Who rents and buys IP's?

[neaka]

Just wondering how many of you rent your PPOR and buys IP's? We are currently renting and own one IP and are at the point where we are deciding whether we would be better off buying a PPOR (but this would mean selling our IP).
The other option is to continue renting and continue buying IP's and build our portfolio to eventually sell off and buy our dream home?

 

[Xenia]

Many of our more sophisticated investor clients are on our landlord list and our tenant list! This may seem funny but they recieve more in rent than they pay in rent and live in a better house than they can justify paying for! Makes sense to me

This is why property managers should be treating tenants with absoulte respect and not only focus on the landlords

 

[alexlee]

I rented for a few years before I bought my PPOR. I didn't sell any IPs to fund the PPOR, though. Which means I have a big lump of non-deductible debt on the PPOR that I could pay down if I sold some IPs. However, selling any IP means I lose the future gains on it, so I'm willing to pay the 8.7% after tax interest on the PPOR loan because I think I'll make more than 8.7% on my IPs.
Alex

 

[LeeF]

We dont own a ppor yet ... so we are renting.
We do own one IP.
Reason is, we are paying a ridiculous rent relative to where we live and can direct the difference in $$$ towards maintaining IPs.

 

[im sparticus]

i dont have any ips though i do rent out my ppor and rent where i currently live.

 

[im sparticus]

just a question for you all with ips but no ppor, is there a reason why you dont consider one of your ips as a ppor?

 

[shermy]

Hi neaka,
We've just gone the route of moving into rental premises and converting our PPOR into an IP. This was done as we needed a larger house. We could have sold the current house and upsized but with my wife taking extended time off for maternity leave we didn't want to increase the size of our out goings.

It was not an easy decision but every seasoned investor we approached for advice on the subject said point blank "don't sell!" After crunching the numbers we actually improve our financial position slightly (ie:it costs us a little less to rent and have an IP).

Our next step is to use our healthy equity to invest more. The goal being to buy a larger PPOR in 5 years time. So I guess my answer would be to stick with the renting and continue accumulating IP's. But it's a very personal decision that only you can make. Good luck!

 

[Dazz]

When first starting out, we rented for 3 years whilst accumulating IP's.

It was one of the keys to our strategy. It worked.

Combining this strategy with purchasing a modest PPoR with little or no NTDD when you are able, forms a powerful boost to getting into the good stuff sooner.

 

[want2bewealthy]

I currently rent with a friend at $100 per week, hes a bit out of town so fuel is about $100 a week also but Ive been able to save alot of money, have 1 IP and am on the cerge of buying a PPOR because Im sick of living with other peolpe and Ive always wanted to be able to have my own space and not have to worry about living arrangements or talking to flatmates when I dont feel like it.

Just do the math, are you saving more than you otherwise could in other living situations?

 

[Rob Williams]

I've been renting for a few years now. During that time, I've ploughed all available cash, equity and cashflow into IP's. Buying a PPOR isn't an option for me, but I made the decision to follow my current path some time ago.
Renting allows me flexibility in terms of where I live and I can rent cheaper than I can own, giving me more buyign power for IP's.
My longer term plan is to build a share portfolio that can fund my rent from dividend income.
This strategy suits my lifestyle, medium to long term goals and my risk profile. I know it's not for everyone, but it works for me, at the moment.

 

[silversands]

Hi.

FWIW, We own our ppor, almost outright but have no desire to pay the negligible amount still owing on it, off, + we have 3 & 1/2 i.p's (about to build i.p. number 4) Before we knew anything about how to invest successfully, we just followed well intentioned advice to pay off our own home as soon as possible.

We have children and we all enjoy swimming, so we have a pool. So even if we knew way back when we purchased our home what we now know about investing, I don't think we'd have decided to rent out our ppor as the pool would be a major inconvenience from a LL's perspective.

We feel regarding our own personal situation that we prefer the lifestyle we have and it's worth the $ trade off. Financially, perhaps most, who are starting out may be better off renting whilst they accumulate i.p's, but emotionally that could be hard to do.

How much stress renting will cause each family will differ. The longer and more secure the lease is likely to be, the better the option looks. I prefer knowing my kids have some stability.

Regards Jodie

 

[Mike F]

I rent as well as owning several IP's. For me, being young it does not make sense to spend almost double what it costs me to rent a place, just own it.

