PPOR or IP again...

Hi All,

Long time reader, first time poster. Looking for some general advice after reading heaps on the forums which has left me a little overwhelmed.

Our situation is that we trying to decide on if our first step should be a PPOR or an IP. Basically, my logic boils down to the following:

If PPOR: Buy and in a blue chip area or buy high yielding and convert to IP in 3 years?
If buy and hold: Buy a larger place that will meet our requirements for 10 years, or upgrade along the way
If IP: Rent in the school catchment and continue accumulating. Buy an PPOR maybe in 5 years when we have more equity behind us.

Our background is that we are a couple with a young family starting out on our property journey a little later than most (42&43). We are currently renting and will need to move in a year.

I work as a contractor with my own PTY LTD and my wife works in the public service. By having my own PTY LTD, I have some flexibility on what I pay myself. We are currently on $80k each, but could up my salary to 180k pretty easily. Currently, the surpluses will stay in the PTY LTD to be taxed at 28%.

We want to be in a blue chip school catchment area in three years time, and we're not afraid to delay gratification a little and make some sacrifices to try to get ahead.

We have considered buying a new 3/2/1 town-house in a blue chip school catchment and live it in for a few years and covert it to an IP when we need a bigger place for the kids.

New town-houses in the school catchment area go for around mid $500k.

Houses in the school catchment area go for around mid $700k on a 600m.

The catchment is approx 6-8Km out from Brisbane CBD.

We have approx $100k in savings in shares and bonds that we'd use for property.

My accountant suggested getting into a PPOR first, and then start accumulating IP's later. The strategy my accountant suggested was to buy IP's and hold for 10 years, then sell for capital gains and pay out no salary in the year of the sale.

My concern about going down the PPOR path is balancing the upgrade transaction costs vs the future value of buying a more expensive property to hold for 10 years.

I'm interested in hearing opinions, and about other peoples experiences. I feel that this is probably something I should take to a financial advisor. How do you find a reputable one?

Hi Simon

no one has your combination of unique circumstances...........................

the obvious numerate stuff isnt always "where" the decisions are made, in fact most of us make these decisions emotionally and the justify them logically.

even on the simple numerate stuff, there are way too many variables to come to a fixed conclusion

First off, welcome to the good ship SS.

There is no wrong or right way - just different ways.

You chose the way that's best for you.

No one else can suggest what you should do because they are not you.

They are merely suggesting what is right for 'them' to do.

Success is 80% mindset x 20% strategy.

In other words how you think is 4 times more important than how you do it.

I hope this provides some food for thought.
Yep, many ways to do things with no one right answer.

Consider buying the dream PPOR now. Live in it for a few months, establish it as the main residence and then move out and rent it. You can then claim the main residence CGT concession for up to 6 years yet be able to claim all associated costs - i.e. negative gear.

The main residence is one of the only CGT free assets that you can get. So you might as well take advantage of it.

From a financing perspective it doesn't matter what you pay yourself as the lender will look at both you and the company. However once you have a loan you have to consider interest being paid and whether it might be better to pay some tax to get the company money out as so you can save interest.