HI All,
As the title suggests I’m avoiding making a life changing decision as I feel I’m lacking the neccesary skills.
I’m 28 married but no kids. My wife and I bought a 2 bed unit on sydney’s northern beaches 4 years ago. Current debt of about $275 and worth around $400k. This unit is immaculate full reno but unfortunatly best unit worst street[angry2]
I think its time to cash out and buy some better investment propertyAfter spending the last 6 months reading and rereading steves books and following a huge number of posts on this forum i’m stuck sitting on a fence.
I made a big decision 24 months ago and gave up a great job with good salary to follow my dream of selling property. Now 24 months down the track the bank account is drained big time and i’ve just resigned from my sales job ( just signed a 12.7mil development site as a goodbye gift to the office).
My fence post consists of playing it safe after not making much money the last two years and just keep plugging away on the mortgage or my preffered option Sell the unit go rent a unit in the same area save an extra 200 a week on mortgage/rent ratio and buy two investment properties with the cash from the sale.
$100k will get me 2x 1bedders around manly/deewhy beach area and although not positivly geared I’ll only be tipping in about 100/week on each of the properties. I’m very familar with the area as this is where I have been raised as well as selling for the last two years.
Sorry for the essay but after a 2 year mistake now a little wary of trusting my instinks.
If anyone can offer other options to spend the 100k I’m open to suggestions.
I look forward to reading peoples thoughts and opinions good or bad
Cheers
Andrew
Hey Andrew,
I believe the speed of your accumulation will be largely dictated by how much your wife and yourself are prepared to sacrifice your lifestyle standards now…to improve your general lot in life later. Having no children at this stage may help this.
I’d suggest you sell your PPoR and try and extract as much as you can. Say you are left with 115K after the washup…
I’d take this 115K and go and buy the smallest dump in NSW that had a land component and really grotty hovel on it. I may be way off with my NSW values, but can you pick something up for this and pay it out in full for 115K ?? If not – take the smallest loan possible….surely you can buy a dive 40 or 50km out of the CBD with land for 150K.
Anyway, despite my lack of NSW R/E knowledge…you get my drift…really rock bottom type housing. Knuckle down and improve the dwelling on your private time for minimal cash outlay so that it is half decent.
Immediately take the hopefully paid off title deed to the bank (or if you have a small residual mortgage use the most equity you can) and leverage yourself to the max with Mr Bank (go the broker route probably).
You should be able to buy something in the 400K region with a LVR just under 80%.
Now you’ve got over 1/2 a million in dirt working for you.
Get your good job back so serviceability is OK.
Now you are in the right tax friendly regime. Start investing and away you go. Give it a few years and upgrade the PPoR into a nicer area when the kids come along. Lifestyle is going to take a big hit meanwhile and you’ll have everyone telling you “This is a dive and what the hell are you doing living here”. You’ll probably lose all of your “posho swanko” friends.
Anyway, that’s what we did and it worked out OK. We stayed and gritted our teeth in Drossville for 3 years. Looking back it went like a flash, and in fact alot of the people in the suburb, especially the older folk, were really decent people.
Once again….what and how much you and your wife are prepared to sacrifice now in terms of living standards will determine how quickly you can get up into the good stuff.
Good luck.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
hi HAV11C
I will give my opinion which is not advice,
you have a loam with equity of 125k don’t sell the house with dazzling you get 115k, get as much out of the house as possible 125k.
get a job ( because this level will not get you into a state that will move you forward from a lending position)
lend the 125k to the new investment you have unit in the costliest city next to tokyo in the world (why sell it)
use the 125k to leverage with a tenant to a 400k house in doss ville as dazzling says.
get all your investments on interest only loans.
make sure that you have movemant in your investment prop for gaining value by increasing value ie new kitchen or up grading.
hold and leverage every 3 years to the next prop.
not sure your state but go to a group meeting and get advice from investors there and learn.here to help
(why sell it)Oh I dunno…howza about getting rid of the 275K non tax deductible debt for starters…at 7% that’s a good (19K p.a.) or $ 370 p.w. he’s giving the banks and getting no relief for it.
Their current unit needs to appreciate by 4.8% p.a. just to keep up with this cost.
This $ 370 p.w. after tax is the real cost of the lifestyle choice Andrew and his wife are paying as opposed to living in a smaller dingy fully paid off PPoR. If Andrew’s wife wasn’t working, by moving to Drossville this would effectively be her salary for moving….which would be about $ 500 p.w. before tax. Not bad pay I’d suggest for starting off right.
From a cap. appreciation perspective, their current unit would need to appreciate by more than 19K than the hovel to be in front. Cashflow wise, it ain’t looking too good if they stay where they are.
Good luck with your decision Andrew.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
hi HAV11C
know I have read dazzling complete post.
1.not sure of the wife and if she is going to work( and I’m not interested as I’m not your broker nor will I be unless you want to pay my bill)
2. and this is where I disagree with dazzling and I change hats don’t ever think you know a persons position unless you have asked the person I haven’t nor would I.
when ever I am talking he it maybe he/she or visa versa.
I think talk to a broker on this forum that can forumulate a system thats workd for youhere to help
HAV11C,
Got a coin? Both Dazzling and GR have valid points! Realistically you need to do the maths on both options to see wich way to go.
For me personally I would like to keep the PPOR and possibly turn it into an IP – don’t know if that is possible.
One thing that WILL help is getting your job back, for now. Get the dollars flowing again….
I am glad that we listened right at the beginning and bought a cheaper house rather than comitting ourselves to a top of the range home. My friends, down in Perth did this and he has to go away (FIFO) just to allow them to keep up with the mortgage. She has stoped working to stay at home with their first child – and their situation is compounding!
Sell if you can’t –
* get your job back (or other suitable employment)to cope with the financial drain
* refinance to make use of your equity to by another cheaper place to make your PPORThese are my thoughts – I was trying to tie the two other sugestions together (taking a liberty).
What ever your decision, plans change all the time (mine did). It took us 3 years (after attending my first seminar) to buy our first house, the second one is just about done and that only took 12 to 14 months.
Do talk to a Mortgage Broker, though and see what they can suggest to suit “your specific situation” before you make any final decision.
Hope this helped some……
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonFirst I’d like to thank you all for your comments its been a huge help.
I have already beeen rehired with my old company so the money is flowing into the bank.[biggrin]
Dazzling your idea of buying a new PPoR outright sounds fantastic. I’m already on the hunt for property on the outskirts of sydney in the 100 to 180 price range.
If I can just ask what you thought of my inital idea of selling our PPoR to rent near by. Renting the same apartment would save us 200pw. I would then purchase 2-3 apartments close to the beach. Roughly 280k to 320k each. The rent on the units would be around 230pw each
I was thinking this way due the future value of these units and also the current ease of them to rent.
GS on your idea of keeping the current unit and changing to I.O and renting out my only concern is the unit is best unit worst street. Due to this factor I want to offload it now when its not a critical move for us. It will only be a first home buyer interested in it and as the grant is still around i’d like to get the cash we have in it and place in properties i feel have better future propects.
GS if the unit was in a better postion I’d be following the idea you put forward as I think its very cost effective as we have already paid stamp duty and so forth on this property. But alas its in a very underperforming street compared to the rest of the suburb.
Cheers
Andrew
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