Hi all, I'm relatively new to investing so I'm after a few opinions on my current situation... I currently own a house on the north side of Brisbane which I am currently renting for $320/week. I owe $250k and the house is worth around $450-$465k at last estimate. I bought the house with the help of a parent and need to pay them back the deposit that was loaned to me so I plan to sell the house sometime in the next 2 - 3 years regardless but given the outlook on housing I am wondering if it would be better to sell the house now. I would be looking at taking around $100k profit and possibly investing the money into stocks and some into the purchase of a modest unit (to rent out) or something along those lines. I realise that now is not the best time to sell given the slow down in the market but if I buy again straight away would this not be irrelevant?
Hi Muzza Is the only reason you're intending to sell because you need to pay back the deposit? If this is the case, then why not draw down on some of the equity and repay it this way? Sure, you're going to incur interest but selling costs (agents and legal fees, cap gains tax) also erode your profits, so you may be better off knuckling down to pay off the repaid debt to your parent instead.
Its definitely something I have thought about although cash flow is a bit of an issue. Also it would probably mean going from a fixed, full doc interest rate to a Lo doc interest rate (a rise of about 2.5%) to get the extra funds. All that aside my other reason for wanting to sell and buy is that any extra loan against the house to pay of my parents would not be tax deductible whereas if I sell and then buy all my debt would be. If I sell I should be able to fund the purchase of a 3 bedroom unit closer to the city as well as have $10-20k to invest into a fund to start the whole debt recycling process.
are you sure that refunding the deposit wont be tax deductible? if your parents paid the actual deposit to the REA then it might be.. if they paid it into your bank acount and then you paid the REA then it wont be.. might be worth checking which one before deciding
Unfortunately it wont be deductible... was a 'gift' to myself. The only way I have thought of to achieve this deductibility is to 'sell' the property to a trust at a price that would allow me to refinance and also pay out my parents. Not sure how this would be seen by the ATO etc.
