Who rents and buys IP's?

I own my own PPOR but rent my family weekender on the gold coast.THis is my little bit of luxury after accumulating IP's. At the moment it makes sense to do so this way. I pay Rent of $400pw. I could buy a similiar unit in the same block for $585,000, body corp fees are $144 per week. So would probably cost me about $800 pw more to own. Personally I can do better with the $800pw as though in a great location I don't like buying units in large towers, but as somewhere to stay on weekends they're great.

HOWEVER.
I will probably buy a weekender shortly (house for sale at $800k at the moment in the same st).

WHY
Renting works great for now. but what about in 20 years. The repayments on the loan for your PPOR would be the same as when you started 20 years ago. But rent would be at market.
 
RPI said:
WHY
Renting works great for now. but what about in 20 years. The repayments on the loan for your PPOR would be the same as when you started 20 years ago. But rent would be at market.
Click to expand...

But as you say, buying the weekender now would cost you a lot more than renting it. So you put the extra money into IPs or other investments. What if you keep doing this for 20 years? Personally, I'm thinking about a time when by focusing more on investments, I can buy a PPOR or holiday home or whatever is MUCH better than what I can afford now even if I were to sell everything and max out on loans.
Alex
 
I think it depends on what your short and long term plans are. We have 1 x IP and owe about $240k on a $530k PPOR however we really don't like our PPOR. The PPOR is a corner block 680sqm block in a good suburb so our dilemma is whether we sell the PPOR and buy elsewhere or rent a nicer place and rent out our PPOR. It seems that the latter may be the better option for us with the plan to develop the land in a few years time. We are just trying to crunch the numbers.
 
I would actually love to rent but theres nothing decent out there for less than $1000 a week. The available stock in sought after areas of Syd is abysmal. But the problem with buying a PPOR though is the expense, especially if you had to be transient like Austini. Everytime you switch PPOR, you're up for $50-$60k stamp duty, $20k selling and marketing costs, $200k+ post tax interest payments. Not to forget undeductable maintenance costs. Convert it to IP you say? and receive net 3% yield. Then theres the land tax threshold of only $357k in NSW when your UCV will be in the $800s. Well, thats Syd living for you.

Trying to explore maybe some house swapping so I can totally remove the leeches in the property business who destroy and skim off our hard earned wealth.
 
We rent, and will continue to, although admittedly I occasionally suffer from nesting syndrome....

We'd made the decision to rent and not buy a PPOR while living in Sydney in 2002. It was a tough decision for me, but not so much DH, he could see the way ahead, clever man! It has worked out well, DH's work moves us every couple of years anyway, so instead of paying for a Sydney PPOR which would have become a very low yield IP, we accumulated cash positive IP's between 2002 - 2003 instead. Looking back I can't believe I wanted to buy a PPOR knowing we'd only live in Sydney for 3 years, but I was home and around family, I'd also just had our first child....nesting.
 
alexlee said:
But as you say, buying the weekender now would cost you a lot more than renting it. So you put the extra money into IPs or other investments. What if you keep doing this for 20 years? Personally, I'm thinking about a time when by focusing more on investments, I can buy a PPOR or holiday home or whatever is MUCH better than what I can afford now even if I were to sell everything and max out on loans.
Alex
Click to expand...

Good point Alex
It would probably make sense with my PPOR also except that I am always building something on my own home. At the moment am doing major extensions that I just plug away, it is something I enjoy and I do not do many hours looking after my businesses and investments so have the time.

PPOR's often don't make investment sense but it comes back to the irrational owning your own piece of dirt bit. My PPOR will be worth somewhere in the $2-3$mil when I finish. And even taking into account that I have created significant equity through my reno's that would make a fair deposit for some commercial or resi property. Yes I could borrow against the property for the deposit but takign it up to 80% would still leave a large chunk of equity locked away and then also having to pay interest on that deposit rather than it being a cash deposit changes the cashflow situation also. Maybe if I looked at it further I could talk myself into selling and renting. Unlikely would get it past my better half though.
 
LouiseHui said:
We rent, and will continue to, although admittedly I occasionally suffer from nesting syndrome....

ha ha i can understand that I too am 'nesting'.
This is why we are facing the dilemma of renting Vs building a portfolio.
We are ready to start a family and I worry that my loss of income (50k) for god knows how long means we will never get a big enough loan to buy a PPOR down the track.

However, some very valid points have been highlighted and thank you. We are originally from Sydney and now live in Melbourne - there is a strong chance in 5 years we will want to go back.... also i will be a freelancer when i do have babies so will be working from home meaning more cash can be saved by claiming on our rent.

I too was always taught the great aussie dream of home ownership and that rent money is dead money. In todays climate this opinion is becoming less and less relevant.
Click to expand...
 
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For those that do rent their PPOR and buy IPs - is there a point where you have to continue to buy IPs for renting to make financial sense?
 
neaka said:
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?

:p
Click to expand...

We are currently renting our PPoR, and have IP's.

We will continue to do so for the next couple of years after we return to Aus next friday (yay!).

Then, do some cosmetic renos on the PPoR to get it ready for sale. The proceeds from this will pay out the land we have, and also the construction of the new PPoR we are planning for it.

Your plan is a good one, and once the DreamHome is put to bed, then use all that lovely equity to keep on investing!!
 
Xenia said:
This is why property managers should be treating tenants with absolute respect and not only focus on the landlords ;)
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Totally agree.

As long as it is a two-way street.

I respect my tenants until they prove me otherwise worthy of it, then it's not long before they are out of there.

In my opinion, PM's first and foremost job is to ensure that the tenants are made to honour their Contract and respect the property.

In many cases, the PM's focus on not upsetting the tenants.

There needs to be more severe consequences for tenants who display disrespect to Landlords and their property.

To me; it's too much in the tenants' favour currently.
 
Lilli said:
For those that do rent their PPOR and buy IPs - is there a point where you have to continue to buy IPs for renting to make financial sense?
Click to expand...

Renting only makes financial sense while you have a mortgage on your PPoR.

If your PPoR is debt free, then live in it and use the equity for more investing in things such as IP's, shares, businesses.

I wouldn't put the majority of the funds into shares and businesses though - these two vehicles can wipe you out in short time if you don't know what you're doing, while well selected property is way more safe - even for the less educated - when your own house is on the line.
 
We're currently renting in Sydney CBD. Mostly for convenient reasons, ie. close to work, as both of us working quite long hours. With Sydney rent going to the roof, we're in the process of purchasing a small PPOR - still in the city. We'll have to scale down a bit spacewise, but our current rent will actually covers the mortgage plus outgoings! Way we rationalise it is: "live in a smaller place but actually get the place for free"...well after many years that is! :D

Cheers, kristaje
 
Hi,

So if I was to turn our PPOR into an IP what would I be able to claim?

We bought the property 2 years ago. It is a house on its own land.

Thanks

Lilli
 
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