Hi all.
I'm stuck and confused. Not sure where to go in my situation.
Purchased a block of land for 160k around 18 months ago and built a new home claiming the FHOG. House cost 250k to build. Lived in it for 6 months and now it is renting out at $380 a week.
It is cheap rent but I like my tenants. I was quoted $450-$500 a week and given it is only a 6 month lease, I will up that near the end of this year.
Property is worth around 500k and I have a loan for 350k. It is interest only and I haven't pumped any extra money into it at all as it's an intro loan with no offset so I'm just trying to save money at the moment. Have around 30k saved but only have access to 20k at the moment (loaned the rest to a family member and will get back within 3 months).
I'm only on a measly wage of 45k a year. No partner so that's the only income at the moment and not sure where to go from here. I would ideally like to accumulate as many properties as I can as quick as I can but I don't want to put too much pressure on myself given my low income. Also moved back in with my parents and that costs me $200 per month plus around another $400 a month in expenses (train, phone, insurance, etc).
My plan was to now by another property. The bank has said I can borrow up to 400k based on my circumstances (including rent from this new IP) but now I'm not sure if it's better off to pay down my current loan as with interest rate rises, it is starting to become negatively geared (was originally positively geared). Or buy another IP (hopefully cash flow positive).
Any help is appreciated. I don't know what the better option is here.
Thanks
Buying positive cashflow properties is probably your best bet. As interest rates rise, rents will rise and some positive cashflow properties will help offset your current property if it does become negative. With 400k to use you could easy create some nice passive income from properties.
Try http://cashflowinvestor.com.au it is a positive cashflow property finding service. It could save you all the legwork of searching high and low to find a positive cashflow property.
Paying off your debt could be good short term, but not long term. Cash is a depreciating asset, if you pay off cash you are effectively buying a liability (money). Buy using your cash to buy a property instead you get all the growth that comes with it and therefore become richer more times over.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHello Donkey33,
The numbers are not making sense. Sorry, maybe i did not understand. Are you saying that you can hold a loan/s up to $750k on your income and the IP rental?
From this base I see it being tight and possibly defeating your goal…. I don't want to put too much pressure on myself
I have a question/position for you to consider: When you find a suitable property (price, performace etc) suitably matched to your profile. The most important to consider is YOUR ability to hold this or these properties over the next 5 years. If you do the numbers and you can… Then your ready now!
Good Luck.
AA
Thanks. Yes but the banks take into account the current rental income and also the predicted rental income of a new place putting my annual income around 75k. I was told it’s all about being able to service the loan which I can even on a measly wage plus two IP’s.
But, I don’t intend to use what the bank has made available. I’d like to have the next one a lot smaller as to not risk putting myself in a bad way but right now, it’s comfortable. The current IP is costing me nothing to hold.
What is better when looking to buy another IP?
Is it better to have a deposit saved or to show equity? With that 30k, should I pump it into my current loan or leave it for when I purchase my next IP (hopefully with 8 weeks if I can find something)?
Thank you. yes I know how the loan process works. I was trying to get clearer on your position.
If I may repeat/expand on my explanation; One of my golden rules is being in a position to 'hold' your assets. Statistically a high number of investors sell/loss their wealth becuase they can not hold these properties, (of course for a number of reasons). One main reason is cash flow. I hope this is making sense.
It depends on your loan structure; re-draw etc. In most cases it is the same difference.
By the way this website has a free on line investment calculator: http://searchinvestmentproperties.com.au
AA
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