Hi folks,
I have dilemma to solve and please help. Don’t give me the “it is up to you, and what do you want” staff. I would like answer wich would benefit me financially the most. Please. The case scenario is: i wrote here the post about my financial situation:
own house-value $500 000-loan 130.000
first IP bough recently:$190 000-interest only.
What would you if you are me. Interested in your opinions. What would benefit me most. Selling the house and downsize, buy something and be loan free, rent this house (recently renovated, not sure about renting). I am ready to listen, please. This time i want to make thing easier on myself in the past was other way around. I know one thing for sure, doing what i am doing now it is slavery. Life is becoming pure work, work and more work. Please give me some your insight, would appreciate VERY much. Many thanks.
Yasmina.If I were in your situation I would buy buy buy using the equity in your own home, do your research and find some great cf+ properties, then sit back and wait for the cash to roll in. But thats if i were in your situation and I’m not and your risk barriers may be higher than mine.
Hi Yasmina,
Some more info is needed to try to assist you with some creative thought.
1. Regarding your mid to long term goal…. did you want to be debt free? or not relying on your job to pay for it?
2. Is your investment prop cashflow positive or just positively geared (gives you cash after tax considerations).
Without info on your loans, terms and interest rates (INT ONLY or P&I) is it hard to work any possible scenarios for you.
however…. I will makes some guess work and see how we go.
PPOR 130K @7.5% over 30 years = $210.00/week
INV 190K @ 7.5 Int Only = $274/week
Approx ave rent based on 5% yeild = $200/week
rates and insurance approx = $50.00/week
repairs and Maintenance (5% of rental return = 10.50/wk
Letting fees (Based on 7% REA fees)=$14.00/wkTotal rental nett (income – outgoings)
return is approx -$148.50/week (out of your pocket)
Add in the fact that you also have to add to that the cost of your PPOR per week you seem to hav a sum of: -$358.50/week going out of your pocket.
That is almost a full time job just to pay for your housing related costs… then you have to eat and drive and live :o)I have not even calcualted the added costs of insurance, repairs and rates on your PPOR so it is actually more than that.
Would this be close to the mark?
I could be way off here … especially if you have a 10.4% (minimum) yeild on your IP that would take care of he $148.50/week and put you in a better position.There are plenty of solutions to your challeges it is just we need to know where your goals and aspirations lie and what skills you have to utilise all the tools of the property trade (So to Speak).
Look forward to some more information so a we can add our thoughts and possible scenarios.
Cheers
KiwiHi Kiwi-Fulla,
It would be nice to be debt free i would breath much easier, that is why i was considering selling and buying something smaller. IP that i bought recently it is not cf+, bought if from 190,000+ cost of buying of course, rent is 230 at the moment in november is going up to $240. Bought property here on the Gold Coast. Debt on my IP is IO loan, my PPOR is interest and principal. I havent mentioned in this post i have in previous ones i am basically new to all of this, dont have any experience in investing, but have been reading Steve’s book, have been reading this site for a while now. I was always interested in property, have done couple reno’s in the past, that’s how i started. Have done things hard way in the past that is why i am trying to avoid it now. I was trying to find cf+ first IP but timing was not very good. Under the circumstances had to buy something very quickly and it wasn’t cf+ but…next one will be. Hope this helps. Cheers.
Hi Yasmina,
It would be nice to be debt free i would breath much easier:
Sell the PPOR and rent. Buy IPs something like this one:see Ko Huna Beach Resort- Mackay Q under General Property.
Good luck.
hrm
Hi Yasmina,
Just ot clarify…. do you want to be dept free…. or have the debt pay for itself and give you some freedom of choice?There is good debt and bad debt…. IP is good debt (as long as you are not paying for it out of your pocket) PPOR is not so good debt …. but consumer debt is BAD debt.
How long ago did you purchase the IP? what is its value now?
Thanks
KiwiHi Yasmina,
I know what you mean by work, work and more work.
