Another Buy Now or Wait - Opinions Please

[xcesiv]

I have been thinking over the last few months which way to go.

Before i have my meeting with my accountant at the end of the week i wanted to seek the opinions of others.

I currently Live with my mum which is great for saving but I want a place i call my own. I am not in a rush to leave, but if the right place came along i wouldnt hesitate to move out or buy as a short term IP.

I am toying between the option of either buying my own place early next year or buying something sooner and renting it for 12 months and make it my own.

I currently have 2 IPs and both combined are very close to Cash Neutral. 1 is Cash+ and the other not far off.

Combined Value $565k. Loan Value $385k.

There is Pros and Cons to both ways and this is where i get stuck.

Is the Cash Flow, Tax benifits, taking full advantage of the current low rates and Rental Income worth the 12 months Renting it out to get myself as far infront with the place before i move or is the hassle of finding a tennant and then kicking them out worth the effort.

Im sure im not the first person to consider or actually do this.

My Budget comes in ok with buying a place for about $320k plus fees.

If i rented the place for 12 months first i think could push this budget another 15-20k more

What are your thoughts guys and girls

Thank you

Warren

 

[Jas]

or buying something sooner and renting it for 12 months and make it my own.

From a tax point of view, this is the better option. You get deductions for the house while it's an IP and possibly you could use that time to pay down the mortgage. That means when it becomes a PPOR, you will have less debt and the non-tax deductability won't matter as much.

 

[xcesiv]

That is my thoughts....

Any Tax Benifits is always a plus. If i buy something semi new i can also depreciate the place for the first 12 months and do any work to it in the first year to get my full benifits in the first year.

I could then also get a bigger/better place, with the extra income for the first 12 months paying off the extra i spend on the place aswell..

 

[Jas]

How long are you planning on living in this new place? The reason I ask is that I have heard of people constantly doing up their PPOR and then moving up. They save on the CGT tax that way.

But if you are planning on living there for the forseeable future, you may want to look at ways to ensure you have as low a LVR as possible - which may mean paying it down whilst it is being rented out.

 

[HandyAndy888]

I'd do it...but that's just me...

 

[xcesiv]

Im looking for a place that fits my needs for the foreseeable future. Im single now. Looking Low maintenance place, front town house or a full house due to having a show car which is kinda Loud and if im the front house i wont annoy as many people with it. 3 Bedroom or 3+study. I run my own small business part time so i want at least 3 rooms for 1 to be my office. I want to also rent a room out while i live in it.

I want to buy a place and pay it off as quick as i can, build the equity in this to then build stability to buy my next round of IPs.

I have no need to rush into making it my PPOR, but i do want to have a place of my own. Also not the easiest to say i am almost 30 and live at home with my mum still...lol... even though its by choice.

thats why im considering buying a place and paying off as much in the first 12 months, take advantage of the Rental Income and Depreciations on the place, then move in after paying off as much as i can while rented

Other than the chance of a bad tenant stuffing my place before i move in, can anyone name some cons to renting it for a short term before making it my PPOR

I'd do it...but that's just me...

Do what... i had 2 options there.?

Can u explain why you would do what you choose.

 

[HandyAndy888]

Sorry...what I meant was I would buy now, regardless of what your intentions are (ie. live in it or rent it out). If you wait, you will always wait...just jump in and do it!!!

 

[xcesiv]

I wont keep waiting i promise you that...

I have a plan i want to stick to, and next step is getting a PPOR. then back into IPs.

By Dec 2009
Have My show Car finished.
Decide on PPOR Or Short Term IP3 into PPOR

Before Easter 2010
Placed an offer on my future PPOR.
Either move in or Rent for 6-12 months

The Earlier i make the offer the longer i will probably rent it for.

By Dec 2010
Be in My PPOR
Rent out 1 room in my PPOR.
Build Equity over the next 12 months and Deposit for IP3.
Min $1500-2000 a Month into Interest Offset Account or off PPOR Loan until refinancing to get IP3 underway.

By Dec 2011
Make offer on IP3



Thats the basic plan...

But step 1 still is the question... IP for short term or straight into PPOR.

 

[Jas]

You asked for cons about your plan to by your (to be) PPOR. The risks are:

The house will fall in value
The tenants will destroy all or a portion of the house
You are unable to pay the mortgage and the bank takes it.

There are likelihoods and options to offset all of those, it's up to you to figure how likely they are.

Jas

 

[xcesiv]

Thanks Jas

All of those i can either minimise or stop.

1) Value: Being a Long term investment i should have little worry here. If Value drops significantly then that will delay my Timeframe to buy another IP, but it will still go ahead.

2) Tenant destruction: We all run risk assessments on all of our tenants, so with good management and fuss tenants this should reduce this risk.

If i was to rent it out for the short term, i would consider being a bit extra fussy on who the tenant is, get someone witha little less risk.

3) Unable to Pay: This wont be a problem either if i buy it as a PPOR or an IP. If i buy it as a PPOR and **** happens i can always revert it to an IP and seadly move back home with the old lady till its all back on track. This is highly unlikely to happen with a fairly secure job, a payrise on the way and running my own business part time my cash flow is easily there.

I have approval for my PPOR Loan disregarding my income through my own business. I dont need to include it to purchase the property at the value i want, so all that income is a bonus.

Areas of concern I have to think about at the moment.

a) Any Tax issues

b) Affordability to buy next IP in my time Frame. Either Spending a bit too much now which slows down my timeframe to buy another IP or something.

c) Weighing up the PPOR in 6 months or buy IP between Now and 6 months with a 12 months Rental Plan.

I have moved my meeting with my accountant til wednesday next week. Before i go, is there any specific questions i should be asking of him in the meeting to discuss my Plans.

 

[xcesiv]

I received a call last night offering $300k if i was to buy it as a PPOR and $330k if i was to buy it as an IP.

So now me thinking buying IP and running IP for 12 months to get the loan reduced as much as possible while its a tax benifit, then PPOR. This will get me a bit better place for me to move into.