Would you ever buy an IP worth more than your PPOR?

Discussion in 'Investor Psychology' started by freyja, 27th May, 2015.

  1. freyja

    freyja Member

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    I think there is definitely a psychological hurdle in this scenario. Well, for me there is anyway!

    I'm new to investing property, having bought my first one recently and am entertaining the next purchase. I'm not considering Sydney for obvious reasons but one day, Sydney could be a possibility. However, with my PPOR's current value at 700K it is possible that I'd have to outlay more than it's worth to secure a well located IP property . This just doesn't feel right to me, even if the numbers added up.

    I know each to their own and do what makes sense to you etc, etc - but I was wondering if others feel the same?
     
  2. D.T.

    D.T. Property Lookerafterer

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    It's only psychological really. There's no logical reason why the value of an investment would be even compared with value of your home.

    My IP's happen to all be worth less than my PPOR, but only because that's the strategy I've used for those acquisitions. Nothings to say future ones might be more or less or whatever.

    Judge on the quality of the investment on its merits and how it fits into your goals and strategy, rather than trying to compare it to some other unrelated number.
     
  3. Biz

    Biz $17 DOLLAS YO!

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    I have an IP worth more than my home, no biggie. Never really thought about it tbh. 1 bedroom house in a totally different area compared to my 4 bedder ppor. I get what you mesn in a way though, it would be a bit weird to be in the same area and your tenants have a better house than you haha.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    All of my tenants have dishwashers, my own home doesn't (and my wife never let's me forget it). They all live in nicer houses than I do. Some of my IPs are definitely in more expensive locations than my home as well.

    That said, we bought our home for the location and land, way back when it was cheap(er). When we're done rebuilding hopefully next year, the new property will probably be worth twice what most of our IPs are worth.
     
  5. Xenia IM

    Xenia IM Property Manager

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    difficult to answer as it depends on the price of your ppor.
     
  6. Mindmaster

    Mindmaster Brendon

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    Moot point because I don't have a PPOR yet have 4 going on 5 IPs
     
  7. LeoT

    LeoT Member

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    To be honest you answered it in your first sentence. Its completely a mindset trap.

    IMO the only thing you need to consider for each IP is how does it fit into your portfolio and will it get you closer to your overall goal. That's it.

    Cheers

    Leo
     
  8. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    Probly not, because expensive single title resi IP's usually have crap yields.
    Commercial/Industrial is a different story, and you only said IP, not resi specific, so it's a possibility....
     
  9. citystar

    citystar Member

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    Sure if the numbers ticked all the boxes: positively geared and potential/expected capital growth in the short term I would jump at the chance.

    However my IP's have all been cheap places that have needed a good reno to increase rental return and add value.
     
  10. Sonamic

    Sonamic Member

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    Yes. PPOR has the lesser Value of mine. But is seeing some solid growth ATM. So that may soon change. :D
     
  11. NPB

    NPB Member

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    I did it many times in the accumulation phase of my investing, now that I am in the sit/harvest phase and I have upgraded the PPOR a couple of times it would be extremely unlikely I would do it again.

    My thoughts were If I delayed the upgrade of the PPOR initially I could expand the portfolio far wider and buy better quality IP's which would eventually allow for a more desirable PPOR long term. Happy with how it worked out.
     
  12. knightm

    knightm Member

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    Agreed, there were a few yrs we were renting basic accom and had brick 4 bedder in gladstone, kept joking about moving into it one day, then sold it to build our place and now our place is worth more than that gladstone place (partly also due to market slump up there after we sold)
     
  13. Jamie M

    Jamie M Mortgage Broker - Oz Wide

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    It's all psychological. Work with the numbers. If your IP ends up being more expensive then your PPOR - but you're confident the numbers work and it makes for a good investment, then so be it.

    Cheers

    Jamie
     
  14. neK

    neK Member

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    My IP's are a lot nicer than my own PPoR and one of them is valued more than my PPR.

    I don't think much of it. I'm happy with my own place and how it is :)

    I look at this situation much like friends with lower valued properties and have driven nicer cars and had more material things.... sacrifice now so one can have nicer things later.

    End of the day, its whatever stacks up, if an IP is going to be more expensive than my PPR, then so be it.
     
  15. westminster

    westminster P Plate Developer

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    Yup done it 3 times. My developments/tenants also have much nicer spec than my own house which I whinge about a lot :)

    However those developments and tenants are paving their way to me getting a nicer PPOR next year so all good :p
     
  16. skater

    skater Capitalist

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    Yes, we bought a place to be our PPOR, but we never ended up moving in. We've still got it, and while it is a nicer house than our own, our current PPOR is now worth more, but for maybe 10 years, we lived in a tiny ex-housie while our tenants had a nice 4x2x2 with a pool & spa.

    The nice one is earmarked for sale in the coming spring if prices keep moving up though.
     
  17. BayView

    BayView Member

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    This. ^

    Our PPOR when we bought our first IP was $305k

    The IP was $395k, and with a prospective rent of $450p/w, apparently.

    Didn't materialise; rent was $350p/w. :eek:

    So, the confidence in the numbers, and the good investment - weren't. :eek:
     
  18. GreyGhost

    GreyGhost Member

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    At least her dishwasher has a longer life expectancy that that of your IP's ;)
     
  19. Deltaberry

    Deltaberry Member

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    All my IPs are worth more than my PPOR, some by a factor of 4-5x.
     
  20. Richard Feynman

    Richard Feynman Mortgage Broker

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    They are worth more than my PPOR, and nicer, and bigger, and better-equipped.