Hi All, a while since i’ve been around – been finishing the last reno. Anyway – I have a bit of a nice problem. I may be about to some into some money – more than I had ever anticipated from my Dear old Dad. I have 5 properties (1 ppor)- all neutrally or negatively geared but in great areas that I want to hold on to. What would you be doing with this windfall – lowering debt, buying more positively geared properties, sitting on the sideline and watching the market or going to shares (eek) or something else. My goal (like everyone’s I guess) is to give up work and let my investments fund my lifestyle. What would you do in this current climate? HG
HG,
First of all it sounds like you’re in great shape already so well done! As to your little windfall, well that’s a nice little dilemma to be in. I guess the trick to your question lies in the “current climate” caveat at the end, and that becomes a little bit of a crystal ball question.
FWIW, I would recommend you keep doing what you’ve done in the past. Use the $300K as deposits on more properties. If you can keep them neutral or better, then cash flow won’t be an issue and you’ll be leveraged to the tune of a few solid million in good property. There’s the trick though, make sure you buy quality at below value! So, its not juse a case of splurging it on the first few properties that cross your path, but of a lot of diligent research and steady buying. You’ve got a great opportunity now to really increase the size of your portfolio.
I’d suggest using strict criteria like Steve Navra’s rental reality to determine purchase prices. In the current overblown market its far too easy to buy above value.
If you’re scared you can always park it in some 5%-ish cash type investment for a while. But I think quality neutral geared will get you a lot more than a 5% leveraged return on your capital down.
Cheers,
Michael.I wish I had a problem liken that. My personal preference would be conservative. I would pay off the loan on the PPOR, if you still have one. I would then park the rest in one or more of the other loans and redraw as other opportunities arise.
Initially, I would consider at least, setting up a LOC against your PPOR with an offset account and park at least initially, the money in the account, which effectively reduces your non-deductible payments to zero.
The LOC then can be utilised to purchase shares, property etc and the interest is then deductible.
James
I own my ppor and have loc for the 4 investment properties alreay. So you think to park would be the best at the moment. HG
Originally posted by hgwells:I own my ppor and have loc for the 4 investment properties alreay. So you think to park would be the best at the moment. HG
[cap]
The current market is titled a buyers market. There are sellers out there getting very keen to move on. I wouldn’t be parking/sitting on the fence. As the saying goes Time is Money. Everything seems to be set up well with your existing properties. I’d be searching for some more good investments allowing for your neutral slightly negative cashflow position. Good Luck. I’d imagine that there is a lot of people out there that wished they had your problem.
WestburnHG,
I think it might to wise to look at diversifying your investments. So maybe shares & property.
With regards to an IP purchase(s), I actually think time is on your side and don’t believe you should rush. You have time to do your due diligence without worrying that the bargains will vanish.
Alternatively, I think development or renovating older property in the current environment is a good option. With CG limited, anything you can do to create value independent of general market price changes is a solid choice.
Good luck with it.
Go to your local casino and put it on red.
Man you have a big problem.
What ever you do I think you know what you are doing already , so just keep on doing it.Good Luck (not that you will need it)
Cheers Rick[drummer]
No definitely black!!!
Seriously though, you obviously know what your doing.
Good luck
DardiOriginally posted by westburn:
There are sellers out there getting very keen to move on. I wouldn’t be parking/sitting on the fence. As the saying goes Time is Money.Why are these sellers getting so keen to sell? Could it be that they are holding a depreciating asset?
Perhaps time is money if hg DOES park his cash in an investment with positive CG potential rather than purchasing more property?See a could accountant or a registered finanicial advisor.
Proffessional help is cheap.Dom[biggrin]
I would suggest you look at fully paying off your PPOR – paying off non-deductible debt. Then you can reborrow against this property to use as deposits with the remainder of the money (if any).
Maybe also look at setting up trusts and gifting the money to the trust. Maybe have one for you and one for the spouse as this could increase borrowing capacity down the track.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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My first words of advice are usually to say – work out what your goals are, then determine what you can do with the money to get there.
It seems you already know what you want, ie your investments to fund your lifestyle.
So if it was me, I’d use the money to invest in positive cashflow properties to increase my non job income. I’ve personally used wraps to do that, but you may prefer “normal” cashflow positive property.
Wraps can be quite time intensive, so depending on your situation, it may even be worth investigating doing a JV with a wrapper, or even become a private lender to an investor, with rates of say 12-15%pa on your money for doing nothing.Keep smiling
Felicity
I’m in a similar position myself although sold all properties to realise gain at top of Gladstone (CQ) “boom”. At present I lease until another bargain ppor comes along. My cash is in interest bearing acct at 5%+ and use to secure a LOC. The LOC is my 10% deposit for good sized +ve cashflow commercial property. These are around and can easily fund a 7% 1st and 11% 2nd loan.[cigar]
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You’ve got to ask yourself (and I don’t know what age you are) what you want to do in the future. You can own property, but it can also own you! I have approx 8 properties, and looking after them all, renovating, repairing, improving etc is fine. However as you get older, you also need to diversity into something which doesn’t need as much of your time. This is also why people buy shares. Purchased wisely, you sit back and collect the dividends twice a year (no effort) and watch the price rise. No painting, replacing plants that the tennants have let die due to non watering etc…Of course shares can be more volatile in the shorter term than property.. And whatever you do, keep a little cash aside possibly in a 100% offset account for a rainy day.. Every asset class has its day, remember todays rooster is tomorrows featherduster. Diversify and sleep soundly, remember the best investment is the one that you can sleep soundly with, without worrying. Hope I’ve been of help. PJ
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