Finance advice

To sell or refinance?

By Paul Glossop

There comes a time when many investors have to think about whether they should sell an investment to help pay down their principal place of residence or refinance and reinvest.

Blogger: Paul Glossop, director, Pure Property Investment

In a previous blog I outlined the substantial capital gains made by Sydney and Melbourne residents over the past three years and how these capital gains could be reinvested to potentially double your money in 15 years.

Now I want to discuss the crossroads that many property investors are currently facing: ‘should I sell and pay down or refinance and reinvest?’

The short answer is that it is really dependent on where you are in your investment journey but I’ll provide a scenario that outlines the benefits of refinancing and investing again.

Over 70 per cent of property investors only own one or two properties and stop at that but with the example below you have to ask yourself the question, ‘why wouldn’t I reinvest the profits?’

In this scenario the investor currently owns one investment property and their PPOR.

 

Option one: Sell your investment property (neutrally geared) and pay down your PPOR.

Investment property loan amount: $300,000

Investment property sold price: $500,000

Capital gains tax property purchased for $400,000 (25% of profit approx.): $25,000

Agents fees (2%) : $10,000

Closing costs: $2,000

Net profit from sale: $53,000

 

PPOR current value: $500,000

New mortgagee amount (originally $300,000) using the profits from the sale of your investment property: $247,000

PPOR projected value in 2030: $1 million

Monthly repayments to pay off your PPOR by 2030 (based on 6.00% interest rates): $2,084.33

Total net position by 2030: $1 million

 

Option two: Hold your investment property (neutrally geared) and continue to pay down pay down your PPOR.

Investment property loan amount (interest only): $300,000

Investment property current value: $500,000

Investment property projected value in 2030: $1 million

Net equity position by 2030: $700,000

 

PPOR current value: $500,000

Mortgagee amount: $300,000

PPOR projected value in 2030: $1 million

Monthly repayments to pay off your PPOR by 2030 (based on 6.00% interest rates): $2,531.57

Total net position on both properties by 2030: $1.7 million

 

Option three: Hold your investment property (neutrally geared) access the equity to re-invest in a second investment property (neutrally geared) and continue to pay down pay down your PPOR.

Initial investment property loan amount (interest only): $400,000 ($100,00 line of credit)

Additional monthly repayments (interest only 6%): $500 per month

Investment property current value: $500,000

Investment property projected value in 2030: $1 million

Net equity position by 2030: $600,000

 

New investment property loan amount (interest only): $300,000

Investment property current price: $400,000

Investment property projected value in 2030: $800,000

Net equity position by 2030: $500,000

 

PPOR current value : $500,000

Mortgagee amount : $300,000

PPOR projected value in 2030: $1 million

Monthly repayments to pay off your PPOR by 2030 (based on 6.00% interest rates): $2,531.57

Total net position on three properties by 2030: $2.1 million

 

The brass tacks of the three scenarios is that if you can afford an additional $218 per week (remembering that these scenarios don’t take into account depreciation which could potentially negate the $218 all together) the 15 year benefits of scenario three over scenario one is a staggering $1.1 million.

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About the Blogger

Paul Glossop

Paul Glossop

Paul Glossop is the founder and director of Pure Property Investment. Paul has built a substantial property portfolio, focusing on the fundamentals of property investing. He founded Pure Property Investment to enable investors to experience a truly holistic approach to property investment. From the initial consultation to the acquisition of the property, Pure Property Investment is a true partner for its clients through the entire journey. We specialise in sourcing properties Australia wide that are below market value, positively geared and primed for capital growth.

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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
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A property investment plan years in the making
object(stdClass)#1203 (52) {
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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