Hi all,
I’ve been reading the informative posts here for a few months but this is my first post.
Our situation is this: I’m looking to semi-retire in two years time when my partner reaches his preservation age and can retire, but I am in two minds about what I should do.
I have an IP in a good growth area in NW Sydney. It’s been valued by a realtor to be around $1.5 million, and I owe $160,000 on it, so there’s a lot of equity there. We also have three other IPs, one small one fully paid off, and the other two recently purchased with IO loans so no real equity.
My aim as I said above is to have my partner retire in two years time and me to semi-retire. The only way I can see this achievable is to sell my Sydney IP, pay off all the other loans (PPOR included), sell the small IP (only worth around $130,000), and live off the rent from the remaining two unencumbered IPs. However, the rental income from these two IPs at the moment is only around $28000 after expenses, so it’s a little on the low side, but with some money from super and my part-time work it should be sufficient.
Is there another way I can go about this? Would it be wise to instead use the $1 million equity in the Sydney IP and buy as many good quality properties as we can in the two years and hope the capital growth in all the IPs can be used to pay down as many IPs as possible so that our rental income is higher than what we can achieve above? Is that realistic?
I think it’s a shame to sell the Sydney IP because it’s in a great area (thirty minutes from CBD, good transport links, and close to major amenities such as a university and big shopping centre) and there is a plan to revitalise the suburb centre, but I can’t think of anything else I can do if we want to retire as planned.
Can any of you experienced and super knowledgeable investors out there see other options? My brain is so muddled right now. :(
Joe
Hi Camp grenada,
Wow, you appear to be in REALLY good shape !! With that amount behind you, I’d be thinking there would be a way to turn this ship into “positive geared” so that you can retain all properties. As you say, holding property in Sydney is usually a Growth play.A little bit of confusion from me though – you mentioned two IP’s with little Equity, but followed up that they are “unencumbered”. I’m not quite sure what you mean there. What I would suggest is that you lay out a few lines with :-
Area/suburb Value Mortgage Rental Expenses
…. for each of these four IP’s. See, with the amount of Equity available, you could look to purchasing more positive geared IP’s to Offset any losses from the others, or even look to diversifying into Shares to “top up” the Income. Perhaps even use a smallish Margin Loan.
I’m sure many advisers would LOVE to have a client like you !! There will certainly be LOTS of options for you, so don’t go rushing headlong into anything right away. Do read up on Offset accounts (if you aren’t using these ATM) – you can find a post on them somewhere in here:-
https://www.propertyinvesting.com/forums/general-property/4349450Meanwhile, I’m sure some of the stalwarts on here will have some really useful info for you. Keep watching – I’m sure there will be heaps of ideas coming your way soon,
Benny
Hi Joe
Welcome to the forum and hope you enjoy your time with us.
Good for you in having taken steps to financial freedom.
In saying this i am not sure i would rush out and buy as many properties as you can on the basis you hope they increase in value within the next 2 years as the entry and exit costs will erode your potential profits.
I think i would be looking to diversify away from property and focus on high yielding investments with low or no entry costs as with limited exposure you could really make some inroads into paying down the outstanding debts.
2 years isn’t long so ask yourself whether you really want to be taking on significant debt going forward.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Richard is right, you need to focus on income. To do that you need to have a clear property strategy and plan this next stage of your life.
It’s not possible to give you advice based on the information you have given, or give you the sort of advice you need. It’s just too is far too complex to be carried out on a public forum.An advisor needs to sit down and get the whole picture before providing you with a statement of advice.
On that basis telling you what I think you would be advised to do would be unethical.
Modernity Investing
Email MeHi Benny – thanks for the advice. What I meant by the “two unencumbered IPs” is that they will be paid off after I sell the Sydney IP. And thanks for your kind words. I think a combination of good luck, being frugal, not living a profligate lifestyle, and being DINKS helped our situation.
Hi Richard – thanks for the welcome, and I sure have enjoyed my time here so far! So many inspiring people to look up to including your good self. Thanks for the point re entry and exit costs eroding potential capital gains as I hadn’t taken that into account. And thanks for suggesting diversification away from property, because I know two years is not a lot of time.
Hi Mark – thanks for corroborating with Richard’s opinion. I do need a proper strategy so I need to see an advisor. Any recommendations based in Sydney?
Hi Camp
Just make sure any professional adviser hasn’t got a personal agenda.
As am adviser I see it every day of the week.
Must admit I am down in Sydney a bit seeing forum clients so might send you a PM next time I am down to see if the diaries line up.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard, that would be great. Cheers.
Joe
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