I made my life a little bit easier by changing to a LOC. I don’t have to worry about finding money every time a big bill comes in, and I can pay off my credit card in time as well. But one must make sure they stay savvy with this type of loan.I have left my story in the “Tell Tale” part of the forum. There’s alot of stuff that I haven’t mentioned in it, like I got all my tax back except $800 and this year I’m getting an extra $150 a week in my pay because of depriciation.
I still will have to work hard for a few more years yet. But at least now I can see a light at the end of the tunnel.
My answer to your question Yasmina is.
You have a pot of gold in your equity, use it now to leverage your wealth into the next stage and buy 2 or 3 more properties. If you do this, then by the time you get to my age you should be very well off. Jan Somers has a terrific video about this that you can get from the libary.
Hope this helps..
Thanks for reply guys but still….. i cant believe 87 reads and couple of reply’s only. Please dont be shy i would like to know what do you out there think. Cheers.
YasminaHi Yasmina,
Seems to me like you have plenty of options – it’s all in what you want to do. Personally, I would move out of the house, and rent something. This allows your house to be tax-deductible debt. And rent something for less than you can rent your current home. i.e. rent for $300/wk, if you can rent your house for $500/wk.
Or, if you have spare rooms, you could rent them out to help with your repayments.
If neither of these appeal, then, if the renovations you have done are substantial, you can get your house re-valued – giving you more equity to invest with.
How much more capital appreciation is your house likely to have? If you’re in a great spot, stay. If not, sell up. I know everyone has their own angle on the buy-hold-forever vs sell-if-necessary, but that’s my opinion.
Like I said, so many options!
Munjy
thank you Munjy,
Just to clear bit the air, my house is in very good spot, in very good area of Gold Coast, close to schools, shoppping, transport, near the golf course. Very convenient spot indeed. I am probably on the crossroads right now, not sure what is the next step. Would be wiser to sell and buy something that i can renovate and become debt free or?? That is my bigest dilemma. Would i be better of selling or staying where i am. That is where my confusion is comming from. Sometimes i am wondering what is the point of having nice house when we are never there, half of the house is never used anyway. I am not sure am i trying to convince myself of this or rest of you.
Yasmina,
It’s always hard when you mix in personal preferences with investment decisions.
Sounds like you like where you live, but you want to be less dependent on Mr Bank for his loan. Remember that when you sell and buy again, you’ll incur alot of costs.
If in doubt, you could always trial the rental options (rent out a few rooms- sounds like you have a big house! or move out and rent). At least, the option to move back and live as you are now is still open.
Personally, if it’s near a golf course I just don’t see the confusion
Munjy
You could always ditch your Neg ative geared property (cut your Losses) and start with another IP and build from thre.
You have 320K of accessable equity (80%LVR of PPOR-$130K outstanding)
This means you can secure over 2.5 Million of positive geared properties (one at a time)if you had 9 properties cashflowing $30each NETT…. you would not have to pay 1 cent out of our pocket to pay for your PPOR…
Sound like a good plan to me :o)
Hi Yasmina- you have been given so many good ideas already. I don’t really have a better idea, so I’ll just tell you what I would ‘probably’ do.
The most important thing for you seems to be that you want to work less and to make things easier for yourself.
So, what would I do? Hmmm, I think I find it more difficult than you to decide what I would do, hehe!!! I’ll give it a try:
Since the house is too big (assuming that I wouldn’t be planning a family ïŠ) I would probably:
* turn this house into an IP since it is in such a good location and recently renovated, (remember to have a depreciation schedule done) and because it is not a sellers market right now.
* organise an offset account or LOC to use the equity to buy one or more IPs.
* If I were as good at renovations as you seem to be I would concentrate on buying properties that I could renovate to increase equity.
* rent a smaller house for myself for the time being. I could always decide to buy another house to live in when I feel ready.OR I would:
Keep it simple, and sell the house, buy something smaller to live in, go on a nice holiday to distress and relax, come back refreshed and decide what I would do with the left-over equity… perhaps buy another IP and/or pay down the existing IP loan so that from now on the rent will cover the loan payments- so it becomes CF neutral or CF+.What would you choose between those two options, Yasmina. Hehe no need to answer this…![biggrin]
Celivia
I would like answer wich would benefit me financially the most.Right, that’s pretty much got rid of your dilemma then….very clear that the financial aspect is by far and away the most important and working hard doesn’t come into the equation. In that case, I’d (you asked for it !!!)
