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## Considering Selling Investment Properties for Mortgage-Free Home

So my partner and I currently each own an investment property and are renting while we save up money. Our goal is to eventually sell our investment properties and use the money saved along with the equity to become mortgage-free when we purchase our forever home.

However, I have received advice from various individuals suggesting that we should hold onto our investment properties. The rationale behind this advice is unclear to me, as I see many individuals who have invested in rental properties for their retirement still struggling to pay off mortgages in their 60s. Additionally, the continuous taxes imposed on landlords and the inherent risks associated with property ownership add to my concerns.

Some may argue that my perspective is short-sighted or naive, but I believe there is value in prioritizing income flexibility from the age of 30 onwards, especially considering our plans to start a family. Rather than hoarding money for the future, I believe the lifestyle benefits we could provide for our family now outweigh the potential long-term gains from rental properties.

It is important to note that we do plan to invest in shares for our retirement, ensuring that we are not neglecting our financial future.

I am open to hearing opposing viewpoints and engaging in debate on this matter, as I genuinely struggle to see the logic behind holding onto our investment properties.

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The AI Legalese Decoder can assist in analyzing the legal implications and complexities related to selling investment properties. It can help in understanding the tax implications, risks, and financial considerations associated with property ownership. Additionally, the tool can provide insights on alternative investment options, such as shares, and their potential impact on retirement planning. By utilizing the AI Legalese Decoder, you can make informed decisions regarding the sale of your investment properties and the pursuit of a mortgage-free home.

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21 Comments

  • TheHuskyHideaway

    I sold my IP last year due to mortgages increasing faster than rent. It didn’t allow me to be mortgage free, but it gave me the breathing room to enjoy my life now while my kids are young, and do less OT.

    People think I’m crazy. But the way I saw it was keeping it I’ll be a rich in my 60’s, but have a miserable 30’s and kids that never see me.

  • DancinWithWolves

    Yeah buy a house outright. So many people seem to treat finances as a hobby or obsession, and constantly want more wealth creation.

    I think having a paid off home, then just saving whatever you can is fine, not everything needs to be geared to the max to squeeze every last cent out of it.

    I think the ultimate goal is just owning a place to live. If thatÔÇÖs your goal too, ignore what anyone else says.

  • reddonson

    This is the exact position my wife and I were in 10 years ago and this is how it played out.

    Both had investment properties.
    Both working full-time, no kids.

    Rented together then used equity to buy 3rd unit PPOR.

    Wanted to have kids, sold her IP to buy land to build house on.

    After approval to build sold PPOR to pay for the build.

    Now at the time everyone is telling us, keep my IP, which we could afford on both our incomes comfortably.

    Flash forward to when we have 1 kid and you realise that at least one of you is not going to be working full-time, so you have severely reduced the income you previously had.

    Wife is now on maternity leave and essentially half pay for the first year, leave without pay for year 2 (we decided we didn’t want to pay someone else to raise our child just so she could go to work).

    We find out we are going to have twins just before our house is built, I have basically no option but to sell my IP, because there is no way I can finance 1m+ of loan basically on my own.

    But now together we have a brand new house, $420k mortgage and $70k in the offset.

    Year 3 we now have twin boys as well and wife is currently on another year of maternity leave (never went back to work), so half pay again. Most likely year 4 will be unpaid by her but because we have a modest mortgage we can afford to do that on a single income and at this point sending 3 kids to daycare is barely worth her even going to work.

    If I had my time over I would have sold my IP at the same time as the PPOR.

    My advice to you.

    Kids change everything, what you think you will do before you have them will change once you see them. The ability to be able to choose whether one of you wants to stay at home and look after them or go to work is worth it. If you can have the option of not being forced back into the workforce I would take it.

    Sell everything, buy a house that will fit the family size you want, ensuring that the partner who will remain working full-time can cover the mortgage + expenses solely and pay down as much as you can while you’re both working full-time so that when you’re income drops you will still be comfortable.

    My biggest mistake was doing the sums based off her working 3 days a week (assumed on my part) and also not taking into account interest rate rises.

    I will never buy another investment property again, my plan is to pay this mortgage down to nothing (well at least offset it to 0 interest) and invest in shares only.

  • stonertear

    I sold my investments and now have a 1.3mill house at 35 paid off.

    We still work full time and enjoy life with no budget.

    We both put 30k into super a year.

    Yes do this, if that’s your goal.

    We also are going to start doing EFTs

  • Additional-Meet5810

    Sold my ip about six months ago to pay off my mortgage and simplify my life.

    Very happy with my decision. It is like several loads have been taken off my shoulders, not the least of which is no longer having to deal with tenants.

    My life is now more free and with a higher quality as I have much more disposable income.

  • bewsh123

    Same lines as others in this post, youre not crazy. Yes it may not be the most optimal way to get every cent but youre de-risking your future.

    Way I see it, once you own your home outright, you can rebuild your investments from a stronger position. As others have said, life happens. Kids, injuries, economic downturns etc. personally I would value security of ppor first then worry about wealth later. IÔÇÖd be doing the same as you OP!

  • Agreeable_Fig9224

    Personal choice, and depends on the specific numbers and how much of a financial strain its going to be.

