Buy a property or put funds in PPOR offset.

[Ace in the Hole]

No commercial property experience here, but understand the yields can be very attractive.

Can I get some opinion on what would be the best move here:

• Park 2 mil in PPOR offset account, reducing the interest on PPOR loan.
• Buy a 2 mil commercial property outright and use yields to service PPOR loan.
• Buy a 4 mil commercial property at 50% lvr and hopefully have surplus cashflow to service PPOR loan, would a 4 mil property likely yield better than a 2 mil property?

Thanks

 

[china]

No commercial property experience here, but understand the yields can be very attractive.

Can I get some opinion on what would be the best move here:

• Park 2 mil in PPOR offset account, reducing the interest on PPOR loan.
• Buy a 2 mil commercial property outright and use yields to service PPOR loan.
• Buy a 4 mil commercial property at 50% lvr and hopefully have surplus cashflow to service PPOR loan, would a 4 mil property likely yield better than a 2 mil property?

Thanks

I think option 3 has the best tax advantages if you are earning taxable income.

The yield may not necessarily be better at 4m or 10m - really depends on the property and thats the most critical point - the right IP.

I think option 2 is the worst as it ties up your capital.

Would it be an option to pay off your PPOR - this is non-deductible debt.

Me personally, I am going to access my unencumbered PPOR equity and go with option 3.

 

[Aaron_C]

Option 3...

 

[Blacky]

Option 4) Use $2mil to repay ppor debt. Borrow $1.6mil against ppor to purchase $4mil commercial property +ve geared.

All borrowed funds are now tax deductible.

Blacky

 

[Rolf Latham]

responsible gearing with a good quality appreciating asset

its hard to become financially "free" by just "saving"

ta
rolf

 

[Terry_w]

No commercial property experience here, but understand the yields can be very attractive.

Can I get some opinion on what would be the best move here:

• Park 2 mil in PPOR offset account, reducing the interest on PPOR loan.
• Buy a 2 mil commercial property outright and use yields to service PPOR loan.
• Buy a 4 mil commercial property at 50% lvr and hopefully have surplus cashflow to service PPOR loan, would a 4 mil property likely yield better than a 2 mil property?

Thanks

or
Pay down PPOR loan and reborrow to invest?

 

[china]

Does that mean we should be buying the most expensive PPOR we can afford to pay for in cash?

Lets say we hypothetically have 3 mil in cash.

Is it reasonable to use the entire 3 mil to buy a ppor - firstly for the enjoyment of living there and secondly as a tax free speculative investment and then take out 2.4 mil to invest?

Is this a reasonable alternative to living in a 1 mil ppor (paid for in cash) and then reborrowing 0 .8mil which combined with the remaining 2mil in cash means 2.8 mil in investment funds?

I would hesitate to say that the first option is just as feasible but gives better quality of life and enjoyment of life. What do you guys think?

 

[D.T.]

Does that mean we should be buying the most expensive PPOR we can afford to pay for in cash?

Lets say we hypothetically have 3 mil in cash.

Is it reasonable to use the entire 3 mil to buy a ppor - firstly for the enjoyment of living there and secondly as a tax free speculative investment and then take out 2.4 mil to invest?

Is this a reasonable alternative to living in a 1 mil ppor (paid for in cash) and then reborrowing 0 .8mil which combined with the remaining 2mil in cash means 2.8 mil in investment funds?

I would hesitate to say that the first option is just as feasible but gives better quality of life and enjoyment of life. What do you guys think?

You think saving up 1 mil and saving up 3 mil are 'just as feasible' ?

 

[see_change]

Does that mean we should be buying the most expensive PPOR we can afford to pay for in cash?

Lets say we hypothetically have 3 mil in cash.

Is it reasonable to use the entire 3 mil to buy a ppor - firstly for the enjoyment of living there and secondly as a tax free speculative investment and then take out 2.4 mil to invest?

Is this a reasonable alternative to living in a 1 mil ppor (paid for in cash) and then reborrowing 0 .8mil which combined with the remaining 2mil in cash means 2.8 mil in investment funds?

I would hesitate to say that the first option is just as feasible but gives better quality of life and enjoyment of life. What do you guys think?

