Owner Occupier Homes - Your views appreciated

From: Michael G


Just wanted to open a topic for discussion and hear what people think. Of course the subject matter is of personal interest to me too.

Why?, I've been renting ($230/wk) and now have to move due to the vendor selling up (no I don't want to do a deal with the vendor).

Anyway in the same area I own a nice IP. Mortgage is $155k, FMV about $230k.

I figure my council rates are $170/qtr and strata fees about $280/qtr (townhouse).

This works out to be about $35/wk. Lets just round it up to $40/wk for safety.

So I thought... rent or buy?, if I rent I want to pay no more than $200/wk. If I buy then my repayments would be $200 less $40 (costs) meaning $160/wk.

$160/wk repayment (interest only) at 6.5% over 25yrs = mortgage of $128,000.

So basically I would need to target a property for $135-$125k (approximately).

My other option would be to move back into my IP (thus it would no longer be an IP) and then reduce my mortgage from $155k to $130k IO, thus reducing my "living expenses" to a figure approximately equal to $200/wk.

The remaining equity in the property would then be used to secure IPs (elsewhere). Also using an offset or LOC against the mortgage would reduce my "rent" so to speak.

That's pretty much what I'm doing, but I would be interested to hear what people think about "fixing" their owner occupier mortgage to a figure equal to their equivilent rent.

I would be interesting in hearing the pro's and con's of such an idea.

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Reply: 1
From: Douglas K

Gday Michael

the only thing you haven't factored into your equation is capital gain on the property you purchase to live in.

It is all well and good wishing to keep your repayments in line with what you are presently paying in rent. However don't forget you get to keep the capital gain if it is your place, your landlord keeps it when you rent. Therefore there is a premium to paid (by you) if you what the capital gain as well.

and remember as my dear old grandpa used to say.

"speculate, then accumulate but be sure to buy only where you wanna die!"

happy investing

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Reply: 1.1
From: Sergey Golovin


Maybe you can get your self smaller place (or further away) to leave in (to rent).

Or share your IP (which will become your house as soon as you’ll move in) with someone else and claim half or percentage of that on your tax return.

Or buy another IP so you can run that as business out of your other (existing) IP/ Own House.

Just a thought.

Happy Thinking.

Let us know please what you came with.

Serge G.
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Reply: 1.2
From: Paul Zagoridis

Hi Michael

Good points form Doug there. As you know Nella and I just sold our apartment and will become homeless on Sep 21 unless we find a benevolent landlord who doesn't mind the 200 year old toddler and the $400 cat.

Anyway. Our thinking is...

Rent. We get better return on equity in our IP's. We would never buy IP's like the residence we want. So as long as we put the $$ by renting at 4.5% yield into IP we don't lose the cap appreciation.

Alternatively we will look for an absolute steal (20-40% off FMV) but we can't count on it happening in Aug-Sep in Sydney. So renting is most likely.

Also I would never move into my IP and pay less than market rent. Your stealing from your future then.

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Reply: 1.2.1
From: PT Bear

I couldn't agree with Dreamspinner more. We have never owned our own home, but we're currently looking at our second IP purchase.

We currently live in a large apartment in a great location for a very reasonable amount, simply because the area is flooded with rental apartments. It's close to the office and to the places were we like to entertain ourselves so it's ideal for us.

We're not ready to settle in one place yet, and we don't yet have the requirements for the sort of place I'd like to owner-occupy.

Our current plan is to keep investing in high growth areas, sell a few off to pay for our own place with cash, then use the equity from our dream home to keep investing.

(aka Peter_T when he's hungry)
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From: Steve Navra

Great topic this question,
Will havta throw this one into the melting pot for Sat night!

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