To Sell or To Use IP To Buy PPOR?

[Buyers_Friend]

I have a scenario i?d like your opinions on:

Liam and his wife are having a kid and need to move out and buy a house in the shire with a value of about $800k as a PPOR:

**He owns a unit at Wollongong with a debt of $250k and valued at $400k with rent being charged at $350 per week.
**He owns a unit in Caringbah which he is using currently as his PPOR which has a debt of $350k and a value of $550k.

His wife wants to sell Wollongong to use it for deposit for new PPOR. LVR is 63.15%.

Should he:
a) Sell Wollongong and use it as deposit for new PPOR?
b) Borrow unto 80% of his portfolio (roughly $161,500 if my maths is correct) and use that as a deposit and maintain these investments?
c) Sell Caringbah and use that for the deposit for new PPOR?

Factors i?m not clear on are the amount of fees and CG he will have to pay in order to see what he would be left with to use as a deposit.

 

[Aaron_C]

It's really a personal decision and depends on whether they think the units will have substantial growth that they will forgo by selling.

 

[Spades]

Hi Buyers_Friend,

I agree with Aaron_C.

Isn't the 'gong doing ok?

Anyhow,you could borrow 265k @ 90% with LMI.

You sell the unit in the 'gong,150k minus costs?

Cheers Spades.

 

[Rolf Latham]

500 reasons why there isnt a simple answer here.

Aside from the mechanics, much of this comes down to future goals, risk profiles, and the couple's REAL understanding of how all that ties together.

ta

rolf

 

[Terry_w]

I have a scenario i?d like your opinions on:

Liam and his wife are having a kid and need to move out and buy a house in the shire with a value of about $800k as a PPOR:

**He owns a unit at Wollongong with a debt of $250k and valued at $400k with rent being charged at $350 per week.
**He owns a unit in Caringbah which he is using currently as his PPOR which has a debt of $350k and a value of $550k.

His wife wants to sell Wollongong to use it for deposit for new PPOR. LVR is 63.15%.

Should he:
a) Sell Wollongong and use it as deposit for new PPOR?
b) Borrow unto 80% of his portfolio (roughly $161,500 if my maths is correct) and use that as a deposit and maintain these investments?
c) Sell Caringbah and use that for the deposit for new PPOR?

Factors i?m not clear on are the amount of fees and CG he will have to pay in order to see what he would be left with to use as a deposit.

Seems like you are focusing on one aspect.

I would suggest you do the sums for the different scenarios.
Selling may incur $XX in costs but it will save you $YYY in non deductible itnerest each year.

Then also consider the other aspects such as
1. Asset protection. Selling may allow you to restructure more effeciently.
2. Future income tax
3. Fututer CGT
4. Estate planning - different ownership means ability in ability to leave it to specific persons in specific ways.eg. If you died now you could leave it to a testamentary trust to prevent future spouses benefiting, provide asset protection, extra tax benefits etc. But if you sell and buy the new one in joint tenants you cannot.
5. Future finance. Now as sole owner you can do as you please. If the new house is jointly owned you would need the other owner's consent.
I know a guy who is in a situation where this consent is not given. So he cannot access equity for example.