Newbie want to ask dumb questions!!



From: Sheryl Young

Hey all,
Been watching your forum for a while and see it a very good place start out in this Investment Property experience...

I am currently living and paying off a property in a brand new suburb of NW Melbourne. I have approx $75,000 equity in the home.

Am going to move in with partner and rent in an inner suburb to accommodate both of our teenage offsprings (school, friends, etc).
We had contemplated buying there but prices are too high (dont want to get in the mortgage rut...watching the laundry dryer go round on Friday nights etc.)So renting means we get to live in something decent as we only wish to stay in Melb for next 7-8 years.
We will be moving to the beach/bush or NSW coast where we'll settle for good...
Anyway my dilemma or should I say my "new and exciting venture" whether to purchase an IP or IP's after doing the homework etc. or can I turn this current home into an IP if I can get good rent and long term occupancy? We could then maybe purchase a second IP and have our money working for us while we rent where we really want to be for now!
If I do this what are the tips I need to know...
Appreciate any comments,
ta Sheryl Y
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Reply: 1.1
From: Sergey Golovin


Use "Next" button left bottom corner or "Search" at the top of the screen to search for any article.

Serge G.
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Reply: 1.1.1
From: Sheryl Young


Thanks so much for your replies. Found the info you suggested and will keep on keeping on. Seems the rent idea will be a good option once I find out how to set my current property up as an IP...or maybe sell and re-buy another...but at least I feel I'm on the right track..
Thanx again

Sheryl Y
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Reply: 2
From: Mike .

Hi Sheryl,

Glad you like our forum. We like it too. Every now and again somebody like yourself describes their current situation and it reminds me of Jan's book "Story by Story". It seems everyone's in a slightly different situation WRT property.

My Advice:

When you leave Melbourne to settle for good in NSW I expect you will want to stop renting and buy your own home. If you buy it with a loan, of course, the interest is not tax deductible. So don't buy it with a loan.

If your aim is not to buy with a loan then you must have available cash with which to buy. BTW this will be to your advantage in price negotiations for the property. Anybody that can buy with cash must get a good discount on the price, so this is definitely the way to go.

To have available cash you must sell one or more of your other properties. Therefore, to give you maximum flexibility, each of those properties should be self-secured. That is, you don't want two properties tied together because you borrowed against the equity of one.

If you wanted to keep your current PPR as a rental but use the equity to fund more IP's, then I suggest converting the equity to LOC accounts, one per IP to pay the deposits in each case. Before you do this, however, make sure your borrowing capacity isn't substantially reduced because you're paying deposits on credit.

If your borrowing capacity IS disadvantaged, then you will have no other option but to sell your home without CGT and purchase all IP's using cash deposits. This is assuming that you want more than one IP. Of course, you should have more than one IP to maximize tax benefits and multiply capital gains.

If you decide not to buy multiple IP's but to convert your current PPR into a rental, then the interest on the outstanding mortgage loan becomes tax deductible and you will only have partial exemption from CGT for the period you were living in it.

I hope this answers some of your questions.

Regards, Mike
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Reply: 3
From: Michelle Riley

Hi Sheryl,I think perhaps there are no correct answers to your questions.
I don't want to step on anyones toes.
I have no idea how long you have been with your current partner.
Why not see how things go
all living together and rent your place out.
Where abouts in northern N.S.W.are you planning to move to?I live in Byron and
it would be very smart to buy an investment
property here(if you can get one)as in 7-8yrs
time you would be smiling.
Cheers Michelle
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Reply: 3.1
From: Sheryl Young


Thanks for you reply. What you're suggesting is what we actually want to together (although we're doing that on a part time basis now for last 8 years or so)and rent mine out. What I'm wondering is if I have to change the loan (from mortgage to investment loan) and will it have the tax benefits that other IP's have for other on this forum(I've downloaded the ATO handbook on rentals and sort of understand the deductable and non-deductables). Seeing as I have some good equity in my house now and partner has some cash to put towards another IP, do you think we could look around for another good IP (say in NSW like you suggest) and then keep ...the sky's the limit (ha ha). The idea of going up the NSW coast is one option (probably Port McQuarie or Coffs...can both get work in those areas). There we would like to build a log home for we do that will remain to be seen after dabbling in this investing 'bug'. See what I'm really asking I suppose is: does it make sense to rent while you have rentals of your own working for you, so that later on down the track, we could buy a property to retire in and much less in value than what we would be renting here now? Sorry if I'm babbling

Can u make any sense of this?

Oh, and by the way, ever so careful, once bitten twice shy partner is making an appointment for us both to see Financial advisor this week anyway........
I just like to be a little bit informed when seeing these guys...if you get my drift??

ta Sheryl
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Reply: 2.1
From: Sheryl Young


Thanks for you reply and I have already ordered Jans 'Story' book. You're exactly right about paying cash for the final family home for us, and that's what we hope to achieve by renting now and investing wisely with own rentals...I've asked some more lengthy questions of Michelle who also replied and once again thank you for your input.

I better get to bed before I get too hooked on this forum stuff I think!

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Reply: 3.1.1
From: Michelle Riley

Hi Sheryl,
Sometimes I think people's decisions are
based more so on their life style needs other
than coming purely from an investment point
of view.
I guess the best idea is to reach a happy
middle ground.
When my two kids were teens they wanted to
live in town.I was fed up with being an unpaid taxi service.I rented out the little
family home and rented places in town.
Today I would not make the same choice.
It would seem pointless to pay someone else's
rent with the income derived from my home.
After a couple of years I sold my house and
bought one in town.Today I wouldn't do that
either.I had the perfect tenant.The house was
sold to an investor the tenant stayed on for 10yrs!I would have kept mine as an investment
and still have bought the new one.Could have
been sneaky and said tenant lived in new one
and been able to claim interest?
Is there another area in inner Melbourne
that you may find appealing but not so
expensive.Seven years is a long time to rent
when you could be making good headway into
owning another home with your partner.
You have equity,he has cash, sounds like a
good combo for a home loan.
All the best Michelle
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