All Topics / Help Needed! / end the bad decisions with a good one

Viewing 4 posts - 1 through 4 (of 4 total)
  • Profile photo of variablevariable
    Member
    @variable
    Join Date: 2005
    Post Count: 10
    June 8, 2005 - 1:11 am

    Hi all,

    long time listener, first time caller!

    I was unfortunate enough to buy my investment property before reading Steve’s books and made quite a few mistakes.

    We (my wife and I) are now in the position where we owe a lot on properties that aren’t worth as much as we paid and we don’t know how to get out.

    We have our PPOR – bought 2 yrs ago for 585k and owe 500k – worth now, about 550k

    We have our IP – bought 1 yr ago for 320k and owe 288k – worth now, about 220k – renting at 250pw semi-furnished (currently) and 220pw unfurnished

    the exact figures, i cant give, but i know we are paying about 65k out per year in mortgages (interest only)

    we are also paying back a debt to my parents for 30k which helped buy the unit (pity i didnt ask for advice from them instead!)

    I own my job, which brings in about 140kpa – my wife also works part time for 35kpa

    we are making bucketloads, but paying it all back out again, mainly due to our bad decisions. my wife is in accounts and our wasted spending is very low.

    The house (PPOR) we are happy with, but the IP i am livid about – my worst decision ever. now i just don’t know what to do.

    we have about $10k in savings (that we dont want to touch)

    another $8k savings in our hand
    and about $30k coming in as a lump sum at october

    october will be the go month, i have the lump sum plus our savings and whatever else we can scrape together. I am expecting that we will have about 40-60 thousand to use on an investment.

    so what should i do??? i have quite a bit of free time with my job, as does my wife. i am considering share trading (me part time, wife full time) as an option – or put that cash onto the mortgage to thin it out – or buy a business (like a cafe).

    we are both quite young (24), but were planning on starting a family soon – this IP has delayed that for an indefinate amount of time.

    i dont really know what my question is, but if anyone can give me some ideas as to a way out of this rut, i would love to hear them.

    thanks in advance

    Kieran

    —-
    What we do in life, echoes into eternity

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    June 8, 2005 - 2:17 am

    Where did you get those valuations from?

    Do you expect the values to drop further? If not then perhaps spending another $10K to sell it plus another $10K to replace it might not be a wise move.

    Would you buy it again at todays price? The answer to that might help you decide whether to sell.

    All the best,

    Simon Macks
    Finance Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of variablevariable
    Member
    @variable
    Join Date: 2005
    Post Count: 10
    June 8, 2005 - 5:14 am

    Hi Simon,

    thanks for the response!

    I got the valuations from similar properties for sale in the area – i realise it is not the most precise way of doing it, but it would be close.

    I am not expecting prices to get below what they are now for the unit. at today’s price, i suppose i would consider it – it isnt cf+ve but it has potential for CG.

    i can’t see a way of ditching the unit and breaking even (even from the loans, not including repayments) so we can afford to hang onto it for now.

    i am just not sure what we should with the lump sum of cash that we will be getting

    thanks again

    Kieran

    —-
    What we do in life, echoes into eternity

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493
    June 8, 2005 - 7:02 am

    Hi Kieran,

    Some simple loan structuring might help reduce the debt levels a lot. For example, put all your cash together into one offset account attached to your home loan. Include any work and rental income and set direct debits for interest only on all loans. Your interest expense will decrease quickly with your income levels.

    Also, fill out the Form 1515 (I think that is the right one) through the ATO so your employers take less out of your wages in tax. This will also help you pay your non-deductible debt down quicker, further reduce the interest expense and further increase the cash flow to turn the situation around a lot quicker.

    I would not touch a cafe unless you had a lot of experience. These go under very often and are a dime a dozen. You might be better served by looking for positive investments – be it property or otherwise (shares, LPTs ???) – which will ease any burden and not be labour intensive or increase your ongoing expenses.

    The Mortgage Adviser

    http://www.themortgageadviser.com.au
    [email protected]
    Essential Links

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.