Buy PPOR or continue renting????

[ScottyB]

I am very interested in peoples opinions on my current situation.

We have just secured PR and have an extension to our 12 month rental and are now secure in continuing our plan to settle in Australia and add to our portfolio over here (Several UK CF+ properties)

I will give as much info as possible so that people can give their detailed feedback.

Current I have 15k net disposable income each month after all overheads including rent, life insurance, Income Protection etc are paid. This 15k per month is my deposit money for IP's

Current rent 920 per week.

No other bills or outlay's all cars Credit cards etc totally paid, i am fussy as hell about making sure all "Bad debt" is smashed but more than happy to have as much "Good debt" as posible

What to do?

1 - Stay in the rental and leverage my growing savings to buy IP's as agressively as i can? Just worried that the 47,840 per year in rent is "Dead" money

2 - Buy my own PPOR something reasonable in a researched area with CG potential and utilise the growth at a later date to snowball the IP purchases?

Things to consider:

My wife picked the house we currently rent, it is right on the beach 40 mins North of Perth and is a dream come true for us, owner is over the moon with the way we treat it being landlords ourself, he has offered us many years long term rental if we want, rent raise after 1 year was only 20 bucks per week!!! Can you put a price on the families happiness?

Wee fella is settled at school there, plays for the local football team (Sorry i struggle with calling it soccer) and life is great.

Will buying a PPOR reduce down my available credit for IP's? Will banks see it this way, or will it in fact help me when looking at LOC options etc?

Do we flip the mindset and not see the rent money as a bad thing and enjoy the lifestyle as a treat for the sacrifices of growing our portfolio?

Buy the PPOR with first time buyers grant and low LTV, spend a qualifying period in it then rent it out going back to renting?

My main aim is to grow the portfolio in oz, replacing my income is going to be difficult but i am more than happy to graft for the next 10 to 20 years to set the family up for life and have a massive portfolio, only aged 36, all our UK property is CF+ and with excellent yields so self sufficient.

Really interested in your opinions on it, you may come up with advantages/disadvantages i have missed?

Choices, Choices........

 

[Propertunity]

It always good to have choices

It is always better to rent a place to live in for yourself if:
1. It is cheaper than buying (which it almost certainly is).
2. You have some security of tenure - i.e. a long locked in lease (and the LL's do not want or have to sell), which is very often not the case with a rental place.
3. Your family is happy in the house and the area (which it sounds like you are).
4. You use the money saved for investments (and not to waste on consumer goods and lifelstyle, at the expense of investments).

Cheers, Alan

 

[ScottyB]

It always good to have choices

It is always better to rent a place to live in for yourself if:
1. It is cheaper than buying (which it almost certainly is).
2. You have some security of tenure - i.e. a long locked in lease (and the LL's do not want or have to sell), which is very often not the case with a rental place.
3. Your family is happy in the house and the area (which it sounds like you are).
4. You use the money saved for investments (and not to waste on consumer goods and lifelstyle, at the expense of investments).

Cheers, Alan

Thanks Alan,

Makes sense, is there any "calculators" available even in simple excel format that seasoned folks could point me to which would help me run through some solid calcs to see the numbers?

I can't help thinking that paying rent is "dead money" or maybe i just see it this way as a landlord myself?

It would really help if people could show me the real financial pro's of staying in rental e.g. Depreciation of x number of IP's and affect on Taxable income, less debt to service in the eyes of the banks therfore more scope to buy more IP's or the reverse you are seen as less risky as you have no PPOR as an asset base?

Any feedback no matter how controversial welcome.

Regards

ScottyB

 

[Ace in the Hole]

I think it's more of a personal thing.
I know we'll never rent a PPOR again by choice, owning feels much better and you can do whatever you like to the property.
Everything in life is not about calculating the figures so precisely.
PPOR can be for your enjoyment/satisfaction and IP's are for income and growth.

We are in a very similar position to you.
36 years old, young child, growing IP portfolio, good income, and, currently looking for a substantial PPOR upgrade.
At this stage, PPOR is right up there in order of importance, for us.
Everybody is different and has different goals.

Just do what's right for you, not anybody else.

 

[china]

Hi ScottyB.

Welcome to Oz. I am of a similar age and own my PPOR. Despite the value of my PPOR dropping, I still feel that it is a worthwhile proposition over renting. Not for the financial benefits but the non-financial benefits - the sense of security and freedom.

I feel that no matter what happens - there is still a roof over the head. Then I can focus all my income and energy into investments so as to create a passive income stream be it via shares, property or investment. If they all go disastrously, then there is still the roof to climb under.

I have not done any spreadsheet analysis but would suspect that renting gives better figures assuming that you have good investments and invest the difference on appreciating assets. However, if it is was all about financial figures, we would all be living in a 10k shed in a caravan park.

 

[matto_]

Hi,

There are a couple of spreadsheets around doing this comparison. I think on the spreadsheet thread (one of them even had a couple of "sliders" built in to change the parameters).

Will try and have a search and see whether I can find it.

Matto

 

[matto_]

Found it: (the thread at least)

http://somersoft.com/forums/showthread.php?t=66882

 

[ScottyB]

Found it: (the thread at least)

http://somersoft.com/forums/showthread.php?t=66882

Thanks for taking the time to find the link Matto, really appreciated!

Some good points raised there by other posters as well, thanks for the welcome and input.

Any Brokers with input as to how lenders view each scenario?

Are they more likely to lend more with no PPOR to service or do they see renters as additional risk because they don't have a PPOR?

Regards

ScottyB

 

[lizzie]

Sounds like you've got your head screwed on and not just spending the extra cash of doodads.

It all comes down to personal choice. We've been renting last 6 months, having moved to an "unknown" area. But in the meantime we've bought 10 acres and are building - whilst the build happens (still at architect stage) we decided to buy a nice house in a good area to live in, that we will turn into a rental once the build is completed - unless prices have gone thru the roof and we might consider selling.

On today's figures, return will around 7+%.

We decided it was better to pay the "dead" rent money to the bank on our own house, rather than the landlord's bank.

But it is personal.