Hi all,
I have read 1 to 130 properties and found it a very interesting read. My husband and I have a negative geared property and a lot of bills. This is my problem.We have huge amounts of debt. We both work. Me part-time and I have 4 kids plus im at uni. Our investment property has gained 100k in growth and i think we should sell it to pay out our credit cards and car and most of our own home which we are suppose to be renovating but we never have any money left. Or then I think we should keep it and try to pay out debts slowly so not to miss out on owning a property(investment that is).
My idea was end up just owning 30k on primary home (valued at 180k) and complete reno and then look for +propertys and also look into share market to diversity.
I just worry ill do the wrong thing.
Any help please
should I sell or should I stay!!
thank you
Amanda[
]That may be a good idea to sell the IP and pay off bad debt. Have you factored in capital gains tax?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I haven’t looked at the capital gains and im unsure how the ratio works i.e.% of growth. Any idea?
Thanks
AmandaCGT will be sale price (less costs) – purchase price (plus costs).
the resulting profit will then be halved if held for more than a year, and added to your income. Tax is then paid at your marginal tax rate.
If you’ve held it for more than a year, at worst you will pay $25K in tax. At best, well, depends on your situation.
If your IP loan is P&I, I would change it to IO, and see if that saving will help. If it is already, then factor in the tax, and perhaps it might be wise to pay off your bills – or sit down and work out where your money goes each month, and see if you are ‘wasting’ any of it that you could put towards the bills.
If you pay down your homeloan, you can always draw down some of the equity to invest (tax deductible then). Lots of things to consider before rushing out and selling.
Cheers
MelErrm … dont know if this will help …… but perhaps try it anyway …. John Burley has a great Debt redution tool (Weapon) called the “Debt Terminator Plan”
http://www.johnburley.com/free_downloads.html
Worth a shot…
Best of luck!
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KiwiHi Amanda,
Being a little bit lateral here – is it possible for you to sell your PPOR (ex renovation) and then move into your existing investment property and then classifying this as your new PPOR – no CGT.
Don’t know whether this is feasible or whether or not the ‘numbers stack up’ but food for thought.
Otherwise I tend to agree with the others on the proviso you manage that ‘bad debt.’
To me there is little value (unless you absolutely have to) in selling an asset due to poor financial management if those habits only get you into the same mess a little further down the track.
I appreciate this may be a little harsh and not pertinent to your situation but it may help in the long term. Apologies in advance if I am off the mark!
Derek
Agree, change IP to IO and look at Dereks suggestion… at the end of the Day, work out the end result of various scenarios and see what works best for ‘your’ situation…
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Thank you to everyone who has made a suggestion. The property is already set up as an IO and is in another state so moving in isnt possible. however I will download those debt removal tips and see how we go. I can see if we get out of debt quickly we may end back in it again with no back up house. I guess having 4 kids is costly and trying to renovate our own home is too.
I was always under the impression that to sell an investment porperty after 5 years your CGT was reduced.
Was I miss informed?thank you
AmandaIf you hold the IP for more than 1 year, your CGT is only on half the gain, at your marginal rate.
Cheers
Melits 12 months and 1 day.
it was on one of these threads a couple of months ago.
cheers
shaunLead, Follow or get out of the bloody way
Hey shaun, more than 1 year = 12 months + any number of days [
]Cheers
MelPersonally selling an IP would not be the way to go for me, however, having said that, I dont see the point in paying off credit cards at the high rates and trying to manage bills and no doubt some charges and or interest.
Bad spending habits or budgeting needs to be addressed immediately. hard as this is, you most likely would find some areas you can cut back and begin to reduce other things.
I think focus is the best bet, juggle things around to your advantge, sometimes it takes a person removed from the situation to see the picture clearly.
I guess you are struggling to even pay the debts you have let alone make additional payments, but I would almost guarantee there are things you can do to change this.
what about refinance?
what about your home equity? some say better to pay extra mortgage than additional credit card interest…cant your own renos be held off? pay your debts off as you can, may take a while but rather that at times than loose an IP with such growth
I’m just thinking..elves
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