Hi all,
Just joined this site and am seeking advice on kickstarting my investment career!
I currently live in a 2bedroom unit with my soon to be wife. We own half the unit with my fiancees sister, we owe 70k on the unit. We are also finalysing plans to build on our block of land we bought in waurn ponds victoria. We bought the block for 145k paid 45k deposit and anticipate building costs to be 190k counting stamp duty. So all up we will have a dept of 370k. We also are recieving 60k from a will soon.
So should i immediately pay 60k of the unit or the soon to be built house?
Or should i be looking at using this money to obtain a positive cashflow property?
We will rent the unit out once we build which will rent for $190+ a week so we will get half of that $85
And we anticipate the house will be worth 350k+ when its builtThanks
Hi Andrew
I would leave the debt on the investment property ie the unit. You owe 70k so the interest per year is about 6k including rates, mtce costs and the income is about 4.5k so not much of a loss that reduces in a small way the tax you pay on your work income. In my view your primary goal should be to have no debt on your home (it is not a tax deduction) hence put the will money into it. When you have paid off your home debt then use the equity in it to borrow for perhaps another investment property if you can afford the struggle (see below). I have done well in property and I'd rather own an investment property that has a growth potential (ie best location) rather than a property that simply pays off the loan (positively geared) and has little growth potential. Better of course to have a property that yields both but these days virtually impossible. So choose wisely and go for location, location, location even if you end up with more coming out your pocket than you would with something else that is virtually a compromise and not worth tying up your equity plus your work in managing it. I know there are some people out there who don't believe in letting go of any property they own…..I don't agree…..if the unit you partly own is not in a growth area then if sold it can reduce further the mortgage on your home . Do your sums eg the debt on your house is 290K so the interest (7%)per year you pay out of your pocket per year is say 20.3k however if you had another 50k (say from the unit) taken of the mortgage your interest for the year drops to 16.8k which means you can pay another 3.5k off the debt and hence in each subsequent year you can pay more and more off the debt (ie maintain at least the current 20.3k payments each year even though the debt keeps dropping). Anyway this information is just something for you to think about given that you are just a young couple starting out and believe me you don't want heavy debt in those early years if you end up having children. Focus on the home and your family to start with.
All the best
Carpe
I currently live in a 2bedroom unit with my soon to be wife. We own half the unit with my fiancees sister, we owe 70k on the unit. We are also finalysing plans to build on our block of land we bought in waurn ponds victoria. We bought the block for 145k paid 45k deposit and anticipate building costs to be 190k counting stamp duty. So all up we will have a dept of 370k. We also are recieving 60k from a will soon. 
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