I believe if I were to buy PPOR, this would set me back too far in the long term due to not then having as much spare cashflow to buy more IP.

I will eventualy buy though, but not for an investment reason, more a sense of ownership and security feeling that you can't get by being in a rental.

 

[oracle]

I am also renting currently as my rent is quite low. I do have 1.5 IPs (half because I have bought land and will be building an IP once land settles in next 2 months).

My currently strategy is to buy couple of more IPs and then buy my PPOR. Once I do buy my PPOR. I would be aggressively paying down the PPOR loan to an extent where Debt Recycling becomes an option for me (Using LOC and offset accounts).

Regards,
Oracle

 

[Chris.R_WA]

We rent relatively cheaply and own 2 IP's.

My currently strategy is to buy couple of more IPs and then buy my PPOR. Once I do buy my PPOR. I would be aggressively paying down the PPOR loan to an extent where Debt Recycling becomes an option for me (Using LOC and offset accounts).

This pretty much sums up our future strategy to the letter, thanks for typing it oracle!

Chris

 

[oracle]

We rent relatively cheaply and own 2 IP's.



This pretty much sums up our future strategy to the letter, thanks for typing it oracle!

Chris

No worries Chris,

Although, the big challenge is going to be cash flow. Since most of my IPs are going to still be negatively geared. Saving the deposit for PPOR and also paying it down to an extent where Debt Recycling becomes possible is not going to be easy with IP holding costs. Anyways, I have got a few years to figure out the best way to go about doing it. I guess that's the fun/challenging bit to find solutions to tricky problems.

 

[ianvestor]

Starting out, when my partner and I had 2 IPs, we rented a 1 bedroom unit to live in... we were paying $175 / week while our tenants were paying $240 and $250 per week.

This helped us save for our first house, which we moved into, and since then have owned our subsequent PPoRs, converting to IPs as we move out.

Even for the time (Nov 2006), $175 was cheap. I kept thinking, "I'm glad I don't use this REA as my PM". We would have happily paid $200 or more. Since I knew it was really cheap, I secured us a 15 month lease

 

[Mamaof3]

we do

having our own house isn't a priority for us.....reaching our financial goals are so when it comes down to it, we pay alot less money to rent than it would cost us to buy our own place....plus our rent is also tax deductible as we use it as a home/office as well so that makes it even cheaper!

i know some people who can't do it so it really depends on what you're comfortable doing and what your goals are.

 

[Lilli]

Hi,

I am so glad to see that someone has started this thread as we have been looking into doing exactly that. We have a PPOR and 1 x IP and are looking into turning our PPOR into our 2nd IP. For those that do rent after turning PPOR into IP - how did you go about doing the sums? Is there anything in particular that we would need to consider?

Thanks

 

[HandyAndy888]

I am one of the lucky few who gets an education house to rent for a comparatively very low amount and own one IP....I hate paying even this rent, but hey, it's very very cheap...

 

[austini]

Hi Gang,

We have owned a number (too many) PPORs over the years. Unfortunately just when we think we are settled for a reasonable forseeable period of time career etc brings on an unplanned move. This has resulted in considerable losses earlier on due to the sometimes short time period of ownership. I can't believe it took me so long to learn that the saying "rent is dead money" is far from true in certain situations. While growing up my parents were always drumming into me that you must own your own home as rent is dead money. So whenever work required us to move cities we automatically sold the existing PPOR and purchased new one without even questioning whether this was the sensible thing to do.

So nowadays given our transient lifestyle and armed with a lot more investing knowledge (and common sense) we rent our PPOR. Plus we have been able to rent very upmarket accomodation for a fraction of the cost of owning it and are free to move whenever we feel.

The only downside is that there is usually no guarantee of being able to renew the lease after 12 months should the owner decided to sell etc. Although fortunately we have often been able to have and "option to renew" at the end of the existing lease. Thankfully we have had a good run in that we have always had good landlords and been able to rent as long as we needed to.

But if one does rent it is critical that you invest the difference. Some people just don't have the discipline to do this.

So the lesson learnt for us is that if you like a change in lifestyle fairly reguarly and/or work requires you to move frequently then renting is a no brainer.

Cheers - Gordon