We're always bought PPOR's that were in the area we want to live in and were nice . Initially this was by necessity rather than by choice , but now twice we've built really nice houses and bought something for around half the price ( not quite correct , this time we've bought the new house and we're holding the current one for a while while ( hopefully ) the price goes up further ) . The first time we did this it gave us the cash to start investing in the early 2000's . The second time , still haven't made up our minds . We might use it to fund another round of buying if we see good value still , or we may just accept what we have and use it to pay down debt.

We have friends who have always stretched themselves to buy really expensive PPOR's and they have done very well doing this.

At the moment , in sydney , the best value is in the upper market . If I had 3 mill in cash I'd be buying a waterfront PPOR and borrowing the rest

http://www.realestate.com.au/property-house-nsw-mosman-113619323

http://www.realestate.com.au/property-house-nsw-neutral+bay-107728811

http://www.realestate.com.au/property-house-nsw-manly-114416043

http://www.realestate.com.au/property-house-nsw-seaforth-113683695

But I'd be getting my skates on . There are less on the market than there were a few months ago .

Cliff

 

[china]

You think saving up 1 mil and saving up 3 mil are 'just as feasible' ?

After the first mil, it gets much easier.

You have the strategies and discipline in place for savings and the first mil will generate some income making the subsequent mils much easier.

Going from zero to one mil is like getting from nothing to something, an infinite return. But from one mil to two mil, it is just a 100% gain and subsequent mils are even less of a percentage gain.

 

[china]

At the moment , in sydney , the best value is in the upper market . If I had 3 mill in cash I'd be buying a waterfront PPOR and borrowing the rest

http://www.realestate.com.au/property-house-nsw-mosman-113619323

http://www.realestate.com.au/property-house-nsw-neutral+bay-107728811

http://www.realestate.com.au/property-house-nsw-manly-114416043

http://www.realestate.com.au/property-house-nsw-seaforth-113683695

But I'd be getting my skates on . There are less on the market than there were a few months ago .

Cliff

If these properties are good value as PPOR, would they then not be even better value as resi IPs? Or not?

Would they be too speculative to sink the entire 3 mil in and borrow the rest, counting on purely on capital gain down the track?

Its very hard to determine a good value pricing for these type of properties as comparable sales are not really that comparable.

 

[Rolf Latham]

If these properties are good value as PPOR, would they then not be even better value as resi IPs? Or not?.

typically the rental yieldson these are sad , and then there is the land tax burden to boot

ta
rolf

 

[see_change]

If these properties are good value as PPOR, would they then not be even better value as resi IPs? Or not?

Would they be too speculative to sink the entire 3 mil in and borrow the rest, counting on purely on capital gain down the track?

Its very hard to determine a good value pricing for these type of properties as comparable sales are not really that comparable.

As rolf said , poor returns . These were impacted by changes in the living away from home allowance , which made it relatively attractive for visiting execs to live in these .

In terms of pricing , like all things it's a matter of DD. Getting old sales values etc . I think most people buying these sorts of properties have been watching the market for a while so get to know what's good value and what's not. Around about a year ago there were quite a few nice properties on the market and we briefly toyed with the idea of selling everything and buying one , but we would have had to get a mortgage again on a PPOR . We ended up going with the option of buying a weekended at North Arm Cove which has enabled us to keep on investing.

Bottom of the market for a waterfront house on Sydney would be around 4 mil and I'd expect that to double in the next cycle .

IMHO for those who can afford it I think it's no more speculative than buying a 3 bedder in 2770 three years ago and a better option than buying a first IP as a commercial for the same price.

Cliff

 

[china]

.

IMHO for those who can afford it I think it's no more speculative than buying a 3 bedder in 2770 three years ago and a better option than buying a first IP as a commercial for the same price.

Cliff

Why is it better than a similarly priced commercial IP?

 

[Scott No Mates]

I'd generally put my money on the commercial with the higher yield (cash in pocket today) rather than holding an unrealised capital gain on the event should the market go up for residential. A bird in the hand is worth 2 in the bush (or in 2770).

 

[Rolf Latham]

Bottom of the market for a waterfront house on Sydney would be around 4 mil and I'd expect that to double in the next cycle .

Cliff

Alas, they cant make any more middle harbour waterfront...............

t
arolf

 

[Scott No Mates]

Give it 20 years or so Ralph and with rising sea levels we'll have a whole heap of new harbour front properties.