Hi All,
I recently read Steve’s first book as well as ‘Retire Young and Retire Rich’. These started to get me a little excited at the prospect of financial independence before I am 10 feet under.
I am now doing more reading and attending some upcoming seminars but am haunted by the following:
18 months ago I bought a 2bdr unit in the southern suburbs of Sydney, I have done some minor renos and made it nice and homely. But I have come to realise that this so called ‘asset’ has put me right in the middle of the rat race.
I have considered moving out, renting my place and negative gearing the property. But this does not free up money that I would like to use for investing in real assets that have the potential to make me a +CP. Friends and family recommend I keep the unit as I ‘will never afford to buy in Sydney again’ if I sell.
I have looked at prices in my area and they have been pretty flat and based on estimates provided by a couple of real estate agents I think I will probably break even on the property.
I would really appreciate some guidance from enlightened investors who may have been in a similiar position.
Kind Regards, Appless007From one 007 to another – firstly welcome.
You mention that you have done some cosmetic renovation to the property and it is now homely. From this i assume that you live in the property as your PPOR.
If you were to sell the property you will need to live somewhere by either paying rent which is dead money or purchasing again meaning you will incur both sale and purchase costs. I am not fully aware of prices in the Southern suburbs of sydney but imagine prices are a little flat.
Why not stay put you have put money into the property and as your friends state you will not be able to afford to get back into the Sydney market again.
Consider utilising the available equity in the unit and purchase a +CF property.
Ensure that you structure your home loan correctly (and this may mean discussing your options with an independant broker) to make sure that you are doing everything you can to reduce the non tax deductible debt on the unit as quickly as possible. Correct loan planning with your IP will see the debt on your homeloan come down and more equity being created.
If finding +CF proeprties is hard look at alternatives such as wrapping and Lease Options. There si nothing to stop you getting someone else to repay your home loan for you.
Slow planning will create an effective long term structure to launch your finanial independance from. Don’t be in a hurry just make sure your foundations are solid first and then you can take steps to maximise the opportunities when they arise and they will.
Cheers Richard
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Originally posted by Qlds007:If you were to sell the property you will need to live somewhere by either paying rent which is dead money
We’re talking Sydney here… renting a similar unit should cost around half of the current interest payment. In this case, selling up, breaking even and renting will save Appless half the dead money currently being p***ed into the bank’s coffers.
My advice, balance the benefits of staying put against the potential savings (and problems) of renting. Changing the property from PPOR to IP would have all the negatives of both without the benefits.
In my opinion.
Regards, F.[cowboy2]i also think you should stay there, dont be in too much of a hurry to buy a zillion properties at once. Hopefully in time you can borrow some more money from the bank as the unit appriciates in value.
For now i suggest your keep reading and try and take in as much information as possible so that your ready for your next investment.
Hi Everyone and thanks heaps for your input. You have certainly given me some more to think about. I agree patience is important and I certainly dont want to rush into anything but I have to agree with Foundation re. dead money.
Renting is about 50% cheaper which means I can either save 50% (plus more if you add all the expenses of owning a property) or pay 50% less (not really if you again consider all the expenses of owning a property) on my mortgage payments. The latter option is pretty ugly -ive gearing for a property with little potential for capital growth.
Argh, if I had only read those books 2 years ago…
Still open to more comments
Appless007
p.s. Glad to meet another 007 on the forumAs I said in another thread, “rent is dead money” is just a crappy cliche that means nothing and is plain wrong. Rent is the price to keep a roof over your head. What is dead about it? Interest on a mortgage is dead too, no??
Do not make you decision based on cliches you haven’t thought through.
That said, I say stay put. Nothing to do with rent being dead money, all to do with capital growth on your unit.
hi appless007
I’m not a 007 nor am I some one looking at bailing out of sydney.
I put a post previous and I think its something you need to remember.
Sydney is the second most expensive city in the world to live in.
it has had one of the highest growth curve of all developing cities in the world ( except saudi).
The growth of sydney compared with the other states can’t be compared.
my advice is get into either a buyer group or a syndicate keep the unit use terryw or similar( if you want to find him put a post home loan wanted)he will organise to use the equity in the unit to leverage to the next unit.
my reading of your post is this is your first investment( I might be wrong)make sure you structure your investments. a bad foundation no matter what type of brick still makes a disaster waiting to happen.
Get the roots right and the tree will grow.
also feed of terryw and alike they will help.
read my tag we are here to help.here to help
G’day Apples,
This is what I would do. As you can see, everyone has their opinion and would do different things. Pick the one you like.
I’d rent out the property you current live in and live in a rented apartment myself. Bottom line for me is, tax deductibility. Now the interest is deductible as well as the expenses, etc. I get to keep the property and any future CG.
Originally posted by grossrealisation:Sydney is the second most expensive city in the world to live in.
This could very well indicate that Sydney has currently the second most over-valued real estate market in the world…
it has had one of the highest growth curve of all developing cities in the world ( except saudi).
The growth of sydney compared with the other states can’t be compared.Sydney also has has also seen the highest ‘loss curve’ (more like a near vertical straightline, depending on the x-axis resolution) recently. The median house value has fallen by a little over 7% in the last 18 months alone!
I still expect to see an additional 25-35% fall in real value from peak to trough.
Cheers, F.[cowboy2]
If you’re thinking really long term, keeping it is an option. For short term though, it seems that all your money is tied up in an investment that you don’t expect to increase in value any time soon, while there are investments out there that are increasing in value as we write.
Or did you just buy the place so you’d have somewhere to live that you could own? If that’s the case then there’s no reason to sell if you’re happy making the repayments.
As to not being able to afford to buy in Sydney again in the future, well, why not? If values are falling or going sideways while you’re out making more money in smarter investments?
What is it that you’re aiming to acheive? You need to know the question before you can work out the answer.
Hi All again and special thank you to Foundation for your return visit.
Like all financial decisions they are never easy so I really appreciate everyone’s input and different perspectives on my situation.
In particular the question from Oshen made me realise there are fundamental questions that I need to address as well.
For now, I had decided to rent out my property and live elsewhere and pay a lower rent than what I am receiving and share living expenses with a housemate. I will inject this additional cash directly into the loan principle and reduce the -ive gearing position.
This is a long term view but I now realise that I do have equity in this unit that can be leveraged rather than trying to cash up.
I will also spend more time researching investment options and controlling my spending habits.
Again thank you all for your time and support. Appless007Perfect ending, with the keyword Research..
Roy H.
L.R.E.A., Dip FS (FP)
Guardian Property Specialists (GPS)
http://www.gpsnetwork.com.au
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