HELLO ALL I AM NEW TO PROPERTY INVESTING AND I HAVE A BAD DEBT OF 120K.
I WANT TO BUILD A PROPERTY PORTFOLIO TO HOPEFULLY WIPE OFF THAT DEBT. I'M NOT SURE WHERE TO START, DO I BUY POSITIVE CASH FLOW PROPERTY OR BUY FOR CAPITAL GAIN I JUST DON'T KNOW.
ANY HELP FROM MORE EXPERIENCED INVESTORS WOULD BE GREATLY APPRECIATED
Would you like to expand more on what you mean by Bad Debt.
Just there is a big difference between Bad Debt and A Bad Debt.
Richard Taylor | Australia's leading private lender
Hi Richard thanks for the response.
Sorry for not being more clear, basically the debt is not a bankruptcy it's an accumulation of credit card debt and personal loans.
The debt is split between my brother and myself so we are in debt 60,000 each.
Any advice you could give me would be beneficial.
Thanks again,
Demitri
Ok Demitri thanks for the explanation.
Look dont want to be a a doom and gloomer but if the debt is owned as Joint Tenants then you actually liable for $120K 's worth in the eyes of any lender.
With investment loans capped at circa 90% lvr (Yes i understand there is the odd exception) then you are going to need savings over and above repayment of these external liabiliites.
Unless you have access to equity in the current climate it will be a very long road but formulate a budget and start to whittle away the debt as and when you can. try and consolidate to a cheaper rate of interest and this will give you more disposible income to pay down the amounts outstanding.
Good luck and keep us all informed on how you go.
Richard Taylor | Australia's leading private lender
I would think it best to pay the debt off first. You are unlikely to get a loan if you have $120,000 in credit cars as they will assess this as a $3,600 per month expenses.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Dimitri,
Please don't take this as 'professional' advice, but I too had quite a bit of debt on credit cards (no personal loans). My husband and I worked really hard to remove all of that debt and we did it by making the most of the low interest rates on balance transfers. Essentially, we transferred as much as we could to a new credit card, and worked very hard to pay it all off as quickly as possible. Of course, when we received the new cards in the mail – they were chopped up so I couldn't be tempted!!
It's been a while – but I'm sure that these offers are still out there.
For us, it was an easier way to manage our debt repayments, but it did take a while to get out of the red, and we didn't enter into any more debt until that slate was as clear as could be. Since then, we have a pretty low limit on only one remaining credit card and always pay it off in the month that it's due.
Good luck.
Amanda.Hey Dimitri,
I would not say that Personal Loans and Credit Cards are bad debts, they are just unsecured debts. Bad Debt means you have had collectors after you or a bad payment history.
There is a couple of options for you, of course there is the above suggestions which are possibly best, especially if you are on a lower income. The other suggestions would be find a low rate personal loan and consolidate individual debts from yourself and your brother, this will seem less daunting to yourself and would also give you the opportunity to pay down your portion of the debt quicker. The only issue that you may have is consolidating an unsecured debt. If you have a personal loan for a vehicle and you still have value in the vehicle maybe look at down grading to something cheaper and use the funds to pay down your personal debt quicker.
Also, when applying for finance on a home, they will work off your actual repayments to the personal loan debt, whereas credit cards most instituions will use 3% to work out an average of your credit card repayments.
I hope that this helps
Cheers.
Investor123 wrote:I would not say that Personal Loans and Credit Cards are bad debts, they are just unsecured debts. Bad Debt means you have had collectors after you or a bad payment history.Actually, personal loans and credit cards are bad debt. Bad debts are debts on depreciating assets. Most cars, electronics, general bling etc are bad debts. This is opposed to good debt, which is a debt incurred in order to be able to buy an appreciating asset, eg, property. I have millions of dollars worth of debt, except that mine is all by way of mortgages on a property portfolio that is increasing in value. This is all good debt.
But back to the point. Dimitri, I wonder whether it would be worthwhile going to see someone who specialises in debt reduction. There are people/companies, who will help you write a budget, organise consolidation of debts and help you make firm plans to eliminate debt. I know that several people will tell you that you can do this all yourself, but I would think that if you have incurred (jointly) $120,000 worth of bad debt, that you will probably need some help and support to change your spending habits.
But apart from that, I agree with the other posters. Apart from no banks lending you money with such a significant debt, property investing is not a "get rich quick" scheme. To my mind, it is one of the most reliable methods of wealth creation, but it takes a lot of discipline and in this market, it will be costing you money to start off with. Decent positively geared properties are not easy to come by, so most properties will take money out of your pocket, at least in the short term. Also, with the market quite sluggish, it will be a while before any decent capital growth is seen.
Pay down your debt, learn some financial discipline and in the meantime, start researching where/what you want to buy.
Good luck
K
investor 123
how can you say its not bad debt just unsecured.do you think for one minute a lender is going to say yes we will loan you money because your bad debt is only unsecured you dont have debt collectors after you.
this guy has to stop spending and pay off his debt.its as simple as that.dont kid yourself the bad debt fairy isnt going to come along and wave a magic wand.
Yes I'd think it was very bad debt, as it may be some time before you can get a deposit/loan, I'd be addressing the issue of how I managed to spend such a large amount of money on credit/personal loans especially if it was on material consumption (disregard of course if it was a matter of urgency/critical situation). I would think about putting in place a good budget and savings plan and also in the meantime researching and studying the market and different approaches to property investing. Before you know it you will be in a better position finacially and ready to invest
Hi Dimitri
Been there. From someone who lost his shirt and clawed it back, congratulations on reaching the turning point of asking for help or advice.
I would examine the who or what behaviour got you to this level of debt, and remove or change the behaviour otherwise you will bring that with you into your comeback phase and be doomed again.
You don't have the skills or you wouldn't be where you are, so get expert help, and when you get the rescue plan, live it.
Include financial and investment education, plus personal development in your plan to fill the gap in your knowledge.
You could search this forum for popular "must read" books listed by members. Motivation is necessary on the recovery road.
Good luck
cheersthecrest | Tony Neale - Statewide Motel Brokers
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