What would you do?

Some options I might take in that situation:

• Renovate IPs and increase rent, thereby increasing the value
• sell both IPs and pay off more of your home mortgage

downsize your home, thereby reducing your personal debt

• Sell one IP and reduce personal debt on home

.
Have you read Steve’s article on this site about “Negative Gearing”?

I recall Steve asking the question in a seminar when talking about “Negative Gearing” – “How fast do you want to go broke?.

I personally would be active in my approach to resolving the cashflow rather than waiting around for “Capital Growth” that may or may not occur and then if it does, interest rates could then rise and put you back in the same situation.

Have a good look at what you are trying to achieve then develop appropriate strategies for achieving those goals.

If things aren’t working the way you want, maybe you need to do some drastic change to shift the goal posts.

Sure Positive Cashflow properties are more difficult to come by, there are some still out there.

Look for different strategies to make property worth more either for valuation purposes or for rental purposes, get creative and “add value”.

Hope this helps

Sue

Your situation sounds very like how we have lived for 20 years since we married.

You say they are “slightly” negative. Depending on how negative these properties are, if you can renovate cheaply (paint, add dishwasher, a/c – whatever suits the house and is fairly cheap) to increase rent I’d do it. I know that Brisbane rents are increasing (at long last) and depending on where you are, the slightly negative could soon be neutral.

You will incur costs to sell and pay capital gains tax, so if it was me, I’d do what I could to increase the rent, sit tight (if you can afford to) and let rents catch up. Meantime, pay everything you can into your PPOR. Hopefully your IP loans are interest only. If not, that would make a difference to your cash flow.

If you sell one IP to reduce debt, you will pay all the selling costs and then have to buy again to get back in the market. If your IPs are in good areas and will make growth, why not hold on.

Better (in my opinion) if you can hold tight, and be holding three properties for the next boom, even though it may be several years away. In the meantime, tenants virtually pay the loan.

This is my opinion only, because I have regretted each property we have sold, even though we had good financial reason to sell. I also look at our houses as forced savings. If we had more cash flow, I reckon we’d spend more, without a doubt.

Wylie

Hi here is one idea: you can buy a property in Bulgaria (as prices are still low and so is renovation cost) for about 10,000 euros (close to the coast) renovate it and add a pool – about 20,000-25,000 Euro (using a company). And then sell it for 50,000Euros, so you make 20,000-25,000Euro is 3-4 months and in reality you don’t do anything yourself!
If you like the idea, http://www.balkandreams.co.uk/ has some of the cheapest properties.

GFB

Before you rush out and:
sell both IPs and pay off more of your home mortgage downsize your home, thereby reducing your personal debt
Sell one IP and reduce personal debt on home
think of the CGT implications.

If the properties are in good locations and have minimal maintainance and you beleive have good chances of further appreciation then you could then consider selling the properties to a Trust. Yes both stamp duty and CGT maybe payable but the surplus funds could go towards the reduction in your PPOR debt.

Other suggestion would be to look at the structure of your home loan and other loans and ensure these are working for you and not for your lender. Correspond with a mortgage broker before doing so.

+ cash flow properties are out there and so is the demand for wraps still very much alive.

I don’t mean you have to buy in Bulgaria!!!!

Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]

Just don’t forget that if you lock into a fixed rate and decide to sell during that fixed period, you will be up for penalty fees.

Wylie

You’re asking a big set of questions there. How brave and serious are you and your partner ?? This can be life changing stuff. How much are you prepared to sacrifice ?? Where do you both draw the limit ?? You’ll have different thresholds for sure, and if you are to get through the epic struggle together and come out the other end better off, you’d better sit down together and grit your teeth.

We were in this exact situation back a couple of years. Two IP’s under the belt, completely clueless how to get out of the mire we found ourselves in without flogging our heads against a job brickwall for the next 30 years. Cash continually leaking out of our after tax pay packet. Scheming ways of getting above the typical couple on the street. This is what we did.

Using our equity, paid cash for and bought a small 3 bed 1 bath on a decent block in a really really really average suburb for 96K with dross for neighbours (saggy tracky dacs, VB bottles, and ugg boots as far as the eye could see). Gritted our teeth, and with a steely resolve gave ourselves 3 years in the dross to ‘climb above our station in life’. Women in general will resist this tactic immensely, especially if they’ve grown up in a “good suburb”. You’ll also get massive resistance from her ‘friends’ and most of your relatives. It ain’t easy, but the rewards are worth it….IMHO.

Purchased an IP in a swisho suburb that we could only dream about before using the previous strategy. We used the paid off PPoR equity as a deposit.

2-1/2 years down the track, left drossville and shifted into the swisho suburb. Now relatives go from concerned belittling and “why do you live here ?” to moaning “How do you afford to live here ?”. Wife’s friends go from being not happy (concerned about their friend) to still being not happy, for differing reasons (concerned why they cannot live where you are now living).

Did a whole bunch of equity shuffling and everything is where it should be…..paid off PPoR every step of the way and fully loaded IP’s.

Tinkering around the edges might get you somewhere in the long run, but it’ll be a long run…..especially if the natural CG isn’t too strong.

If you want the short track to get out of the mire, my suggestion is to jump straight into the mire at drossville, boots and all.

Your choice.