Hi,
We purchased IP for $249,000 3 years ago, and recently refinanced and it is furnished with presently a good long term tenant at St Lucia, 5 min. from the Uni. 10 min. from the City Cat, before finance they valued it at $370,000(unfurnished) It is neg. geared.I do have $40,000 to start my portfolio.Is it now time to sell the unit,so we can have equity to work with…
We have over $530,000 debt and want to reverse that to NO DEBT! Can someone please advise me? Thanks
Norma[blink]
Hi Norma,
I don’t see how selling the $370k unit will reverse a $530k debt![eh]
‘Is it now time to sell the unit,so we can have equity to work with…’
This would leave you with negative equity, would it not? Perhaps I have misunderstood your question and information.
Cheers, F.[cowboy2]Norma
I must admit that i am like Foundation and slightly lost. I am presuming that the extra debt is a loan against your main residence or other investment property.
If it is a debt against your home then by all means consider ways to reduce this as quickly as possible. Converting the IP to interest only (If of course it is not already) and utilising your extra $40,000 to start a wrap portfolio would certainly give you additional cash flow to reduce any outstanding debt against your own home.
if we are way of the track feel free to email me direct and I will try and assist you further.
Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap service.Richard Taylor | Australia's leading private lender
Hi,
Thanks for your input1
I am sorry that I didn’t explain myself too good.
I don’t quite understand the wrapping concept yet. But I thought that by reducing my debt it would be a start to put a portfolio together and on my way to getting out of debt. I also thought with such a bit debt that I wouldn’t get finance for any wrapping deals.
Maybe I still don’t understand any of anything. The 530k is refinancing from my residential (valued 320k) and IP.(370pk)regards
NormaHi Norma,
Selling the unit doesn’t really give you more equity, because you’ll pay Cap Gains Tax and agents’ fees. But what it does allow you to do is to access the cash and pay out some of the PPOR loan.
Doing that reduces your non-deductible debt (“bad debt”), then you can borrow against it for another IP (“good debt”).
But since the equity in the IP isn’t really substantial enough, better approach may be to borrow more against the IP to purchase something else (either now or when you think the market may be rising…). Eventually you should end up with SUBSTANTIAL equity which would make it worthwhile selling IP’s and paying off PPOR completely.
Mick
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