Hi everyone. I’m new to the forum (discovered it after reading Steve’s books). I’m on the verge of making a life making decision and am absolutely terrified. I have an extremely well paid job but since having my daughter just over 12 months ago I have been seriously resenting the fact that I had to go back to work (full time). In hindsight we’ve made some really bad financial decisions and have lived up to the salary I earned. Very bad mistake. My husband and I have two investment properties, but both are negatively geared and have prevented us investing further. Reading Steve’s books has made me realise that I have the power to change my situation, but it involves making extremely hard decisions. We are now seriously contemplating selling our beautiful home that we built 3 years ago (and worked very hard for) and move into one of our much smaller and far less attractive investment properties + sell the other investment property which is sadly a bit of a lemon. This change should mean that our mortgage repayments will be drastically reduced, giving me the flexibility to work part-time, spend more time being a mummy and concentrate more on property investing (although it will adversely affect our servicability as my husband’s wage isn’t too crash hot). I’m really scared at the prospect of doing this – part of me knows that if we do it, I will always look back and wish we didn’t sell our home (particularly in years to come when it will be worth a mint). My family think we’re crazy after having worked so hard to build a successful career and build our beautiful house. I guess I’m after some reassurance that I’m not crazy – or perhaps confirmation that I am! Any feedback would be appreciated, and if anyone knows of a financial advisor or something like that who could help us to make the right decision, details would be fabulous. Thanks.
Kate.[confused2]Kate you are not mad!!!! We started when our daughter was on the way and have not looked back since. We recently sold a “dog” investment of ours that was dragging us down a bit too. Never be scared to make choices that change who and where you are because stagnation helps no one.
If both are negatively geared, why not sell both, find suitable neutral or positive properties and never look back. We now have 2 kids and have had enough success that we now live out of Sydney and love the lifestyle change for the better.
Continue to think outside the square and you will succeed. Family is all important as well. After all, they are only little once.
Take care and happy hunting.
DD
PS146 Certified Financial Planner
Don’t sweat the small stuff,and it’s all small stuff!!Thanks for the encouragement DD. We considered selling both IPs, and our house and buying something smaller. However, we did some number crunching and figured it would be a more cost effective option to move into one of the IPs (that way we don’t need to pay stamp duty on buying a new house ot live in, and won’t have to pay CGT on the property we don’t sell). I will continue to think outside the square – thanks for the encouragement.
Kate.
Its really hard to comment without all the facts.
But I know where your coming from. I am a father of two young children. My oldests starts shool in Feb 2005. My wife does not work.
I would not sell my PPOR – especially after having worked so damn hard for it. If you still owe some money on it sell your investment properties to pay off any debt on the PPOR. After all its tax free (not subject to tax).
Property investing is a long term proposition.
Then using the equity you have in your home that you are more than happy to live in – use the equity to invest. I also suggest you read the latest book by Peter Spann. That way you can ascertain what your existing properties are like.
Good luck with it.
yack,
why would any gain be tax free on the investment properties ? don’t you mean selling the PPOR would be tax free ?
D
<hr>
I spent most of my wages on women, booze and fast cars. The rest I wasted. – George BestI do mean the PPOR is not subject to capital gains Tax.
We to are on the verge of going out of our comfort zone also, we are moving out of our home which we have put allot of money, heart and hard work into. We are of to SA for a sea change. Anyway can I ask would it be worth renting your house out and then renting yourself? This way you keep your home and can later sell if need be and by renting yourself you should save a few $$$ (no water bills, rates, maintaince). Have you done the figures on your place? does it end up posative, neutral or negativly gearded? remembering you’ll be paying the bills that you wont be paying on the place your renting yourself + agents fee’s, perhaps get an accountant to do the figures for you and work out your tax benifits in doing this. Worth reading “Rental Properties 2003-4” phamlet availible at tax office. We figure that we can’t regret renting our home out as we can sell later but could regret selling our home and there’s not much turning back there.
