Hello all. Advice please. I am one of those poeple who own two negatively geared investment properties. (paying off 3rd mortgage whilst renovating on another which picked up at a bargain)It has work well for the last 3 years. One property has double in value in those 3 years, the other has gained around 35% (1 year)on purchase price. A nice little capital gain. AFter reading “0-130”, I now realise that financial freedom is not going to come this way. Question, Am I better of selling the 2 current properties and reinvesting in more expensive, but, positive cashflow realestate or starting a new strategy hanging on to the current two properties? The book is very inspirational and truly a different aspect of investing that I niaively ingnored, but has anyone read any books on “financial freedom through negative gearing”
Rgds
Stuck in a rutstuck-at-two
I empathise with your situation, and the answer is not going to be a straight forward one, as investing is horses for courses.
But can you give a bit more info like, how long you had each what you paid and how much rent they are getting. I am sure someone here can help you be creative or point you in teh right direction for making a decision.
Cheers
Leigh K[
]Carve your own path and lead the way …
Unit 1 Paid $85K in 2000 Valued $170K Rent $145wk. (but just rang real estate and increase to $155wk pending)
Unit 2 Paid $185K in 2002 Valued $230K Rent $250wk.Stuck
By my rough calcs, they are both cashflow positive now in that they would be covering their own mrt payments and general outgoings (making assumptions on cost of outgoings)with good available equity (also based on assumptions about outstanding mortgage and interest rates) but I figured you have about 100k or more to play with.
So my suggestion is to set up a line of credit set up against those two properties and use that money as deposits for new properties.
Hope this gives you something to look into.
Cheers
Leigh K[]Carve your own path and lead the way …
The equity in the two properties has been used to purchase the third property. Owner occupied. Paid $325K, but borrowed $340K for all purchasing expenses (stamp duty). This house is valued at $390K. Last years profit and loss was a loss of $2500 (rates/strata)
I guess my question is, should I hang on to these two investment properties given there capital gain is not going to appreciate much more in then next few years, (but rental rate could) or as Steve says” Get out of your comfort zone” and go for something more cash flow positive?Stuck
Now that adds an interesting problem, you may need to check with your lender but if the PPOR is x collatoralised (spell checker) with your IPs then you will need to fund or refinance the amount used out of the equity (generally your 20% deposit and the costs you borrowed), when you sell your IPs.
That doesn’t sound realy clear let me know if you want me to try and elaborate. Hoe you know what I am talking about.
Cheers
Leigh K[]Carve your own path and lead the way …
i have to agree with enjolady here that the first 2 units really do sounds like a good cashflow properties. is the 3rd properties financed by the equity from the first 2 properties?
by the way, what’s PPOR? i knew someone told me once but it just slip my mind again.
opps
kevin
Motivstorm, PPOR is primary place of residence. Where you live or where you claim you live.
C2
“Is it true the more you owe the more you grow until the bank steps in?”
Hi Stuck and others
It sounds to me like the properties are cross collateralised, but that the positive cashflow from the two investments are helping to pay off the PPOR. Stuck, if you sell them, then you can reduce the loan on your PPOR, but will have to fund all remaining mortgage payments out of your earnings some other way. You will also have to give up some of the profit in Capital Gain.
My opinion (worth 2.2 cents with GST)
If it were me, I would look at channelling as much cash as possible to reducing the loan on the PPOR. As soon as you can, refinance it (if it isn’t – I have made an ‘ASSumE’ here) so that it stands alone. Also, I would be talking to any one of the many mortgage brokers on this forum, to work out if you could buy more positve cashflow properties now, or if you do need to wait a bit.If you can keep paying off the non-deductible (bad) debt from your PPOR, and then reborrow to invest, you can move ahead.
Hope this helps.
Cheers
Mel
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