All Topics / Help Needed! / Buy investment property or get rid of Personal debt.

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  • Profile photo of brendan6677brendan6677
    Participant
    @brendan6677
    Join Date: 2009
    Post Count: 1
    September 7, 2009 - 5:30 am

    Hi, Im 32 with wife and child and 1 investment property at the moment but thinking about buying another, what to do?

    Here is my situtation:-
    my house value $380,000 owe $240,000 (on 5.39% rate) with $45,000 redraw
    investment property value $240,000 investment debt is $127,500 (interest only 5.39%) and $44,000 personal debt secured to house(deposit for house we live in. 5.39%) renting $265 per week minus 8% fees

    Do i used my redraw to purchase another property?

    The property i would be looking at buying would be worth approx $280,000 if i put down a $28,000 (10%) deposit + fees should get a $290-$300 per week return.

    Is this something i should be looking at or reducing my noclaimable debt.

    Thanks

    Profile photo of j900j900
    Participant
    @j900
    Join Date: 2008
    Post Count: 56
    September 7, 2009 - 7:38 am

    I would pay off the personal debt first unless you know for a fact that the property you mentioned is severely under valued (ie too big a bargain to pass up). I personally believe, for a house at this price range (entry level house), if it's in Mel/Syd/Brisbane, the prices are not going to change much over the next 6 months. Just my personal believe tho.

    Pay off personal debt then work on an LOC facility against the IP. Use LOC to pay the deposit for your 2nd IP (not redraw from your residence's loan account).

    Anyone has other idea?

    Profile photo of JustLearningJustLearning
    Member
    @justlearning
    Join Date: 2009
    Post Count: 4
    September 7, 2009 - 7:43 am

    Hi agree with j900. Get rid of your personal debt and then use the LOC against the IP. I am doing somethign similar right now. Infact I am going a step further and selling my IP as the market says I will get my yield.

    However, do your numbers. It is a trade-off between reducing your personal debt vs. the potential for capital growth for the property. I would only invest if there was potential for substaintial capital growth over the next 12-18 months. But that is my personal view.

    Good luck to whatever you decide.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    September 7, 2009 - 8:45 am

    Unfortunately their is insufficient data to enable any structured advice to be provided however i dont think it is as simple as all that.

    One thing i would be careful about using your redraw facility for a investment property deposit.

    You would be better off to clearly separate the two loans and structure the facility so that they help in reducing the PPOR debt.
     
    Are the loans cross collateralised ?

    Richard Taylor | Australia's leading private lender

Viewing 4 posts - 1 through 4 (of 4 total)

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