Also have you considered going to Steve’s seminar? $200 discount at the back of his second book. We are due to go in March (can’t wait) we are hopeing this’ll help us map out our path to financial freedom.
Just a thought
WISHING YOU LUCK!!Alsomay I add…..kids are only young once, make the most o! it
Hello Kate,
My suggestion is to keep the PPOR that you have worked so hard for, sell either 1 or both of the IPs, hopefully you have made some capital gain put the money into the PPOR to reduce your mortgage. By doing this you will pay less on your mortgage and also save money by not losing money on your IPs. Hopefully this will enable you to spend more time with your family. Once you have done this hopefully you will see how much money you have and then go looking for property again. Good luck. I have 2 young children so I know what it is like to live on one wage for a while. Things do sought themselves out. I didnt think we could live on one wage but it is possible as kids certainly put a dent in your social life which helps you in the hip pocket.[biggrin][biggrin]Martin
Thanks everyone for your feedback. Our first consideration was to sell both IPRs and keep our PPOR. However, when we did the figures, this would reduce our mortgage insufficiently to allow me to stop work – at best I could cut down to 4 days a week (not quite what I’m after). We also considered renting our PPOR out, but the rental would no where near cover the mortgage. We think moving into one of the IPRs is the most affordable option.
I have actually signed up for Steve’s Masterclass in March in Melbourne – so perhaps I will see some of you there.
Thanks again for all the advice (although I’m still not sure we’re doing the right thing!)Kate.
Kate
Networking with like minded people is a wonderful thing everyone that has replied has given you and me some really good options to investigate. My beautiful wife and I are in a similar quandry to you. We bought a negatively geared property for 430K (4 months later still not tenanted) and a block of land hoping to develop. The vacant land intended building was knocked back by the shire because they deamed it not expensive enough for the area. Now my wifes company are not able to pay her the last three months wages. I was going to kick up my offshore work and completely devote all my time and energy into +CF properties, instead of taking the plunge I have decided to take a contract starting 1 Jan for 6 months away from home to maximise my income allowing my wife to follow her passion and find some work she is passionate about. In the last few weeks I have renovated as smartly as I could and now have the “reno” ready to rent out, and will be selling at the same time (hopefully tenanted) to any other investor. Even though the reno is in a great location with water views and natural bushland 15 mins from city I feel that the market sentiment is waning and it may be a drain for a few months still. Our current POR the rent has just increased again 2nd time in 6 months. The vacant block of land will be for sale again in Jan. It is a tough decision to make and when the numbers dont add up it is even more frustrating I know. I am happy that my wife and I have each other and as DD mentioned earlier just continue to think outside the square.One thought that keeps poping up for me to maximise my rental is possible wrap the deal on the reno. That may be an option on one of your properties too.
Take care
MilzyKate things will always pan out just be positive, when the going gets tough the tough go shopping. We always make a plan in our household and so will you.
Keep your chin up and dont fret the small stuff.this is going to sound like a wet blanket. Here is what I would do :
1. make sure you talk to a financial advisor
2. cut out unnecessary expenditure, read something like charles givens book more wealth with less risk for tips on cutting expenditure without affecting your lifestyle too much.
3. brainstorm ideas : if you make a lot more income than your husband why doesn’t he stay at home ?If your balance sheet is in need of repair, try a fixup startegy that does not further add to your risk profile. You may need to make some hard decisions.
Hi Kate,
Obiwan got in before me. My husband and I are in the same work position as you (i.e I earn a bit more than he does). When we had our first child 7 years ago we decided to always have a parent at home and the most sensible decision was for him to be at home.
It’s worked really well for us, since all a child needs is a parent who loves them. Who says it has to be the mum. Much as I would love to stay at home with my children, this is what will ultimately get us ahead in the end. I hope you figure out what will work best for you.
