To Sell, or Rent out.

[hershal]

Hi Guys and Gals

I am new to this whole property investment market and am just looking for some advice.

I built my first house back 1.5 years ago here in Perth, and now it looks like I am going to have to move to Brisbane for work. The move wont happen until July next year. But my question is should I sell up and move? or should I rent out this place and buy another property in brisbane?

Looking at Brisbane prices seems that I cant afford to get the same type of house for the same price in Brisbane, and here I thought that perth was the most expensive city to live in.

I have done "some" math and I know if I do rent out my property here, then the rent I get in will probably be about $50 - $75 less than my mortgage a week. This is managable, but I am unsure which way to go about this.

I also at the moment dont have any deposit for a new house, but If I sold then I would have some deposit to buy new. I would prefer not to rent in brisbane as its effectively money down the drain.

I know everyones situation is different but I am just looking for some advice when it comes to this.

Regards
Jase

 

[Peter_Tersteeg]

You may not have a deposit, but you may have equity in your existing house which can be converted into a deposit. It will depend on what your house is worth and what the existing amount owing is. The best way to go about this is to get in touch with some of the brokers from the forum as they'll be able to help with specific advice.

Given that the rent your existing house would be very close to covering the mortgage, I'd be reluctant to sell. Consider what the property might be worth 10 years from now? Also consider what will happen if you decide to move back to WA in a few years. I'm not a fan of selling just for sellings sake, especially if it's easy to keep the property.

Also keep in mind you don't have to buy a new home. You could also simply keep your property in WA and rent in Brisbane (although I think it's still a good time to be buying in Brisbane right now).

 

[K_Raheja]

If I were you , i would keep it.
besides, it wont cost you much per week and can be positively geared if rents go up, IR goes down etc.
Find a good PM from the forum and lease it out....
anyways good luck..

 

[hershal]

Thank you guys for the input.
Yes I am relectant to sell as its in an area which is just starting to take off. I know in a few years it would be worth alot more. I believe I have about $100 000 in equity in my house, If you just work out on What I Owe vs what its worth (currently looking at similar houses in my area).
I would prefer not to rent in brisbane as I really want my own house. Might have to for the first 6 months but after that I would like to buy.

My other concern is the upkeep on a rental, Cost of real estate agents etc. Having a short fall of $50 - 75 in rent doesnt take in consideration of other costs, rates repairs managing the property etc.

 

[Lil Skater]

A lot can change in 12 months. Rents might go up substantially.

Also remember that there could be some depreciation in your property so worth getting a schedule done, and making sure you take advantage of any tax deductions you may be able to get.

 

[hershal]

I know I have alot of time on my handds, however we all know it comes around real quick. reason I am waiting until July is due to partner having to go to Europe for 5 months in Januray for University. Once we come back after that we want to move to Brisbane for better work opportunities. The other reason is due to myself becoming self employed. I figure too its going to be hard to get a second loan being self employed so I wanted to get a good year behind me to show a working business.

I would prefer not to sell and rent, but would like to work out the costs involved, the tax benefits and everything that goes along with it

 

[wylie]

Could you buy in Brisbane now to save the problem you may face of being newly self-employed. It is easier to get finance now than have to prove your new income.

 

[hershal]

Could you buy in Brisbane now to save the problem you may face of being newly self-employed. It is easier to get finance now than have to prove your new income.

I would love to buy now however I just dont have the money behind me. Already started self employed and been doing it for about 2 months now. Money is better than I was on before which I am hoping will show when I go to get a new home loan.

also looking at building again in Brisbane, Could be an option if I could find some decent priced land

 

[chb]

sorry to hi jack this thread but i'm in an incredible similar situation
about $75-100 a week contribution to hold and moving to brisbane from melbourne.

I too was surprised how damn expensive brisbane is.

I live on a busy road though(about 40 metres from the road with no houses inbetween) which with more houses and land being released in my area will get busier. There are hundreds of houses coming up in the next few years as its a newer area. Also in west of melbourne.

Would you guys just sell and move on in this situation? to be honest I can't see much in terms of increase in the next 5 years, but after that anyones guess

 

[chb]

I would love to buy now however I just dont have the money behind me. Already started self employed and been doing it for about 2 months now. Money is better than I was on before which I am hoping will show when I go to get a new home loan.

also looking at building again in Brisbane, Could be an option if I could find some decent priced land

Building in brisbane is incredibly expensive as well! I had a look at this option and it was costing approximately $50K more than in melbourne to build a similar double story house!

 

[Colin Rice]

A depreciation schedule is a worth while exersize as it will potentially narrow the gap for the estimated $50-75 holding costs. Would also be a good idea to look at a restructure of your current loan from P&I to Interest only with an offset account (if not already set up?) in order to maximize your future tax deductions if you decide to keep and rent.

 

[hershal]

Building in brisbane is incredibly expensive as well! I had a look at this option and it was costing approximately $50K more than in melbourne to build a similar double story house!

and i thought perth was expensive.
Same single story house with same land (around 500m2) is roughly 80k more than what i could sell my house for.

i couldnt believe it. I would prefer to build but if I have to buy I will just trying to work out the best way of doing it.

 

[hershal]

A depreciation schedule is a worth while exersize as it will potentially narrow the gap for the estimated $50-75 holding costs. Would also be a good idea to look at a restructure of your current loan from P&I to Interest only with an offset account (if not already set up?) in order to maximize your future tax deductions if you decide to keep and rent.

I was looking into this, Interest only Loan, Its just another thing I have to work out. Kind of have to make a decision to keep or sell first

 

[Colin Rice]

I would go interest only with an offset straight away as you would not be disadvantaged if you did sell but will if you don't. Depending on your current bank this can be a simple two page form to a full application and being newly self employed it would be better if you are with a bank that requires the two page form with no financials? Get guidance from a broker and weigh up the advice rather than straining your brain having to deal directly with the banks!

 

[Darlogus]

I was looking into this, Interest only Loan, Its just another thing I have to work out. Kind of have to make a decision to keep or sell first

This is a common issue for people moving who are thinking of investing.

It might be worth doing the math on if you sell as CGT free, and taking your equity and putting it into your new PPR in Brisbane, and then buying an IP using the equity in your new home.
This will keep your PPR loan lower and have max loan on IP which is deductible. It may also help if your self employed and have a large deposit.

The Brisbane market is behind the Perth market in the cycle so you should still benefit from a growing market as long as you don't sell and sit out of the market for to long.

 

[Vendor]

If I were you , i would keep it.
besides, it wont cost you much per week and can be positively geared if rents go up, IR goes down etc.
Find a good PM from the forum and lease it out....
anyways good luck..

Finding a good PM is not easy. I have not had much luck in that regard. In effect they are only as good as the individual employees and they change.

 

[hershal]

thanks for all the advice guys, still trying to work out the best way to do this as I am currently away working will have to see an accountant or financial planner when I get back home.

I need to underdtand the whole equity loan thing and investment loan etc

 

[Colin Rice]

thanks for all the advice guys, still trying to work out the best way to do this as I am currently away working will have to see an accountant or financial planner when I get back home.

I need to underdtand the whole equity loan thing and investment loan etc

A credit adviser (AKA mortgage broker) would be the first port of call in my opinion in regards to the loan structure then speak to an accountant and or FP to confirm the advice.