Advice for selling one of my investment properties

Sorry to hear your predicament Mytch.
Here are few things you can try:
1. Are you paying interest only on the I.P? If you are paying P&I talk to the bank about restructuring the payments to I.O. This will take some pressure off, plus you only need to be paying interest on your I.P, as it’s only the INTEREST that is tax deductible, and try to reduce debt on your non-deductible debt such as car, PPoR, c/c’s etc.
2. Don’t forget to include a Depreciation Schedule in your tax return if you haven’t already done this. An apartment as expensive as yours will have excellent tax benefits from depreciation I would expect. If you haven’t had one done get it done asap and include it in last financial year’s tax return. You can use it for the previous 4 years if you haven’t included it, so you may be in for a good sized tax return which will help with the loan repayments.
You will of course re-invest all tax returns into personal debt reduction won’t you?
3. Rent out your PPoR and move into the cheapest rat infested dive you can find and make a profit off your PPoR rent. All the outgoings on your PPoR will become tax deductible as well. The combined effect will save you thousands I reckon.
Do you have a good accountant? If not, get one asap.

On a more personal finance note: look very hard at your “latte factor” – the amount of money you waste every day on lifestyle and looking good.
See how much money you can save by getting rid of the ‘wanker toys’ that all 24 year old males on high incomes have (I was one myself a million years ago!) and do it REALLY tough for a year or two – no one will care I promise.
Other than that, you are stuck with it I’m afraid. You sound as though you have enough income to handle the neg cashflow? If so, try to weather the storm – the prices will eventually go back up but how long it will take no one knows.
Paying that much for an apartment with no land value (even if it is in Sydney) to me is not a good idea. The higher the purchase price the lower the rent return tends to be.
Next time go for something below the median house price; there are a bigger pool of renters and buyers in this price range, and the returns are always better. And make sure it has some land content as well.

Cheers,
Marc.
[email protected]

Hi again Mytch. I have all the time in the world to reply.
I’m here in L.A on a 2.5 year holiday while my wife pursues her career. It’s tough, but someone has to make a sacrifice!
Good to hear you have shaken off the typical consumerism we see today!! You should see L.A – it would make you cry. I know people who are earning over $100k per year who are in their mid-late 40’s and are still renting (in our apt building) and will be for life. But hey! they are keeping up with the Jones.

If you buy houses ‘with your own money’ you are missing out on valuable LEVERAGE.
For example; if you spend $100k cash on one property and it goes up 10% per year, after 10 years it is worth $259k (10% compounding).
But if you use that same $100k to buy 5 properties each worth $100k – using standard 20% deposit, 80% bank loan to finance remainder, you have then LEVERAGED the $100k.
You now have 5 times the capital growth working for you.
That same $100k when leveraged, after 10 years, is worth$1,295,000
Of course, there is serviceability of the loans to be considered, but you see my point?
As for cheaper houses, they are a better choice for rental returns mainly. This is important for not maxing out my serviceability, so I can continue to keep buying without straining the cashflow. Realistically, most tenants can only afford so much, and once you get over about $250 per week the renter pool really thins out a lot. So I have elected to buy cheaper, newer (for tax benefits) freestanding or semi-detached units and houses in the lower quarter of the market – always below the median for the area. This makes it a lot easier to find tenants and buyers should I need to sell. I buy properties that the majority of people can afford to buy or rent.
Being free-standing or semi-detached is important because it means there is land content on the property, and it is the land content which goes up in value.
This is my strategy so far, and I would like to expand into apartments one day – but not just one apartment; I want to buy the whole block. Then I still get the land!

Cheers,
Marc.
[email protected]

I was just looking at your rent figures $310 sounds pretty cheap in this day and age. I am not sure if it is in the city or where its location is, but have you had the rent reviewed recently? I know in Brisbane would get a lot more than that so surely Sydney would. I guess it is all about location and access with units

Wayne Skewes
Mortgage Broker
Email [email protected]
http://www.eaussie.com.au/Mortgages/Aussie_Mortgage_Adviser.asp?ContentID=852280
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