Additionally, if you plan to build a granny flat and rent it out, you can also get a tax depreciation schedule to help claim wear and tear of the property against your taxable income. It would be worthwhile to speak to a quantity surveyor that specialises in depreciation schedule to let you know how much you can expect in deductions.

 

Thanks for your response, yes I have a few options to consider and earning more will definitely help

 

Thanks for your response Kim

 

Look for an upgraded ppor which suit your plan first, not the ideal ppor as you can see that you can't afford it yet.