Landt.Hi Kate,
I think you sound very brave. Although you are scared you sound as if you have already made the decision to change your live for the better. Don’t loose your focus – I believe that you already have a plan (you have repeated it several times on this thread) and you know your situation better than anyone else. Do your due dilligence (asking questions here is part of that), have faith in yourself and follow your chosen course of action.
Some sacrifices are hard to make (eg selling your PPOR) but in the long run are worth it. When I am tempted to feel regret or loss over material things that I have had to sacrifice I tell myself it will only be a matter of time until I can have something even bigger and better with less hassle and stress. We are concentrating on actively building wealth now and accumulating “nice” things when we can do so without sacrificing our future (never easy but sometimes harder than others). On the other hand those precious moments with my children can never be replaced. I believe that my kids are better off with me at home most of the time and that they will be better off in the future as a result of our property investing efforts (despite the sacrifices we all feel at the moment).
As for those who knock you and/or your unconventional ideas… Do you want to achieve what they have achieved? Or do you want something more? It seems to be a common thing that friends and relos all jump on the bandwagon to call you “mad” (or worse) when you start talking about doing things differently from them. Just remember that you have to do things differently to end up somewhere different. Stick to your guns and good luck with it.
Kind Regards
SonjaHi Kate,
Yack has offered some good advice,Regarding speaking to a financial planner, please be aware that some of these may try to steer you into a completely different investing direction, If you decide to consult with one make sure they offer unbiased advice, Good luck.
Regards
Steven
Mortgage Broker
Mobile Mortgage Market[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Ph:1800 820 500
VICTORIAPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
I’m with Obiwan! LEt hubby stay at home for a couple of years and assess your situation again then!
As much as things may be heart breaking at the moment, other opportunities rear their ugly head because you are open to them.
Just stay positive and money isn’t everything. Your child is.
As long as you have food on the table, you will be just fine.
Steph.
Success is 1% inspiration and 99% perspiration.
I would implore you to read John Burleys Secrets of the Rich, mainly because I think it could help you tremendously.
While it talks about RE investing, it also talks about money habits, habits that can make you entirely debt free within 5-7 yrs (inc. mortgage).
So homework: Read ‘Money Secrets of the Rich’ and Peter Spans latest book (Yack has some excellent advice!).
Rgds.
Lucifer_auRgds.
Lucifer_auIt is a very hard decision to make. I would work out all the possible scenarios, 1) move out and rent, 2) Sell PPOR and rent etc. Write each scenario on a different piece of paper, and see which is more cost effective, in the short term and the long term.
Things to watch out for:
-Your husband earns little, while you earn a lot. so oculd he stay home while you work a few more years?
-If you sell your PPOR, it will be CGT free, but this is your only tax free asset, if you rent you won’t have a home growing in value which will be tax free.
-if you are going to sell, condider moving into your rental property short term and then rent it out, so that you can establish it as your PPOR for tax purposes.And don’t rush into anything.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | 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
Terry’s idea is great. Set up a large piece of A3 paper so you can work out each strategy and can compare them all. Jot all your figures and then take them to someone who can help you financially to back theem up (check them).
Cremin and I have done that several times (including reasons why to return back to Aus when we were in London). It really helps clear your mind as you can see it on paper and you can add things you might have forgotten.
Plus, maybe do an extention of each section about future goals. If we did this, it means we could do this more easily. That sort of thing.
Good luck. Don’t get too drunk tonight thinking about it, but do take the time to orgnise your ideas and thoughts with your hubby.
Have a good one!
STeph.P.s. Just had a thought, maybe if you desperately want to keep your PPOR, why not downgrade your cars to something minimal and pump the extra cash in to the house. I know it would be terrible in the eyes of some investors, but when you feel so strongly about something, you have to go with it… Maybe even get rid of one car if you have two. It makes you really think about where you HAVE to go rather than, oh I’ll pop there. Plus you get a bit fitter from walking everywhere! Hubby and I did it for 3 years and saved a tonne of money from it!
Success is 1% inspiration and 99% perspiration.
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