Hey all,
is it now a good idea to start with a small IP or move to a bigger ppor ..
So current house value is around $600K with a 390K loan bought back in 2021; we can borrow up to 290K from the bank
saving $40K
is this the right time to get into buying a small inv property? Will I end up paying CGT when selling the current PPOR ?
Thanks
Yes, upgrade to a bigger (4 bed) house
For capital growth and to build wealth for my family
is this the right time to get into buying a small inv property? I personally don't think so.
Will I end up paying CGT when selling the current PPOR ? No if you've been living there since moving in.
Are you happy to stay in your current house for 10 years? If yet, then consider an IP. If no, then don't buy an IP.
Thanks but why 10 years
Historical, house prices have doubled every 10 years
If you're going to buy a IP, it will probably set you back 10 years to upgrade your house.
Not necessarily all depends on the IP choice; my current PPOR value increased by ~15% in just two years
@Stylekind: lol..you've owned property for 2 years and you think what you experienced over the last 2 years is normal?
You buy an IP to improve your PPOR - if you can buy a PPOR now then that's priority (IMO)
how do you improve PPOR by investment ?
By selling it and using it towards your PPOR??
Define small property.
In Brisbane so probably a townhouse no apartment
Where do you save $40k? From the equity that has grown in your PPOR? Because that's your money, not a saving.
Will the bank let you redraw the full $600k (full house value), or just up to 80%? You may face LMI if you go over that LVR. That starts to look more like $90k you can get from them. Or were you suggesting a new loan of $290k — probably not enough for an IP though?
Where do you save $40k? From the equity that has grown in your PPOR? Because that's your money, not a saving.
I think they mean they have $40k in cash
Ah, ok. So $290+$40k is the new IP budget?
Probably not… That's why I'm asking 😊
40K in offset account
I'd invest elsewhere, the tide is turning against property investment. People are getting openly hostile to the idea of property investment, it wasn't that way when I was a kid. Investing in property was a no brainer, today it's more like no morals. If you have children then you could morally justify an investment property as a gift to your kids one day for them to live in or sell to buy their own. But I think the days of proudly telling people you own investment properties that is nothing more than an investment opportunity to you are numbered. There are other things to invest in, Warren Buffet still rates Apple as undervalued. He isn't buying homes in Australia.
People are getting openly hostile to the idea of property investment
What does what other people think have to do with op buying an investment?
the tide is turning against property investment
Limited new housing supply, and a government that's addicted to immigration, sounds like a great time to buy property.
What does it matter what other people think about farting openly while having lunch? If it doesn't matter to you what other people think of you then you should do what you want.
Limited housing supply, so you should limit it further by borrowing money to drive up the price of one of the few houses for sale, sounds kinda opportunistic to me. See a problem and decide to make it worse to profit yourself.
What does it matter what other people think about farting openly while having lunch?
One directly affects people, the other is just the opinion of whingers.
If it doesn't matter to you what other people think of you then you should do what you want.
It doesn't, and I do.
Limited housing supply, so you should limit it further by borrowing money to drive up the price of one of the few houses for sale, sounds kinda opportunistic to me. See a problem and decide to make it worse to profit yourself.
You make it sound like property is the only investment people borrow money to get. If op doesn't buy it, someone else will. Why don't you cry about the government creating this mess?
@brendanm: I don't cry about it, just pointing out that people are starting to point out the issues with it. On Q&A audience and panelists alike are complaining about it, contributing the the culture shift and putting more impetus on the government to change up the housing market or risk bleeding young votes to the Greens.
@AustriaBargain: They are providing housing for people who can't afford it don't want to buy. The issue is that the government continues to import people, while we don't have anywhere to put them. In addition, the twit at the reserve bank continues to raise rates, which raises rents, which raises inflation. So he then raises rates again, and the cycle continues.
The day I put more than 2 seconds of thought into what the "people" on q&a whinge about, will be a sad day indeed.
If people vote for the greens over housing policy, the majority may be even stupider than previously thought.
It affects public policy
See Victoria, Dan's voters hate landlords, so it's easy for the government to up taxes on them
Vic and NSW are both flat broke with huge expenses and they need the money, and few have more of it than property investors
Becoming a property investor may in the end become almost a charitable venture as many of the profits are stripped in taxes
so it's easy for the government to up taxes on them
Then rents go up to cover it. Are people really so stupid?
Vic and NSW are both flat broke with huge expenses and they need the money, and few have more of it than property investors
Haha, plenty of corporations who pay diddly squat tax due to dodgy tax loopholes being available for them, they could probably start there. The people they are taxing isn't the landlords, ita the renters, as any costs are just passed on.
Then rents go up to cover it. Are people really so stupid?
You can't just endlessly up rents, unless you want to turn your property into share accomodation, or something like that. Then you'll suffer in damage to the property.
Also, Victorian government is already talking about capping rent increases. You're playing in their court and they set the rules, nothing you can do about it.
Haha, plenty of corporations who pay diddly squat tax due to dodgy tax loopholes being available for them, they could probably start there.
They "could", but those corporations have lobbyists and a hell of a lot more influence over the government than landlords do.
Plus they can just invest elsewhere, turn those states into Detroits. You can't take your property elsewhere.
It's very delusional to go into an investment thinking you can just fight your way to profit past the government and public opinion.
