What's the next step? Is this plan viable?

We've just decided to go a bit further with property investment. I'm in the learning stage and still trying to get my head around the different strategies (...and the new terminology to go with it!).

I like to know what I'm working towards so have worked out a bit of a plan.

Current situation:
PPoR (beachside suburb) : Mkt value $650 (Equity $350K)
IP1 (City townhouse, currently tenanted): Mkt Value $550K (Equity $350K)
IP2 (To be knocked down and 2 x houses built/Currently tenated)

Ultimately (within 10 years), we would like to be mortgage free with a new PPOR and have at least two IPs bringing in a positive cash flow (a few more would be good!). Our current PPoR would become an investment property, we would keep our city townhouse, and both of these to be positively geared.

I'm unsure what my next step should be. When we build the two houses later next year, should we aim to keep both of them as rentals, sell one and hold one, or sell both? My gut instinct would be NOT to sell both of them.

What should my priorty be at this stage? Should we be aiming to pay off our PPoR or buying more IPs, with a view to sell at some stage and hopefully discharge the mortgages. Am I being too ambitious with wanting to be mortgage free?? Is it always a good idea to have a negatively geared property?

Any thoughts? Happy to listen to all advice...I don't have any friends or family who have invested in property so this forum has been great to read.
 
You seem to be doing alright without our help but I will give you my 2 cents worth- but and hold- selling incurs tax liabilities. Refinancing doesn't to the same extent but you still have the use of the money:D
 
When my husband and I met, we both each already had a home so that has given us a head start, I guess. The only property we have purchased as an IP is the one we plan to knock down. We have lots to learn... :)
 
Just a couple of things to keep note of.
- CGT. How does selling both in the same year affect your tax rate?
- Cash flow ok to hold both?
- Does keeping both give you enough diversification in your portfolio?
- Can you get a better yield by selling one/both and purchasing else where with the profit?
- Will land tax start to become an issue?

Lots to consider and a bit hard to get answers without being able to provide all the information. I'd be tracking down a property savy accountant ASAP and getting them to advise on your position.
 
Murphester

It's difficult to decide what's best without knowing your particular circumstances. Can you easily afford the repayments of at least 1 more property and with interest rates at 7 or 8%. Will your family or financial situation change later on? Considering the equity you've got I'd say that you should be able to buy 2 more IP's.
I wouldn't pay down the PPOR mortgage, Does this mortgage have an offset account attached to it?

Some more questions for you

1. Are all your properties with 1 lender?
2. Can you borrow any more money from them?
If not, have you tried a different lender or a mortgage broker?

3. How is the property market where you are?
Do you think you'll miss out on some capital gain if you wait another
year with your next purchase?

4. What is the reason for building the 2 houses?
When are you going to build?
How are you going to finance the construction?

5. Do you intend to stay in your current PPOR long term?
If you do, and your answer to question 3b is no then I'd build
the 2 houses by accessing the equity in the PPOR and then
do a valuation to release the new equity.
Question 4a is an important 1. Is there a good reason for the construction?
and if you are going to sell the 2 new houses have you considered CGTax
 
You seem to be doing alright without our help but I will give you my 2 cents worth- but and hold- selling incurs tax liabilities. Refinancing doesn't to the same extent but you still have the use of the money:D
I'll disagree and suggest that selling and realising a profit is not a bad thing. Even better is legal tax minimisation (sp?), so if you purchase in the correct structure you should be able to sell with a reasonable tax liability.

Have a chat with your account before you purchase.

Capital Gains tax is just another tax, so come and join the low income earners club.

Cheers
Graeme
 
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