    If you want to sell and have more financial security for your PPOR, go for it. Less stressful.

    We just bought a PPOR and have decided to keep our current PPOR as an investment. The numbers will be ok. But the idea of having 2 mortgages does stress me out.

  • read-my-comments

    Borrowing for your primary place of residence is silly if you can own it outright.

    I would rather be debt free on my own home and carry debt on a new investment property or invest in shares.

  • santaslayer0932

    Gonna need more info due to unknown CGT outcome. Probably best to include ballpark income too.

    Without knowing these details tho, generally IÔÇÖd say go with what gives you the best sleep at night factor and best cashflow. Poor cashflow will get you undone quite easily and quickly.

  • DrahKir67

    You’ll have so much less stress if you have no mortgage. Kids and a reduced income will hit hard. I’d sell. You’ll have immense equity in your home and when you are ready you could borrow against that to buy an investment property. If you want. It comes down to your risk tolerance. ETFs are a great option if you don’t want to take on debt or use leverage.

  • smandroid

    I think we’d need to know how much shares you have, what they are, cgt impact and the size of your mortgage to give full informed advice. There’s alot of variables than just sell or keep. However you can always find a middle ground and sell half and pay off half of it, and then see if you can live with thr repayment. If not, you can sell the other half. Selling all your shares in the same financial year is also not tax efficient.

  • aph1985

    Depends how much mortgage is owing on your IPs. If it is a lot, sell it. 

  • CustardCheesecake75

    The way I read it is you have three places, one that you live in and each of you have an investment property each? Is that right?

    I am a firm believer in having at least one investment property on top of the one you live in. And it is a long term investment. Properties now are getting outrageously expensive and to get back into the property market later on will be a lot harder.

    My partner and I had two mortgages (one for IP and one for home) before having kids and were able to cope. It did take a number of years for the rent to cover the mortgage for the IP, but we were glad that we kept in and now that the mortgage is paid off on the IP, we have rent coming in and it’s a nice bit of extra cash and that did help with the home mortgage.

    My suggestion is if you do have two properties on top of your home, keep at least one, sell the other to lower the repayments on your home and the other IP. It is a short term pain for a long term gain.

  • satanzhand

    If they are cashflow positive or you earn enough in wages where you have a big benefit for negative gearing then you do the numbers.

    If you are like most people and the rentals are cashflow negative on the monthly and the negative gearing isn’t that good.. you do the numbers and probably sell them or sell one and have it run virtually debt free.

    So many options and variables, trusts, how much you earn, how much spare cash you have to save…

  • Crazy_Suggestion_182

    You need to work the numbers.

    If the IPs are cash flow positive (or neutral) after tax then I’d usually say to keep them, as most IPs become steadily more cash flow positive over the longer term. This cash flow can supplement, and eventually replace, your PPOR loan repayments, meaning it doesn’t really matter how long it takes to pay it off.

    If the IPs are cash flow negative, and you don’t think you can comfortably service all the debt and costs given the total situation then sell one or both IPs.

    There’s no standard answer. You need to write it all out and work out where it all fits. You may have an amazing and unique opportunity.

  • lift_ride_repeat

    What ÔÇ£everyoneÔÇØ says is irrelevant. Everyone has their own opinions and their own journeys. Figure out what you want and what works for you and ignore the noise.

  • TheWhogg

    IP at the deepest negative net yields in 17 years donÔÇÖt strike me as a compelling investment anyhow. Last time mortgages were this expensive was 2011 and rental yields were far higher.

    But letÔÇÖs say you love your investments. LetÔÇÖs do the maths. You can sell them for (letÔÇÖs say) $1m to keep the maths easy. That relieves you of 68000 of non deductible mortgage interest. You can then borrow against that home equity to buy the places next door to what you sold. Deductible interest saves $25k pa. (You could buy a third one with the same next cashflow, possibly 2 more if rent is half your interest.) Even if you incurred an unlikely $100k CGT and $50k sale and repurchase costs youÔÇÖre recouping that in 6 years for a 17% ROI on the wash sale.

  • Economy-Carpenter-77

    I was in a similar position a couple years ago. Ended up selling the IP (previously PPOR) to pay off the mortgage. Own a house paid off by 33. Now we can live a more comfortable life with our young family and my wife has been able to only return to work for the days she wants. Allowing more freedom to raise our daughter and also more financial freedom to enjoy ourselves. I have just made sure that I’m contributing extra to my super and investing a chunk of my monthly pay into shares/stocks.

  • dr_of_shield

    I slogged it in my 20s to buy two houses (one IP one PPOR). Because of the dumb luck of COVID and property prices having appreciated exponentially, I am planning to sell my IP this year and dump it all into my PPOR offset. IÔÇÖm able to claim on the six year rule as well to forego any CGT. Planning on living at my current PPOR for the extended future so itÔÇÖs the best decision IMO. I havenÔÇÖt told anyone aside from my spouse as I feel I would be ridiculed by the family and friends who are investment minded but I value quality of life at the moment than saving every penny for retirement.

  • Rustyudder

    I am concerned that your autocorrect changed invest to incest.

  • No_Caterpillar9737

    IPs are for economic leeches ­ƒÖÅ