Investing is new to my wife and i and i sometimes wonder if i have done the right thing.Below are some of our details. Tell us what you think.
PROPERTIES WE HAVE
PPOR Bought in 2001 Value $345,000 Owe $200,000
Repayments $365 pw min variable rate with offset accountIP Bought march 07 Value $307,000 Owe $307,000 Exp rent $250
Repayments $420 pw fixed 5 year interest only .
LOCAL MARKET Dropped over the last few years but improving over last 6 months. Believe it has hit its lowest points in quality areas.Rent return is around 4% but aiming at neg gearing.Rent vacencies very low.
INCOME
Wife $30,000
Me $82,000
Rent on ip $250 pw or 250 by 50 weeks = $12,500 pear year
I own a Rare collectible car worth $80,000 and rising rapidly which i am happy to sell in the event of hardship ,kids or job loss
We have no kids or other debt.OUR PLAN
I purchased the ip as i believe the local market has hit its lowest and even though it may not move for many years i want to reduce my tax and if we have kids in say three or so years a investment property may be the last thing on our mind and it may slip away from us. In say two years i expect to have my PPOR loan down below $50,000 including the sale of my cay. Some may say sell the car now and pay some of our loan but i am very confident it will be worth over $100,000 in the near future so im holding on.CONCLUSION
Although our debt is high we believe we can easily service both loans even without the rent and my car gives us a safety net if required. Both our homes are in desirable areas with our IP atrracting a offer of $20,000 more than what we paid before we even settled. I believe both will show good growth although not like we have had recently.
Any comments throw them at me.We are comfortable with our decision and recieved advice from a financial planner but always welcome advice good or bad as i am always learning.PS Our one mistake was cross collateralising but that is a mistake which will be fixed in the near future. I didnt know what it was until i found this site. I know i have asked the above before but i have trouble explaining it clearly.Hope i have done better this time.
Forgot to add. I plan on using the rent plus my tax return(expect around $150 pw). Plus what ever is required from our income to meet minimum repayments on IP. Should be around $50 bucks from our salary.And then continue to pay maximum off our PPOR. We should still be able to double the weekly repayment maybe a bit more.
I think your on the right track. Especially is IP has increased by $20000 so quickly. Negative gearing is OK as long as you have good growth. The first 2 years are the hardest but as rents rise it gets easier. Best wishes. Millions (almost)
Whose name is the IP in ?
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Hi Devo
excuse my ignorance but where can I find more info on the ‘dangers’ of cross collateralising – and what do you now have to do to ‘fix it’ ?The negative gearing on your IP – looks to me like you have a loss before tax of about $9,000 a year. Hopefully your projected capital growth will easily cover that. If it does (and looks like it is at the moment then fine – good onya – but if not then ???
But looks to me that you are within your comfort zone – better to be in the market than not – especially if you are in an area of good growth.
I suppose you could have also borrowed $307,000 and put it all on the stock market (perhaps not a wise move at the current market position – but only a year or so back that $307,000 would have made a motza).
Swings and roundabouts I suppose.
Baba John
Have you obtained a Depreciation Schedule for the I.P?
If the I.P was built after 1987 you can claim considerable depreciation on the building, fixtures and fittings.
This is compiled by a Quantity Surveyor, then you give it to your accountant. He/She will apply any ‘on paper’ depreciation claims to your taxable income. It could increase your tax return by a few thousand. You may end up with a pos cashflow or neutral cashflow situation.
The cost is around $500, but the benefits will pay for the cost in the first year.
talk to your accountant about this first.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Well i was a bit scared to read your responses but they werent too bad.
First qld007. The IP is in my name only so neg gearing is more affective.Baba. I found out the evils of x’sing on this site. I have discussed it with my lender and he said he can fix it this year for me. Im sure they may be some cost involved but if it protects my assets its worth it.You are right ,there is quite a big short fall but i have seen my tax accountant with the details and he as indicated i should get around $150 pw back maybe more(including my normal return) so that balences it out a bit better.
La.aussie I will be getting a quantity surveyor in after settlement. The house was built in the 60’s or 70’s but it has had a major reno of over $100’000 including new rooms, replacement of exsisting walls and a completely new roof aswell as other improvements
The property is only 500 metres from the cbd in a street thats becoming trendy with restraunts and cafes as well as tastefully reno’d older style houses. so it should show improvement in prices over the next few years.
Thanks for the reply’s everyone
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