Strategies for a couple upgrading from 2 PPR's to 1

Hi all,

Just looking for some ideas/recommendations on the best long term financial decision for this situation.

My Dad and his partner both own their own separate units on Sydney's northern beaches. They have owned them for around 7 years and paid off a decent amount of the mortgage - I don't know how much, let's just say 40-50%, and have had reasonable Capital Gain. That is 2 units in different suburbs on the northern beaches.

They want to upgrade to a house in the same area, probably valued no greater than the 2 units combined. Their inclination is to both sell their PPRs, and then purchase the house together.

I am no expert, hence my asking for recommendations lol, but my inclination is that maybe one or both of the units could be kept and rented out (I'm assuming they would have strong positive cash flow by now) and allow the equity in both to continue to grow for another 5-10 years, then consider selling them and paying off the mortgage of the new house.

They would, of course, incur CGT by doing it this way. But would have 5-10 years worth of equity growth in the 2 units.

My Dad's concern with this idea is the high mortgage repayments and length of time it would take to pay off the new mortgage on the new house, without having the $$ from the sale of the 2 units going towards it immediately.

What would you do in this situation? Assuming you weren't looking to build a portfolio from this situation - and this was your end-game.

Thanks in advance :)
 
Are they in a new relationship? If so maybe both could be sold CGT free (assuming they were each living in their respective properties).

If all their cash is tied up they may need to borrow more to buy the new PPOR and thereby incur non deductible interest.

Alternatively one spouse could move into the house of the other, borrow to buy the 50%, no stamp duty if the main residence, no CGT if main residence. This would free up cash, increase the loan amount and allow the purchase of the new PPOR at a later date.

So they need to work out the potential costs of all 3 scenarios and compare.
 
Yes they are in a new relationship and can both sell CGT free - they have both been living in their PPR, not together.

Does selling both sound more attractive than keeping them for 5-10 years before selling?
 
I'd Sell both and use an 80% LVR loan for the new PPR with the remainder of the funds in the offset. Then I would look interstate (Brisbane) for a new IP. Debt becomes tax deductible and you now have exposure to 2 markets.
 
You need a crystal ball to work this out.

Haha well put.
Personally and sentiments of others is that the Sydney market is close to topping out so now would be the perfect time to sell both for maximum return. You then have a few options:

Sell both Buy a property together, keeping in mind your also potentially buying at the top of the market.

Sell both, rent a propery together and test some waters, maybe they may decide they would like somewhere else? Renting would give flexibility but more so it is a waiting game for if the sydney market has a slip. They can then capitalize and get more bang for their buck.

Sell both, buy a property and as suggested look for an IP in a rising market such as Brisbane.
 
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