PPR to IP advice

[adzkay]

Here?s the situation
I purchased my PPR 8yrs ago in South Morang for $275k. I refinanced a few yrs ago and bought my first IP in Footscray a 1bdr unit for $310k (currently leased $300pw).
I now have $190k left on my PPR (now worth $360k) and will be looking to buy a bigger place with my partner next year around $500k.
The question is do I turn my PPR into IP or sell up and have large deposit for new place?

Other factors
My PPR loan is NOT an offset but a redraw with 25k
Footscray is NG and I wouldn?t care if Sth Morang was PG (potential $310-330pw)
Past 8yrs have done on a single wage 60k-70k pa, with partner now 55k
I realize tax wise it may not be as effective but thinking cashflow positive is less stressful with money in the pocket.

Cheers Adz

 

[Colin Rice]

If you can afford to keep the PPOR then my opinion would be to do so. I sold a unit in Perth in 2006 that was purchased in 2000 for triple what I paid for it. I stumbled across it the other day and the asking price is more than 6 x what I originally paid for it with a 5%+ yield. I sold it to pay down my PPOR but in retrospect would have been better holding on to it. But horse for courses and you have to do what you are comfortable with.

If you intend turning your PPOR to IP then go interest only with an offset ASAP to preserve the principal. If you still sell then no harm done.

You will need to crunch some figures with a broker first. Have a chat to one of the Melbourne brokers who post here as they know thier stuff.

 

[Peter_Tersteeg]

Years ago a very successful investor said on the forum that he'd bought and sold dozens of houses, every one of which he later regretted the sale. I've heard the same statement many times from investors.

I'd say there are better places to invest than South Morang, but I do think it will increase in value and rental returns over the next few years. If you don't needs to sell, you'll probably be far better off if you keep it.

 

[adzkay]

Thanks, will get in touch with my broker this week and see if its affordable.

 

[Terry_w]

To increase deductions you could consider a spousal sale at market rates of the exisitng PPOR. Done correctly you could avoid stamp duty and borrow more to claim more.

I have seen 3 people stuff this up recently so do take care.