Hi
My name is Debbie and after MANY hours of reading this forum I have finally decided to ask a few questions myself.
Everybody seems so friendly and helpful.
Our situation is that we have one IP in Boulder Kalgoorlie that we now have around $100,000 equity in.
We have shares in a retail property in country victoria which we have $30,000 equity in and a mortgage on our own home for $200,000 which we are in the middle of doing huge renos on and to date has about $60,000 in equity.
Both our IP are cashflow positive with 7 – 12% yields.
My husband is on a salary of around $70,000 pa and i am a stay at home mum with no income.
I feel that WA has peaked (or close to) and I am thinking about selling my property there.
My question is, am I better off selling my WA IP and paying whatever is left over after CG tax off my home mortgage, then refinancing everything into a equity line of credit loan?.
Or keeping the WA property and borrowing against any equity to buy more property? I am guessing that there could be serviceability issues with this option.
I am itching to get out there and buy more property but need some advice with which way would be better for me to set up my finances to enable me to do this.
Any help would be much appreciated.
Debbie
As well as adding up your Capital Gains, consider what effect the profit will have on your Family Tax Benefit.
Thanks Wayne.
So keep the IP – but what do you think about the equity line of credit loan ??? would this be beneficial to us if we want to continue to purchse property ??
debbie
Everyone seems to have this idea to sell their very successful I.P’s.
After you pay all the costs and CGT you lose a fair chunk, and it is not necessary to do this as you can use the equity you have built up.
Sell the duds and keep the winners.
Don’t sell, but refinance your existing loans to set up the correct structure for further investing in the future.
You need a property-savvy Mortgage Broker to help you here – maybe some of our learned M.B’s on this site will step in.
On a side note; can I ask you what the property is you own in Boulder and when you bought it? (I bought a couple of props in Kal and Boulder back in 2003 and I have no idea what they are worth now).
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Deb…
Just an opinion:
I think it all comes down to “what do you want out of this?”….Are you doing the renovations with the intention to sell (for cap growth with no CGT as it is your PPOR) or is it more of a lifestyle choice … ie. for family?
I suppose a lot of people on this website focus on cash flow…
so they would ask the question…. am I going to get a better “yield” elsewhere…
Personally I tend to agree with “LA aussie”…
If you sell, you incur a an insant loss in selling costs…So I would focus on ways to improve the yields in the current state…
Are your current investment properties at their “highest and best use”….? Can you improve the return on what you already have before looking for another…?Having said that… If you think that you can get better deals that could outweigh the selling costs from Kalgoorlie… then weigh that up also…
Once these questions have been answered and your confident
that you can afford to purchase another one… another loan shouldn’t be a problem… there’s always someone willing to lend money.All the best,
Anthony.Hi Debbie not sure what happened to my prior post it seems to have vanished? anyway it all depends on how your LOC is set up. They are quite favoured by investors as they can be interest only on an ongoing basis and payments are only calculated on the outstanding balance.
Not all LOC products are the same it is important to ensure it is set up to cater for your style of investing
Wayne
Mortgage Adviser
Email [email protected]
http://www.alphamortgagesolutions.com.au
Refinace, Loan Consolidation, Owner Occupied or Investment Finance. Free Service we come to you!hi debbie, i was asking myself the same questions as yourself before i noticed your posting. I too have a mining town property thats boom in south hedland, and was thinking of selling that to pay off my debts also.
my general thoughts were – i think the mining towns have peaked (for now, until the next 7-10year boom) and i do believe we are headed for a down turn, and i also have a negative geared property. If you sell i believe you would lose about 25- 30% approx of your profit (please correct me if im wrong – 50% of profit is CGT and then you get taxed 47% on that CGT (depending on tax bracket) = 25% off profit then + selling cost etc)you would then take that profit in put it into your negative geared property. For me its like swapping your positive cash flow mining property with a property in a good location and better chance of capital gains (which is now a positive cash flow after you use profits to reduce debts).
my main concern is if interest rates go crazy again like15% type crazy. +ve geared properties will not be affected that much though so it is safe to hold, but how many -ve geared properties can you hold? (not many)
but im still just as confused as you
all the bestHi,
I am very new to this so dont shoot me down in flames. I just got advice the other night, so I am still processing the info. In fact my “advisor” is probably reading this saying “Ben ben ben….did you hear a word I said?”
Anyway, its been a long time since I have been to Boulder but when you say WA has peaked, isnt it more so Perth than WA in general? Is it possible that growth will continue as far as Boulder? If so then it would be worth holding onto the property. Although I just checked the growth and Boulder has had 42% growth in the last 12 months
If the property is Cash Flow positive, wouldnt it make sense to keep the property and use a line of credit on the equity to buy more cash flow positive properties and take advantage of the tax deductions. The advice we have been given is to set up a line of credit and a trust but everyones situation is different.
Aside from all that, when you say it has 7 – 12% yields, I am curious if that is calculated against your purchase price or current market price? I hear different opinions.
Go gentle….just learning.
Cheers
BenBen
You will go far my boy with the right advice.
Excellent post.
Remember the Trust idea is only if you have substantial equity tied up in a property (usually in your PPOR) and want to release it by making a non tax deductible loan fully tax deductible.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
to qlds007 (Richard Taylor)………huh? How does this trust thingy work regarding the ppor?
wilrose[thumbsupanim]
To esnam
Thank you so much for your post.
You put my thoughts into words perfectly
I looked at it like swapping properties too.
Property goes through cycles and I thought that it was a wise move to buy at the bottom of the market then sell at the top.
I realize that this is not always advisable if you have invested in an area that has slow continual growth.
But the growth that we have just had in the west has been exceptional and it may be another 10 years before it does anything again.
Ben made a good point by pointing out that Perth may be slowing down, but the regional area may still have a little way to go – the old “domino affect”.
My investment there was always only going to be a short term investment. I think that there is always an element of risk associated with purchasing property in a mining town. It was a bit like gambling I thought – now I think that I should quit while I’m in front.
My property is under both mine and my husbands name. His tax bracket is only 31.5% and because i don’t earn an income my share is at the lowest tax rate. We would walk away with around $60,000 net profit.
That would go along way towards enabling me to purchase two positive cashflow properties in growth areas.
We are always limited to the amount of neg properties that we can afford to buy.
I am still confused.
We have just set up a Line Of Credit, interest only equity loan. This should free up some more funds.
Would love to know what you decide to do with your South Hedland property.
And Ben
my 7-12% yield were calculated against purchase price 2 years ago. Kalgoorlie Boulder have several properties for around 6 and 7% yields. Mine might be one of them soon
Cheers
and thanks for you responses. I love this forum
Debbie
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