First time investing Question

My wife and I sold or PPOR last year and are currently renting whilst searching for a new PPOR. We have 2 young kids, and earn a combined income of 137K a year, and have 230K in savings.
I really want to get into building/property development. I am currently a qualified plumber and will soon start studying to hopefully obtain my builders licence.
We are currently looking in the Newport (melb) area and are looking to spend 800-950K on our PPOR.

I figure I have 2 options~
Option 1: Spend 850-950K on a PPOR in Newport that can be subdivided and developed later down the track (say 2 or 3 years.)
Option 2: Buy a PPOR and an investment property in a cheaper nearby suburb (Altona or Altona North). So spend maybe 500k each property.

I would prefer option 1. as I would rather live in Newport and think I will make a bigger profit in the end, but I am unsure whether there are any Capital gains implications through developing your PPOR.
Like if I built on the back of a block but continued to use the same house as my PPOR, obviously the land of my PPOR is smaller and hence worth less than what I originally paid for it. So in the long rung do I lose part of my PPOR Capital Gains exemption?

Thanks. Hope this makes sense!
 
IMO you are crazy to be thinking about spending that type of money on a ppor in your position.
Your joint income is $140k (pre tax I presume?). You interest bill alone on $600-$700k is about $30-$40k. Your tax expense is about $40k.
A ppor does nothing to help your tax, or income position.

What happens if one of you lose your job, or gets pregnant? Or rates jump... Or or or.

Personally, I would keep renting and invest.

You have the potential to move ahead financially quickly due to your current circumstance. Or you could remain treading water for a long time yet.

Look after your expenses, focus on generating additional income, and in a couple of years you will be able to buy that dream home with cash.

Just my 2c

Blacky
 
Ditto...... take Option 2!

IMO you are crazy to be thinking about spending that type of money on a ppor in your position.
Your joint income is $140k (pre tax I presume?). You interest bill alone on $600-$700k is about $30-$40k. Your tax expense is about $40k.
A ppor does nothing to help your tax, or income position.

What happens if one of you lose your job, or gets pregnant? Or rates jump... Or or or.

Personally, I would keep renting and invest.

You have the potential to move ahead financially quickly due to your current circumstance. Or you could remain treading water for a long time yet.

Look after your expenses, focus on generating additional income, and in a couple of years you will be able to buy that dream home with cash.

Just my 2c

Blacky
 
My wife and I sold or PPOR last year and are currently renting whilst searching for a new PPOR. We have 2 young kids, and earn a combined income of 137K a year, and have 230K in savings.
I really want to get into building/property development. I am currently a qualified plumber and will soon start studying to hopefully obtain my builders licence.
We are currently looking in the Newport (melb) area and are looking to spend 800-950K on our PPOR.

I figure I have 2 options~
Option 1: Spend 850-950K on a PPOR in Newport that can be subdivided and developed later down the track (say 2 or 3 years.)
Option 2: Buy a PPOR and an investment property in a cheaper nearby suburb (Altona or Altona North). So spend maybe 500k each property.

I would prefer option 1. as I would rather live in Newport and think I will make a bigger profit in the end, but I am unsure whether there are any Capital gains implications through developing your PPOR.
Like if I built on the back of a block but continued to use the same house as my PPOR, obviously the land of my PPOR is smaller and hence worth less than what I originally paid for it. So in the long rung do I lose part of my PPOR Capital Gains exemption?

Thanks. Hope this makes sense!

I know a number of people that have used a similar strategy to get ahead - with the help of an accountant.
I believe they would move into the retainable house and then build in the back. When the back was finished they would sell the front house and as it was their PPOR it was CGT free. Then they would move into the rear and live in it for a year then sell it CGT free.
They would buy another property and rinse and repeat.

You would need to speak to an accountant to see if the above is still possible.
 
As a plumber - are you self employed? Going to be self employed now that you are doing your builders course?

These are far more important questions I would have thought. Sinking money into a PPOR that is about $900k would eat up all your cash plus leave no working capital for a business...

However if you are not going to do business at all then perhaps it's an OK idea but it is a huge part of your cashflow each year in interest alone.
 
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