Hi all. I have been stewing over this for a few months.I have a 1br apartment with sea views which is costing me far more than it is returning. The obvious solution is to sell and redirect purchase to a higher yielding property/ies. As this property should have a strong capital growth, I am reluctant to sell. Can anyone think of a creative solution to this problem. I have considered refinancing with an equity loan of 20%,giving 20% of growth away.I would appreciate people's thoughts on the situation.
Regards,
peleHello pele
Although this site is basically for people interested in CF+ IP's I have always bought negatively geared property with good capital growth potential and have not been disappointed to date. The problem is being able to support the expense until rents and growing equity catches up.
The solution to speed up this process is to see if doing an inexpensive renovation will increase your rent and reduce the gap.
Also make sure you are claming everything that you are entitled to including depreciation which will give you some tax deductions to help with the finances.
If you don't have any personal debt (non deductible debt) but have some cash then make sure it's sitting in an offset account linked to your loan as this will reduce your interest bill. Also putting all your earnings into this account will have the same effect.From reading posts on this forum I believe that an equity loan means that you give away 40% of your capital growth not 20%. You get 20% interest free from the lender but they want 40% of the capital growth in return.
Not something I would do if you think that your IP will experiance good capital growth.
Cheers
ElkaOne idea might be to purchase some income based managed funds using a LOC and/or margin loan. The excess funds can be used to support the property shortfall.
If you need more info please email me.
I am not selling anything here or providing financial advice.
Mortgage Hunter wrote:One idea might be to purchase some income based managed funds using a LOC and/or margin loan. The excess funds can be used to support the property shortfall.If you need more info please email me.
I am not selling anything here or providing financial advice.
Thanks for your thought Simon.
I am already maxed out with borrowing and I appreciate your thought.
I'm sure it would work given the power of leveraging. I feel that I am already in deep with my borrowings and wish to reduce my market exposure at this stage.Thanks again for your reply.
pele
elkam wrote:Hello pele
Although this site is basically for people interested in CF+ IP's I have always bought negatively geared property with good capital growth potential and have not been disappointed to date. The problem is being able to support the expense until rents and growing equity catches up.
The solution to speed up this process is to see if doing an inexpensive renovation will increase your rent and reduce the gap.
Also make sure you are claming everything that you are entitled to including depreciation which will give you some tax deductions to help with the finances.
If you don't have any personal debt (non deductible debt) but have some cash then make sure it's sitting in an offset account linked to your loan as this will reduce your interest bill. Also putting all your earnings into this account will have the same effect.From reading posts on this forum I believe that an equity loan means that you give away 40% of your capital growth not 20%. You get 20% interest free from the lender but they want 40% of the capital growth in return.
Not something I would do if you think that your IP will experiance good capital growth.
Cheers
ElkaThank you for your reply Elka.
A reno is not possible as the apartment is new and all claimable items are being claimed.
I will look into the equity loan more carefully as I appreciate financing is not primarily structured to to make money for the borrower.
Thank you for the tips offered.
Regards,
PeleHello Pele
I'm new to this forum.
Not sure if I can be of help here, but have you had some capital growth in your unit since purchasing it? Did you prucahse it off the plan. Good to hear you are making the most of all your tax decuctable savings. Depending on where your unit is there any scope of increasing your rent? When the tenancy agreement runs out? Is your unit self managed or is it property managed?regs Nicola
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