I have a set of duplex-gross rent $400 a week property worth $380000 and a house $245 a week rent worth $280000. I owe $440000. I am wondering whether I should restructure my P and I loan to IO and buy more property. I am only young have a good steady income Suggestions please
My suggestion is to work out which property has better chance of being positive cashflow. From what is provided, you have $220k of equities. If you believe your $380k house can be rented out for each room and generate a cashflow, then do it and then if not, consider other options (like subdivide and sell the excess land, if any). Otherwise, I would sell it and free cashflow to purchase more +ve cashflow properties.
Any other suggestions are most welcome
Cheers
JohnWanting financial freedom is not enough. Take some action TODAY. I have successfully built my own PART TIME business whilst still working in a Bank. If you want to know more, PM or email ME.
Hi furnz,
Your current situation is totally unknown as you haven’t provided critical input.
What it will look like after your proposed changes looks a bit like this from where I sit….which is pretty foggy as the details you’ve provided…once again…are real thin…
Gross rents (best case scenario) = $ 33.5K p.a.
Interest only at say 7% on $ 440K = $ 30.8K p.a.
All other costs to hold = lots….only you know this.
Even after your suggested changes to improve your situation, the cashflow is still very negative, despite holding 220K equity in the props. I shudder to think how much is currently being bled out. I think that good steady income of yours better not falter.
As a general philosophy, surely transferring the investment loans to IO would be a good first step….but it looks like you’ve got a few more steps to take to get onto the ‘good track’.
Perhaps sit down and plug in all of the numbers to work out your breakeven cost, and therefore work out how much you require props to appreciate just so that you break even with your portfolio.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
Hi Daryl,
I thought I was on the right track. I am getting a tax refund of around $5000 a year back. I will convert the loans to Principal and Interest shortly but I must admit that I thought I was on the right track.Hey furnz, you probably are on the right track…it’s just there are many lanes on the track…do you reckon you are in lane 1 or maybe out in lanes 7 or 8 ?? Better to be on the track at least – hey.
There are many ways to make money in RE, I am certainly not advocating you are doing badly. Who knows, you may be receiving 35% growth on your IP’s and making a killing for all we know.
Do you mean you’ll convert your loans to IO shortly ??
I’d love to receive a tax refund of 5K, but then I thought that just meant you’ve paid the ATO 5K too much over the previous fin. yr.
Cheers,
Darryl Moore
“No point having a cake if you can’t eat it.”
Thanks Daryl, I was a bit worried. The refund I get back is through negative gearing and I always have a depreciation schedule done. I am converting to interest only presently and I have calculated that the rent will cover the repayments. In fact I am presently working out that another cheaper propery added will alsolet me cover the repayments.
Thanks
Furnz
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