Pitfalls of buying now to live in later?

Hey all,

Just seeking some advice, I've been hunting for an investment property on the central coast for some time now, and have accidentally found a place that would be perfect for me as a PPOR in three to five years time.

Are there any pitfalls to buying now, renting it out and moving in later? Tax implications?

Its a reasonably good investment on its own, not great, but good. Buildings is brick, 10 years old,will get an acceptable rental return and I was already looking at the suburb because its got good growth potential over the lifetime of my investment plan (20 years).

Cheers
Greg
 
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Are there any pitfalls to buying now, renting it out and moving in later? Tax implications?

Greg,

There may actually be some benefits to doing this :)

Leave some tenants in there for a year, then start doing all the maintenance that needs to be done. This way mtce is all tax deductible. And same when you move in as your PPOR - get mtce done prior or just after.

There will be CGT tax implications if you ever sell. Get val done on renting & then in 3 years prior to making it your PPOR for the calcs. But if you never sell then who cares about CGT anyway?

Congratulations on the 'find'.
 
You know, I actually hadn't considered benefits because I remember reading about a draw back but can't for the life of me remember what it is. So thanks for that!

I was certain there was one reason it's a bad idea. It may just be the Capital Gains Tax issue, in which case that's no real problem, but I just want to be sure it's nothing else.

Reality is, it would probably only be PPOR for a few years before moving closer to Newcastle (as I continue the withdrawal from living in Sydney), and I'd be unlikely to sell it afterwards anyway. So eventually it's going to cop CGT, regardless of whether I buy now or later, so that's not worth worrying about.

Cheers
Greg
 
You know, I actually hadn't considered benefits because I remember reading about a draw back but can't for the life of me remember what it is. So thanks for that!

It's usually where the property is brand new and the tenants "wear it in" for you before you get to live in it. Some people find that emotionally trying (oh my beautiful brand new house!)


Much less of an issue with a preloved one.

Cheers,

The Y-man
 
What about FHOG in this case

I think you will not be eligible for the FHOG, if you are not moving in.
But if you have already taken FHOG on some other property, then it is ok.

Regards
Sanjay
 
We own an IP on the Sunshine Coast. We bought with an eye to retirement and as it is an older house in good but rather tired condition we are not too perturbed about tenant damage. Not sure if we will ever live there, but should we choose to give a seachange a try then that is where we will go. There is scope to do a total reno without fear of over-capitalising due to its position so close to the beach, shops and transport.

It took about 4 years to be cash flow positive and is now basically paying itself off while we procrastinate.
Marg
 
It took about 4 years to be cash flow positive and is now basically paying itself off while we procrastinate.
Marg

This is my sticking point. I'm pretty new to Somersoft's software, but the best I can get the figures to work out cash flow positive is like 19 years...which is a deal breaker.

Hmmm, I'm either doing something wrong, or it's just not a good investment. Think I need to find an hour to sit down and get my head around it as I've only been playing in between working today and haven't really concentrated enough at any one point on it.

Cheers
Greg
 
I don't use software. There are too many variables to project ahead as to when a property will become cash flow positive.

We borrowed 100% but have paid P & I and also used an offset account against this property as we own our PPOR. This has brought our interest down, together with the incredibly low interest rates over the last year or so. We keep our properties in very good condition and rent has risen by over $80pw in the time we have owned it.

I can't imagine any property taking 19 years to become cash flow positive unless there was a major catastrophe.
Marg
 
I can't imagine any property taking 19 years to become cash flow positive unless there was a major catastrophe.
Marg

Yup, my thoughts are similar. Hence the confusion. Think I'm going to dump the software until I've read the manual and just design my own spreadsheet for now :)

Cheers
Greg
 
We are struggling with this dilemma - only difference being we actually bought a place on the Central Coast at the height of the market, with a view to knocking it over in 15-20 years time and building our dream house near the beach.

We paid $395k in 2004, 3bed 2 bath 700sqm block at Shelly Beach. The rent has just gone up to $300pw, and value of the property is probably less than we paid - it's a shocker! :eek:
We accept that we paid too much, and that we just didn't know enough about property investing when we bought.
We have another IP house we own outright in Sydney's inner-west, the rent from this goes towards slowly paying down the Shelly Beach house.

