Hi all,
Great site – and I was hoping I could get some advice for my situation.It's looking like I could be made redundant in the coming months and rather than trying to find another job I'm considering setting up on my own. It could take up to 12 months or more to establish a reliable client base and get a regular income through the door. The business would need very little start up costs to get going.My current financials are:Negatively geared IP – Valued at $400,000. IO loan for $260,000. Currently tenanted for $320 a weekPPOR – Valued at $580,000. PI loan for $140,000Both loans are with the same lender.No credit card debt or any other loansMy question is this. Is it possible to draw down from the equity we hold on either property to cover mortgage payments and household bills etc just for the 12 months we need or would I be better advised to sell the IP and clear most of the debt on our PPOR and use my wife's small part time salary to cover our outgoings.Alternatively I could just try for another job – but I'd really like to go out on my own.Any advice gratefully accepted.Cheers.Hi Woodyvale
The important thing in life is to follow your dreams and take some risks to achieve them. We can always block ourselves by finding things to put us off. So go for it if this is what you both sincerely want to do and are both committed to sharing the blame if things don't quite work out. Your debt is around 40% and grows to 50% if you borrow 100k which might be the limit given your situation. If things get difficult down the track then you could always then sell the IP. All the best…
CarpeHi woodvale, i dont know if this is a good idea but!! Why dont u change your PPOR to IP, rent it out and, claim tax deductibles, depreciation and use this to service your Property to bring down your morgage loan. The only problem with this is, it's liable for CGT.
Hello woodyvale
I think you certainly have enough equity in your PPOR to cover you for a 12 month period, specially as you seem to be financially prudent and your wife brings in some income.
It may be a good idea to get a LOC asap over your PPOR now while you are employed as later it will be much harder.
Seeing as you will want to use it for both personal and business expenses I think you will want it to be split into several loans (maybe one private, one investment and one new business? ) but maybe a good MB will be able to advise you.Changing your PPOR loan from PI to IO for a year or two will also reduce your outgoings for the time it takes to get your business off the ground. If you do it now and also have an offset account, then it will cost you no extra interest but will enable you to save up some cash for later.
I certainly would not sell the IP at this point.
I don't know where your IP is but you may want to look at whether you're getting the most you can out of it. Rents have been going up. Maybe even a small out lay coupled with some elbow grease on your part may help reduce the gap ?.
Good luck in whatever you decide to do.
Elka
Thanks for the encouragement and advice guys. Much appreciated.
The IP is in Perth and due for a rent review in a few months, so should be good for a bit more per week.I'm going to set up a meeting with an MB this week to go through a few options.Cheers all, woodyvale.
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