pull equity out of ip to buy PPOR? or sell instead

[Robbo2621]

Quick rundown on what I've got in front of me.

The missus and I want to buy a PPOR. We have 2 Ip's currently and are renting where we live. One of the ip's has had good growth in the last 12 months as I've just had it revalued. I know it's not great financial sense to borrow from ip for personal use, that's why I'm thinking of maybe selling ip instead, use cash for PPOR then use savings/equity to continue buying more ip's when I build up some more money. Just wanting opinions from this highly qualified site

 

[Singo]

To sell and IP and then buy one later, you will be paying selling and buying costs and those may come around 10%. And then you will be paying Capital Gains Tax as well. What is the point of selling a well performing IP and then buy another IP later?

In your situation, I will get a separate loan secured against the IP to buy PPOR. Keeping the loan SEPARATE is the plan. And when your PPOR go up in value, you can top up PPOR loan to pay off the second loan secured against your IP.

 

[Aaron_C]

Increase IP loans, buy PPOR then maybe sell the IP later to pay down the PPOR debt?

 

[Terry_w]

It all depends. Selling may be better and cheaper in the long run.

Did you ever live in one of the IPs? could be CGT exempt.

 

[Robbo2621]

Hey thanks for the replies guys.
Yea definitely alot of costs involved with all the buying and selling. It wasn't my preferred choice to sell anyway but just thought I'd ask the question.

@ Terry, have never lived in either of the ip's

 

[Brady]

You said that the IP has had some growth in the last 12 months and you re-val...

Straight away whether you plan to use these funds or not I would take them out, always a fan of taking equity when available, if not required either into redraw or separate offset... make sure your not mixing the purpose.

2nd do you think the IP is going to continue to grow in value, is it at the start of its growth cycle or you think its done for a while? If you think it's still go to go, why sell? Extract the equity and either purchase PPOR or another IP.

There is also the option of another IP and rent where you would like to live.


Best of luck.

 

[Robbo2621]

You said that the IP has had some growth in the last 12 months and you re-val...

Straight away whether you plan to use these funds or not I would take them out, always a fan of taking equity when available, if not required either into redraw or separate offset... make sure your not mixing the purpose.

2nd do you think the IP is going to continue to grow in value, is it at the start of its growth cycle or you think its done for a while? If you think it's still go to go, why sell? Extract the equity and either purchase PPOR or another IP.

There is also the option of another IP and rent where you would like to live.


Best of luck.

The IP is a 2 bed unit in Western sydney (kingswood). I do feel it has a little bit to go but not sure how much. Trying to pick that peak is a tough one.
I'm a very hands on person, so renting is starting to do my head in. I just want to pull up carpets, paint walls, do some tiling etc. Can't do that in a rental.
But yes I like your approach Brady, I just wasn't sure if I'd complicate things too much by borrowing against ip for my own home. Sounds pretty straight forward though

 

[Colin Rice]

I'm a very hands on person, so renting is starting to do my head in. I just want to pull up carpets, paint walls, do some tiling etc. Can't do that in a rental.
But yes I like your approach Brady, I just wasn't sure if I'd complicate things too much by borrowing against ip for my own home. Sounds pretty straight forward though

You could by a PPOR that needs work, move in, value add with a reno, revalue and access any increased equity. Sounds like you would be in your element

With the right help from an investment savvy service orientated broker you could structure your finances to your benefit with surprising ease.

 

[roberto]

I extracted equity from 1IP last year to buy our PPOR. very glad I did because in the past 18 months that IP and the new PPOR have increased in value (~10%).

The key is to have a separate loan number so only that portion is not tax deductible.

Structuring the loan was the easy part, way more difficult was to find a PPOR that my wife like

Cheers
Roberto