Also, Victorian government is already talking about capping rent increases.
Ah yes, old chairman dan at it again.
They "could", but those corporations have lobbyists and a hell of a lot more influence over the government than landlords do.
Ah, so the government is just lazy, and doesn't actually want what's best for the population. They are nothing if not predictable.
Ah, so the government is just lazy, and doesn't actually want what's best for the population. They are nothing if not predictable.
Duh mate. I'm amazed anyone still thinks otherwise.
Warren Buffet is a huge fan of investment in assets that bring you income, aka property :)
Warren Buffett: Why Real Estate Is a Lousy Investment https://www.linkedin.com/pulse/warren-buffett-why-real-estat…
Click bait title. Read it, he likes real estate. Your article proves my point lmao
“Productive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it. Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees.” – Warren Buffett
@Drpepper666: And yet he buys shares in companies because he believes they will give him a smaller return on his investment compared to buying residential properties and renting them out with the goal of selling them when the bubble gets bigger in the future?
Lmao people are hostile because they are stuck paying rent and are jealous others can afford investment properties
No one has know you have an investment property. So why worry about what people think. Just keep it a secret.
I agree. Pollies are bowing to the pressure of whingers and looking for ways to make property investment less attractive (e.g. not allowing some depreciation). The morals of providing a home for people who want to live in the area but aren't in a position to buy haven't changed, only the attitude of a new generation.
If you're happy and you have grateful tenants, the opinion of the whingers don't matter.
I'd rather provide accommodation for someone who isn't in a position to buy, than to gamble on the stock exchange. I doubt that the return on property is nearly as good, but it lets me sleep at night.
Yes x3
$600K with a 390K loan bought back in 2021
Are you still on fixed rate? Do you understand the impacts of the latest interest rate rises?
Most importantly we cannot possibly advise if we don't know your current income and expenses. If you have a very high income then an investment property that you can negative gear might make sense.
But regardless having only $40k cash savings is not nearly enough of a safety net so you really need to save more before considering either option.
Thanks for your comment, yes 95% of the loan is on fixed rate until 2025
so for the IP, my idea is to buy it and keep it for 7+ years for capital growth and most importantly, have the rental income pay all or most of the loan as the bank requires the property to have a $400 rent appraisal
So when the repayments on the $390k loan go from ~$1,500 per month to ~$2350 per month ($850 increase) will you still be able to afford to save?
have the rental income pay all or most of the loan
This is very unlikely, any positively geared homes tend to have high maintenance costs or low capital growth. If there were properties out there that had a high likelihood of capital growth and were positively geared investors would be driving up the price until the property no longer broke even. Unless you're paying 47c in the dollar tax then someone who is will be able to pay more and outbid you because of the negative gearing tax saving they get.
$320k property (+ $10k stamps/legal) generating $400+ weekly rent?
AND also has capital growth?
That's a unicorn there.
with interest rate going up i wouldn't buy an IP
Maybe in other countries, but this is Australia where policies are written to guarantee property price increases. It’s like being the casino!
just increase the rent - easy.
I thought rent goes up by 5% every year anyway
IP of course, it will double in seven years!
Even if you buy a townhouse in Brisbane for ~$300K :) ?
Not all towns are the same as mine but in my regional Victoria a lot of the real estate has been purchased by Melbourne people recently since covid as potential covid escapes. Some are vacant, some are now air bnbs only are few rented out permanently. My next door neighbour is the local real estate agent just cant get rentals anymore for people looking.
Just in the street basically opposite me (very basic older houses) there are 6 holiday homes now used by weekend warriors and theres nothing wrong with that its just the local building market hasnt caught up yet.
Will be interesting in a few years if these people sell as a few would have in the past have been more interested in bigger getaways such as interstate and overseas.
yeah very true, that's why I directed my attention toward townhouses situated in close proximity to Brisbane CBD or in high-demand rental areas. However, upon careful market observation, I have discovered that such properties are being sold at a rapid pace.
As a local in the regional town, what do the locals think about the city slickers coming in to buy in your town?
Are they happy that city slickers have pushed up the prices of their own home, or resentful (kids can't afford to buy, pushing up rents due to lower number of places to rent etc)?
My thoughts are:
- Property prices have increased substantially, but that is only of benefit if actually selling and moving to a different market
- Increased property values = increased council rates
- There are less rentals available; a lot of the properties are now unutilised for extended periods
- Less rentals = less people actually living in the community = less people available for work in areas such as hospitality = some businesses struggling to maintain opening hours and levels of service = holiday makers getting upset when they can't get a table or a takeaway or a coffee now.
- The upside is that the place is generally quieter during the week and off-season as not as many people about. The (permanent) community seems to be a bit tighter than it was previously, so newcomers probably find it harder to mix in (if they wanted to)
Sounds logical, especially pricing out the locals who are doing the lower paid jobs.
The only thing I disagree with is increased property values automatically increases council rates.
If all properties in the municipality increased by the same 10% and the costs/expenditure to run the municipality remains the same (unrealistic in the real world), then council rates shouldn't increase.
If all property values remain the same or even fall but costs/expenditure to run the municipality increases by 10%, your council rates will increase by 10%.
My house in the city is worth 5x the amount of my regional property. My council rate in the city is less 2x the regional.
Do you need a bigger PPOR?
What do you intend to do with an IP?