If only we'd discovered this forum 5 years ago!
Do your homework people!!!

Any thoughts on what the Shelly Beach/Long Jetty area will do, growth-wise, in the future? Our street doesn't even have proper gutters, just trenches!!!
 
Hi montypython,

Don't beat yourself up, we have all made mistakes.

How close to the water is it? I know Shelly Beach and there are some nicer streets towards the waters edge.

I haven't been up there for a while, but is there much renovation going on in your street or nearby?

Unless it is unaffordable for you, I would sit tight and wait for the growth. Houses at the lower end of the market in the better suburbs of the coast are being snapped up. Prices have come up 50k + in some parts. All good signs.

Regards JO
 
Hey all,

Just seeking some advice, I've been hunting for an investment property on the central coast for some time now, and have accidentally found a place that would be perfect for me as a PPOR in three to five years time.

Are there any pitfalls to buying now, renting it out and moving in later? Tax implications?

Its a reasonably good investment on its own, not great, but good. Buildings is brick, 10 years old,will get an acceptable rental return and I was already looking at the suburb because its got good growth potential over the lifetime of my investment plan (20 years).

Cheers
Greg

Hi Greg,

I did exactly what you are suggesting while I was living in Sydney. I moved to the CC when I was pregnant with my first child.

The property I bought almost quadruppled in 10 years. :D:D

Regards JO
 
Any thoughts on what the Shelly Beach/Long Jetty area will do, growth-wise, in the future?

Shelly Beach is near Toowoon Bay, Blue Bay which is some of the most expensive real estate here.

The Central Coast beach areas took a big hit in the GCF as high income earners dumped their holiday houses to pay back margin loans etc. Too much stock and little demand = 20% falls. We picked up some great bargains for clients during this time. Buyers just had to keep their heads and stop listening to the media (it was a scarey time).

This has stopped now and agents are reporting that anything $500K or below is selling like hot cakes and even above listing pric in a number of instances.

Just be patient this area IMO has terrific growth prospects.
 
Thanks for the encouragement - we are using this as a lesson in what NOT to do. We can afford to hold the property, our PPOR in Sydney will be paid off in 2-3 years, and we will then concentrate on paying down IP loan until it reaches the point that it's almost paying for itself, and continue to search for cash-flow-neutral properties.
We know the suburb is right next to some very expensive areas, Toowoon Bay is divine - and there are some renovation and rebuilds happening.
We are not in a hurry, being in our mid-30s, and as it's not adversely affecting our lifestyle we will be happy to wait-and-see.
It is kinda painful to know we are subsidising our tenants' lifestyle, but one day the capital growth will pay us back.

It is good to hear of the turning tide for prices on the Central Coast, maybe one day we will get back to 2004 prices?!?!:rolleyes:
For other investors, would now be a good time to buy in the area do you think?
 
It is good to hear of the turning tide for prices on the Central Coast, maybe one day we will get back to 2004 prices?!?!:rolleyes:
Many suburbs have achieved that already. Give it a bit more time for some of the others.;)


For other investors, would now be a good time to buy in the area do you think?
What kind of question is that to ask a Buyers' Agent?:p
If I say Yes, I get accused of spruiking
If I say No, I get accused of keeping all the bargains for myself :D

If you take the view that the worst of the GFC is over, then if you buy now you are buying in a dip - always good. My suspicions are (from being on the ground) but the stats reported (3 months old) do not support this view yet - that we are in a growth phase in many parts of the Central Coast. Other parts, say like The Entrance, have still got excess stock to soak up first.
 
LOL, yeah I know, your advice may be tainted, but if you can back it up with cold hard facts then who can argue? Statistics are facts arent' they?!?

Thank you for the feedback - I guess in our situation it would be great if rental yields would catch up with prices around there, but that's not gonna happen in a hurry. We may get an appraisal done in a couple of years and see if there is any equity we can access, fingers crossed.
 
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