hello chaps,
just needing some direction on sub division im currently doing heres the issue that needs to be answered!!!
A: bought house an land for $284500 loan against it $276000 (2006) now worth 330 000(2007)
B: will sell plans an permit to builder for new house only im keeping the front one currently tenented
C:say i make $100 000 profit , rental is 1041per mth @7.35 variable i/o big negative gear
D:do i tip some profit into loan, or find another good deal to make even more cash,will the bank want some of the profit to balance the loan against a smaller block of land ie sub division.because the house might only be worth say 250000 loan is276000 after sub division.then if make a decent profit again on the next deal tip some money later into the loan to lower the neg gear loan?
E:let time pass on the front house to gain growth continuing tenants
F:when do you think it is a good time to reduce some of the loans you have on investment propertys???
many thanks
mark (the confused new comer)
Hey Billy;
good name. I think "ophelia" would have worked well too.
The best time to reduce debt on loans; even investment loans; is… ALWAYS.
I know some people say to never pay off the investment debt because it is tax deductible, but you still have to service the loan and be a slave to your real estate if it's neg cashflowed. If you've got a chance to turn a neg to a pos by paying down some debt, then take it I say.
Less interest to pay means improved cashflow, serviceability and equity for further investing.
If the profit tips the I.P you keep into pos, then you can redraw and go again. The goal should be to acquire as many pos cashflow properties as you can, that also grow in value, so you can retire from the rat race sooner.
If your finances are o.k, ie; good serviceability, good LVR, then invest again.
Unless you can find another project that offsets the neg property with a pos cashflow, I would rather see you with one property that doesn't strain the finances and is fun to own, than two properties that you will struggle with and have stress.
i see what you mean,
maybe ill split the profit into 2 and invest the remaining cash after paying down some of the loan!!!
cheers mush!
Two things I learn't from doing a subdivision:
1. It takes twice as long than expected
2. It also costs heaps more than first thought.But if you can struggle through, the profit is pretty damn nice, and you'll also be surprised that you probably won't see much of a reduction in the value of the front house.
Best wishes,
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