1. Move out to some one bedroom hovel, rent it for $ 80 p.w. or less if you can get it. Take out a ten year lease.
2. Sell all the excess furniture for as much as you can get.
3. Lease your place out to corporate lessee for top dollar.
4. Go immediately and purchase as much as your LVR or serviceability can handle, whichever restricts you the most.I know one thing for sure, doing what i am doing now it is slavery. Life is becoming pure work, work and more work.This doesn’t sit at all well with your stated “most important”…and is causing the dilemma. It sounds as if you want a real easy life as well as the most financially “best” solution….which obviously do not match. Your working constantly has been dumped from the equation as it isn’t compatible with your number 1 stated priority.
If you truly want the top financial performance, you will do anything, sacrificing both lifestyle creature comforts and leisure time…and anything else that gets in it’s way.
In reality though, I think you’ll back off from your ‘top financial performance’ wish, as the price you’ll pay will be way too high.
However, that’s where we get into the murky waters of your personal decisions, and things like the forum contributor’s opinions and financial numbers well and truly fall off the radar and we end up full circle with…
Don’t give me the “it is up to you, and what do you want” If you truly mean this you have just yielded all financial and personal decisions from yourself to anonymous forum contributors ???? You do not mean this, I am sure.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
God…, you certainly have a way with people.
Reason i said “Don’t give me the “it is up to you, and what do you want” is in one of my previous post most of the reply’s was “it is up to you”. Of course is up to me, but i asked for opinions, and i was not getting any, but thanks for reply which i asked for.Yasmina
Hi Yasmina
I have read with interest both the posts and your replies.
one thing jumps out at me and that is you need to get focused not on selling or keeping but what you want your investments to do and it relativley easy once you know what you want.to answer all the question in this post would take another ten posts.
but here some clues.
First your PPOR any money owed in the loan is what is called dead money from a tax point of view so you need to take that down to $5,000 dollars never close it as you can redraw on a loan.drag out as much equity as possible every 3 years and put the cash back in the loan this is floating cash flow.( I like ppor because you can add value without getting taxed)
I would hold the ip (I don’t sell but use the equity to leverage)
as for renting
Not a great lover of it as again its dead money unless you can incorporate it as your business address( creative accounting).
I think you need to talk to somebody in your area that can give you financial advicehere to help
Hi grossrealisation,
I thank you kindly for your reply. Yes your are right i am confused and in a bad need of some kind of direction. You are right i will make an appoitment to se financial adviser what would be the best option under circumstances. Many thanks one more time.
Yasmina
Yasmina,
This is what I hear from the thread
1.You want the best financial result
2.You want to cut down your cost
3.You don’t want to work so hard.So, from your input, your PPOR is in a good area and it has lots of equity. It is too big for you.
Here is what I would look at doing –
KEEP the house, but rent it – this should bring in $450+ ($500?) per week to offset the P&I loan (and leave you some change – up to $200 per week?) Out of that, you pay rates, maintenance, Insurance, etc and still have something left. This extra amount can help to cover the rent you might need to pay elsewhere.Because it is now an investment, there are Tax deductions applicable too. Some $$ come back to you from that. And you can live away from it for up to 6 years and still resell later without paying CGT
I’d keep your IP (as long as it is in a good area) and let time work its magic.
Then you need to look for somewhere to live – and that is up to you. Will you live in a 2 bdr home somewhere? Will you live with friends? Will you rent a room, rather than a house? A unit? Buy a tent? I dunno – but you will.
If you sell your PPOR, it would release a lot of cash, and allow you to set things up to suit you. That could be useful too. But that is YOUR call. You know better than us just what it is you require.
Good luck with your decision
Benny
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