PPOR or rent?

Hi all,

I'm wondering whether I should stick with my PPOR and all its non-deductible expenses, or whether I'd be better off converting it into an IP and moving into rental accommodation instead.

Given that the rent would probably match (more or less) my loan repayments it would probably cost much the same, except the loan interest, rates, etc. on my ex-PPOR would become tax deductible, helping me to pay off the loan much faster. (After which I could move back in and use the equity to buy the next IP.)

Any thoughts on whether this is a good idea or not? Having never rented (gone straight from living with parents to PPOR in 2004) I'm not sure whether I'd like all the inspections (especially open houses if the owner decides to sell), or having to move if a new buyer doesn't want it as an IP.

Maybe I could persuade a family member to buy an IP and rent it from them...
 
The 1st question you need to ask yourself is how would you feel moving every 2 years.

PPOR does offer security as it's a place you can stay in (assuming you pay the mortgage).

What happens if the place you are renting, the landlord wants to sell. How would you like people coming into your home and having a snoop?

I would keep the PPOR, pay down the mortgage and then look at an IP. I wouldn't rent and get an IP. If there are any finanical benefits in getting an IP and renting they are marginal. However the lifestyle of having a PPOR is much better than renting in my opinion. Life isn't always about what's best financially. Also what happens if rent isn't paid for a month on the IP? Could you survive?
 
The choice to deliberately rent as part if an investing strategy is not simply 'financial'. You need to be comfortable with the sentiment of renting and paying rent. Sometimes, people believe it is counter-intuitive. "What, you own x properties but rent yourself. Why are you paying someone else's mortgage?

I can only speak from personal experience, as I have been renting for 7 years (until recently) doing the same thing, and found it to be a fantastic way for me to not only build my portfolio, but be close to work (ie walking distance), give me the flexibility, to live in an area, I wouldn't buy in. And if I did buy, would be paying a much higher mortgage than I would be in comparison to the rent I would pay.

The things you mention like OFI's, 6 monthly inspections etc are nothing in the scheme of things. In fact, it is also a good way to see the other side of the investing fence, eg dealing with PM's as renters, applying for properties, being in the 'rental jungle' and seeing what is really happening on the ground. For me, it has had many benefits, not all financial.
 
To rent or to own ???

I think the decision "to rent" or to "own your PPOR" is a very personal choice, and I honestly don't know what is best. From a strictly cash flow POV, renting is cheaper and means more income can then be used for investing . This is fine in theory ...the danger of course, is the "spare cash" goes on lifestyle choices and lattes :rolleyes:!! We've always taken the "own our PPOR" route even though it seemingly cost us more. But this decision is as much about "control" as anything else. The upside however was when we did set out on our IP journey we had a nice fat bunch of equity in our PPOR to use as "instant" deposits & that enabled us to really take off. Also, I think the banks like it when you own.
LL
 
Interesting. Yes I have no problem with paying rent and I already have two IPs. For me the rent that I would earn on the ex-PPOR would for the most part cover the rent I would have to pay to my new landlord, so in effect I wouldn't be paying rent, or earning rental income from the ex-PPOR, just like the case is now. Only unlike now I could tax deduct the $15k/year in interest I'm currently getting charged, and put that back into the loan.

Spending it on lattes won't be a problem for me, I've been putting every spare cent into the loan and currently have $70k in an offset account and no desire to spend it, except on additional IPs!

I guess my real issue is the open for inspections and having to move if the landlord decides to sell up. What happens if you sign a long term lease? (say 24-36 months.) Can they terminate it early if they choose to sell?

Good point about the banks liking it when you own though...
 
Interesting. .... if you sign a long term lease? (say 24-36 months.) Can they terminate it early if they choose to sell?...

Sounds like renting may suit you ...good to hear you have the lattes under control!
A long term lease would work. No, they cannot terminate it. If the property is sold, the purchaser has to honour any exisitng lease.
LL
 
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